The water industry is among the most energy-intensive sectors in the UK economy – and one of the best placed to benefit from a more flexible approach to electricity. Here, Enel X explores its recent partnership with Welsh Water, and looks at how a diverse mix of assets can help businesses earn revenue across different flexibility markets.

The energy network has evolved, moving away from a top-down distribution model to become a system in which many parties participate. Power no longer comes only from large central power stations: increasingly it also comes from businesses and communities that are using energy more intelligently, and from flexible resources that can adjust their consumption to help keep the grid in balance.

Few sectors are better set to benefit from this than water. Treating and moving water is a continuous, energy-hungry process, and electricity represents a significant share of a typical water company’s operating costs. With energy prices elevated and the sector under sustained financial pressure, there’s a clear value in turning that consumption into a source of revenue – provided it can be achieved without compromising service.

Water companies have understood this for some time. As sophisticated energy buyers, many have already participated in flexibility markets for years, supporting ancillary services and the Capacity Market – the mechanism that plans ahead to ensure electricity supply is sufficient to meet forecast demand. What’s changing is the range of markets open to organisations, and the sophistication with which a varied portfolio of assets can be matched to the programmes that suit each one best.

Welsh Water flexes its muscles

It’s against this backdrop that Welsh Water, one of the largest water utilities in Great Britain, recently expanded its flexibility arrangements through a new, multi-year partnership with Enel X. The agreement sees a substantial volume of flexible capacity contracted through the Capacity Market, with the prospect of further value to come as additional assets and markets are brought into play.

Many organisations have flexible electricity capacity, but they may not be aware of it. Everyday equipment such as pumps and compressors, or processes that involve refrigeration or extreme heat, can often be adjusted with minimal disruption to the business. On-site generation and storage assets such as combined heat and power (CHP), hydro generation or battery energy storage systems (BESS) can also provide support to the grid through the Capacity Market and other flexibility schemes.

Water companies are unusually well endowed with these resources. Pumping is, within limits, a flexible load: water often needs to be moved within a window rather than at a precise moment, which means a site can shift its consumption in response to market signals. Alongside that flexible load might sit generation assets including CHP and BESS, each with its own operating characteristics. The revenue from each can be maximised by matching them to the programme where they earn most.

The UK government’s Clean Power 2030 Action Plan calls for significantly more flexibility across the electricity system, and the Clean Flexibility Roadmap sets out a total capacity target of 51-66 GW by 2030, a two to three-fold increase on the roughly 24 GW installed today. Sectors that can deliver flexibility at scale will be central to reaching this landmark.

Different assets, different markets

The strength of organisations with a diverse energy markets portfolio is that they’re not reliant on any single market for revenue. The Capacity Market rewards committed, dependable capacity, and is well suited to assets that can be relied upon to respond when called. Securing capacity agreements years in advance, as the T-4 auction allows, lets an organisation lock in a known price over several delivery years.

For Welsh Water, this certainty was valuable for planning over the long term. Working with Enel X secured the organisation a strong, known return for its flexible capacity over a multi-year period – the sort of predictable revenue stream that allows organisations to reinvest in their services.

But because pumping can often be rescheduled within operational limits, it also lends itself to markets that reward moment-to-moment responsiveness. Recent reform of the wholesale market – enabled by the P415 code change that Enel X originated – is opening up exactly this opportunity, allowing flexible energy users to be paid for adjusting consumption in response to price signals without disturbing their existing supply arrangements. That’s ideal for a water company that has a degree of choice over when to pump.

Generation assets add further options. Welsh Water’s biomethane CHP and hydro schemes can contribute firm output, but BESS assets – increasingly common in water businesses – are particularly well suited to fast-acting ancillary services such as frequency response. Bringing these together under a single virtual power plant means each asset can be directed to the market where it performs best, and the value of the whole can be optimised across the full stack of services.

The value of a considered approach

Not every asset suits every market, and the economics of enrolment vary widely. Some ancillary services require dedicated metering and control equipment at each site – viable for a large, automated pumping station, but less so for a remote one where the cost of fitting and operating the technology would outweigh the return. For this reason, it’s important to take a considered approach, where the cost of bringing an asset to market is weighed against the revenue it can realistically earn.

What’s of equal importance is to ensure operational uptime and a reliable supply of water, and wastewater treatment. Enel X’s approach identified Welsh Water’s room to flex and matched each of its assets to the right market so that it generated revenue without ever putting service at risk.

As Welsh Water’s experience shows, the transition towards a decentralised, digitised and decarbonised power system rewards organisations prepared to take a flexible approach to energy – provided that flexibility is managed with care. As an organisation with many parallels to a traditional utility, Enel X is a partner that implicitly understands the importance of that care; the delivery standards required to keep critical infrastructure in operation.

For the water sector, with its mix of flexible load and on-site generation, the potential is considerable: revenue that helps offset operating costs, and a significant contribution to grid stability and the wider energy transition.

Water companies have a crucial role to play in Britain’s energy future, with the scale, the assets and the operational discipline to deliver meaningful system services today. As more assets come online, or exit previous arrangements such as Feed-in Tariffs or Renewable Obligations Certificates, the opportunity to turn everyday operations into a source of value will only grow.

What does participation in demand flexibility look like for your business? How could the benefits unlocked through the Enel X virtual power plant (VPP) provide revenue or offset capital expenditure? Contact us today to discover more.