Strategic Sludge Investment Optimisation

Background

Anglian Water partnered with leading industry experts, Business Modelling Associates (BMA), to develop a 25 year decision support tool for its Bioresources strategic management. The model provides a high level end-to-end representation of Anglian Water’s Bioresources value chain from source (WRC) to recycling outputs at a process level and allows multiple scenarios to be evaluated for the economic and performance impacts of the opening of a sludge market. The decision support tool is a critical component of Anglian Water’s Bioresources Strategic Plan from 2020 to 2045 and will allow the water company to determine an optimal strategy in alignment with stated goals as well as meeting OFWAT regulatory planning requirements. It allows for the strategic evaluation of different asset investment options across multiple scenarios recommending the optimal approach taking into account costs as well as asset and operational constraints.

The Approach

The model considers the end-to-end Bioresources activities of Anglian Water across its asset base and value chain as a fully interconnected system. It provides an annual representation of up to 40 years view, covering all direct and indirect TOTEX costs within the current Bioresources price control area, and with specific inclusion of sludge market analysis and associated potential costs and revenues.

• Annual representation of long-term view (10 & 25 year).
• Dynamic representation of OPEX and CAPEX costs including sludge transport, direct and indirect operating costs and capital investment.
• Understanding in-year unit costs to site or asset level (£/TDS).
• Inclusion of 3rd party options.
• End-to-end sludge market analysis including all marginal costs and revenue impacts.
• Multiple TOTEX investment scenarios to determine the optimal investment programme for PR19.
• Rapid & flexible scenario analysis and investment optioneering to consider changes in regulatory framework.
• Enhanced decision-making for ‘no regrets’ investment choices.

“The model has provided Anglian Water with high quality information on which to build both our PR19 and 25-year strategy. It has identified both opportunity for driving out cost to deliver an optimum TOTEX unit cost of treatment and enabled us to plan the timing and location of new investments to deliver the additional capacity as a result of population growth and the impact of tightening consent standards at water recycling centres as a result of the WINEP3 programme. The quality of the work and the demonstration of the model outputs to the wider stakeholder groups were very well received.”

Stephen Riches

Anglian Water Services, Bioresources Asset Management

Opportunities Identified

Aside from providing a greater and more detailed understanding of Anglian Water’s Bioresources value chain, the model delivered insights into future challenges and opportunities that the organisation will face over the next 25 years.

• The impact of expected population growth in certain geographic areas and what this would mean for regional sludge treatment capacity.
• Potential re-location of sites and related investment investigations.
• Enhanced P-removal targets’ impact upon the planned treatment capacity.
• Potential prices at which trading with other Water Supply Companies can be initiated.
• Potential savings that can be achieved with the mobile dewatering units.
• Representation of RCV and MEAV impact.
• Analysis of potential trades considering marginal unit costs, fully apportioned costs, compliance, future growth, possible regulatory and non-regulatory TOTEX investment opportunities.
• The capacity that could be made available within each Anglian Water Sludge Treatment Centre for external trades.
• Representation of accounting separation between multiple price controls / regulatory entities.
• A map of where trades across borders could be economically beneficial.
• Full financial reporting outputs (Income Statement, Balance Sheet & Cash Flow to site level).

Results to Date and Value Delivered

The decision support tool has assisted Anglian Water to develop a sustainable, long term Bioresources strategy that meets the needs of its customers and stakeholders. The tool has also helped identify and evaluate the most cost effective opportunities for Anglian Water to open a sustainable market in Bioresources.

• While the primary focus of the decision support tool was to produce an optimised investment plan for AMP7, analysis of the baseline 2016/17 expenditure data provided by Anglian Water identified potential OPEX savings of more than £2M per annum.
• A follow-on ‘pathfinder’ project has been initiated to develop a bioresources production planning platform to support the organisation in the sustainable realisation of this £2m OPEX benefit, together with delivery of increased site utilisation (to potentially greater than 90%), all enhanced sludge outputs and greater than 124 GWh/annum.
• Instead of expansion of the existing plant at Whitlingham Sludge Treatment Centre the model suggested converting Tilbury to a Sludge Treatment Centre indicating a potential in-AMP CAPEX savings of upwards of £10m.
• Further analysis has been undertaken to understand the individual benefits associated with unlocking some of the operational restrictions currently in place for example, removing the need to retreat sludge from certain WRCs will result in an OPEX saving of £500K+.