Despite reducing electricity consumption by 4% and self-generating 22% of its electricity needs, Thames Water saw its power costs rise to £111.8 million for the six months to end September 2022, compared with £78.8 for the six months to end September 2021 and £63 million for the period in 2020. The company also saw a £12 million increase in raw materials and consumables “driven by a significant increase in chemical prices due to high energy costs”. The company said “we anticipate continued rises in power prices due to market volatility” and added that it expected inflationary pressures to continue into FY24.
Overall electricity consumption was around 400GWh. The company generated 143GWh at its operational sites, using 133GWh internally. Its renewable energy capacity includes over 10MW of solar PV, including a 6.3MW solar array floating on the Queen Elizabeth II reservoir in Surrey , a 1.8MW installation at Walton water treatment works in Sunbury, a 1.5MW system on the top of storm tanks at Crossness sewage works in Bexley and a 450kW array on the roof of Beckton desalination plant in Newham that receive a Feed in Tariff of 30.7p/kWh.
The company promised that “a new Energy Strategy will reduce our long-term exposure to volatile energy prices”. It also said a new business would be set up by Thames Water parent company Kemble Group “to maximise potential of Thames Water’s property portfolio and renewable energy generation”. Chair Ian Marchant said, “To maximise the energy generation potential of Thames and secure increased investment into our network, the shareholders, through the Kemble Group structure, have set up a new group of companies, which will be operational from 31 March 2023. They will invest in energy projects, such as increased solar and property development.” Thames Water already has a venture company set up in June 2021 and headed by Tony Vasishta, whose remit includes expanding the company’s renewable energy business and building resilience. At the venture’s launch Thames Water said its opportunities “include solar power, energy storage, harnessing the heat from the waste network to provide clean energy, driving value from the estate and creating new outdoor public spaces”.
As well as PV, the company produces energy from sewage sludge, which is turned into gas that either provides heat to meet the company’s process requirements or is used to generate electricity – in a June 2021 update to its Net Zero road map it claimed generation of around 300GWh of electricity from sewage the previous year. The business plan said “We produce more than 382,500 dry tonnes of sludge every year, and treat 97.9% of this energy-rich resource using anaerobic digestion or incineration. By 2025 we want to put more than 99% of our sludge through a treatment process to recover energy before we recycle it, reducing our reliance on the grid and the volume of untreated sludge we need to recycle.” It planned to build three new thermal hydrolysis plants and replace five aging combined heat and power engines.
Despite the huge increase, energy costs were not very far from Thames Water’s long term forecasts: in its 2020-25 business plan Thames Water anticipated that power would make up 12% of its operating costs, which totalled £968.6M in the six months to end September. Chief financial officer Alastair Cochran said in the company’s results document that “we have launched a new Energy Strategy to reduce our long-term exposure to volatile energy prices” without giving further details.
He also said “ESG remains at the heart of our financial decision-making. In November, we launched our formal Climate Change Working Group to enhance the way we oversee climate risk and align with the Taskforce for Climate Related Financial Disclosures”. The company is at risk from climate effects – the six month period saw a 38% increase in mains bursts “due to the hot weather and dry ground” as well as a temporary usage ban. The company fixed over 30,000 leaks in the first six months but said “our leakage target is going to be really challenging to achieve this year”.