By Sandeep Bhattarai, Senior Industry Value Advisor at SAP UK&I

Rising demand, costs and calls for meaningful investment are pouring extreme pressure on the industry. Technology could be the silver bullet, says Sandeep Bhattarai, Senior Industry Value Advisor at SAP UK&I.

The water industry is at a crucial turning point.

Heightened public scrutiny, increased service demand and inflation are all placing an inordinate amount of pressure on those running the UK’s water network.

On top of this, the industry is having to navigate new and existing regulatory requirements for service delivery – including the Labour government’s proposed financial penalties for companies found responsible for polluting waterways, as well as the next Asset Management Period (AMP8).

In this operational environment, companies are struggling to deliver the service expected of them. Our research shows water leaders across England and Wales are buckling under the weight of rising costs and a lack of digital infrastructure needed to enact necessary improvements to the water network – risking non-compliance and declining public opinion as a result.

While there’s no one-size-fits-all solution, accelerating the adoption of digital tools like AI can go some way to alleviating these pressures as the next Asset Management Period looms. The right digital tools enable leaders to have complete visibility into their network – from consumption and demand to maintenance and repairs – and most importantly, allow them to react fast and efficiently to issues. In the future, that’s how they’ll meet demand and provide reliable, efficient and sustainable services.

Preparing for AMP8

Over the next few months, water companies will continue to liaise with the Water Services Regulation Authority (OFWAT) over their business plans for the next Asset Management Period that starts in April. This requires companies to provide their investment plans, service commitments and pricing proposals to support the continued delivery of safe, reliable water services to customers across the UK.

Yet, despite AMP8 being just around the corner, leaders in the water industry are not confident they will meet OFWAT’s objectives. Even with the risk of reputational damage and financial penalty should they fail to comply, almost 1-in-10 (8%) believe they will struggle to meet OFWAT’s requirements on their own – and will be heavily reliant on third party intermediaries to meet this criteria as a result.

So, what’s going wrong?

A digital and economic deficit

High inflation, supply chain disruption and a rising cost of living are leaving water companies having to do more with less. Faced with increased operating costs, reduced profit margins and a fluctuating labour market, leaders are struggling to fund improvements to service delivery – with 94% believing investment will need to increase considerably over the next few years or they will be unable to upgrade their infrastructure to meet customer needs.

Research suggests these cost pressures are, in part, caused by ageing technology infrastructure. Water companies do not have the digital tools, like AI and data analytics, needed to gain actionable insights into the network, whether that’s data based on water demand, consumption or carbon dioxide emissions. While this is true for utilities of all sizes, it is more acute for smaller businesses, with these companies less likely to believe their organisation is currently using data effectively to manage and gain insights from water infrastructure. This lack of visibility makes it difficult to understand where specific improvements to service delivery can be made to operate more efficiently and optimise the way services are run.

Yet leaders are in agreement about the positive effect these tools will have on alleviating these pressures on the water network. More than 8-in-10 (84%), for instance, believe AI will shape the future of service delivery by addressing leaks, spillages and optimising usage. With companies looking for affordable ways of transforming infrastructure to meet demand ahead of AMP8, tools such as AI offer a low-cost, scalable solution that delivers long-term value – and could be a crucial piece of the puzzle as a result.

Is technology the silver bullet?

By continuously monitoring water demand and consumption, technologies such as AI can collect real-time data to identify trends, anomalies and possible contamination in the water supply. This allows leaders to quickly identify areas requiring maintenance or improvement, including leaks and spillages, and optimise water quality, usage and delivery.

Moreover, AI and machine learning (ML) can effectively predict system failure or malfunction by analysing data collected from sensors and Internet of Things (IoT) devices embedded into water infrastructure. These technologies can identify areas requiring maintenance early on, allowing companies to proactively identify operational failures before they begin to affect the wider network. In doing so, downtime and maintenance costs are significantly reduced, lowering operating costs and ultimately providing return on investment.

Looking to the future

While industry leaders are dedicated to fulfilling the ambitious goals of AMP8, the challenges of rising network demand, escalating costs, and outdated infrastructure continue to hinder progress. To overcome these obstacles, water companies must prioritise modernisation by adopting a robust digital backbone that seamlessly integrates across their operations. Technologies like AI, which offer plug-and-play capabilities and cost-efficiency, provide unprecedented network visibility. This allows for faster, more precise responses to both issues and demand fluctuations. By leveraging these digital tools, water companies will be better equipped to meet OFWAT’s KPIs during AMP8, ultimately delivering more resilient and reliable services in the years to come.

sap.com/uk