Regulatory impact on water innovation?

A few weeks back I was invited to be on a panel for a project led by research consultants Technopolis, related to the European Innovation Parternship on water. (Food poisoning afterwards is the cause of the delay in my posting up about this, incidentally!)

Photo: Technopolis' meeting in Brussels to discuss regulation's impact on water innovation
Photo: Technopolis’ meeting in Brussels to discuss regulation’s impact on water innovation.

The remit of the meeting was to get the invited panel’s feedback on a methodology being developed by Technopolis for DG Environment and DG Research and Innovation, related to the Partnership. This was a methodology for regulatory impact assessment to take account of water innovations. We were also invited to think about cases around Europe where regulation is either a barrier to or an enabler of water sector innovation.

For me, these are fascinating topics. One of our main themes is about the interplay – often unacknowledged – between water sector regulation and innovation. However we normally just look at the UK’s system, or more precisely just the privatised water sector of England and Wales, and predominantly only at the influence the economic regulator, Ofwat. Widening the scope to take in all the water utility systems in Europe, and all water sector-related regulations – that of course can include non-water sectors like agriculture, as a big influence – is laudable but also extremely ambitious.

For starters, how do you know if you are comparing like with like? A regulation may affect a consolidated, privatised and tightly regulated water utility system like England and Wales in a very different way to a fragmented, municipality-run, loosely (or locally) regulated system elsewhere in Europe. How does one design a regulatory impact assessment approach that can cope with such deep variance of water utility system characteristics?

This was part of the challenge put out to the varied panel of experts present on the day in Brussels by the Technopolis team. My fellow attendees including a range of perspectives and experiences with variously constituted water utility systems around Europe. The range of issues that were raised, as at any such forum for water topics, was wide-ranging – reflecting the broad set of aspects that water touches in one way or another.

Hopefully the team there found our inputs useful in addressing this huge task, which they are attempting to do within a very tight timetable. From my own perspective at least, there were two useful outcomes from the meeting: first, hearing some very interesting non-UK positions, and second, thinking about how one would go about choosing the essential characteristics that typify any particular water utility system in Europe. On that latter point, here are some of my thoughts:

  • Ownership characteristics – e.g. fully privatised, part-privatised (say a franchise), public but nationally run or public and locally run (with or without some degree of private sector participation);
  • System status – e.g. under-investment backlog/deficit, path dependency from already planned/committed investments, current efficiency levels (e.g. from my teaching with Dale, benchmarks like ‘staff per connections’ and so on);
  • Investment patterns and financial resources – e.g. planning and investment timescales and cycles, resource-rich or resource-poor;
  • Water resources – e.g. water-rich or water-poor, water quality conditions;
  • Regulation – e.g. self-regulation, weak or strong local or national regulations, degree of compliance with EU regulations, also capacity of existing regulatory staff/institutions;
  • Political economy – e.g. the ‘variety of capitalism‘ in which the water utility system is embedded, for want of a better term, and the degree to which water investment decisions are strongly/weakly politicised (enabled/blocked);
  • System resilience measures – e.g. social, economic, physical vulnerabilities;
  • System ambitions – e.g. strategies and objectives of the water utility sector in question, where are they now and where are they planning to get to?

Other factors when thinking about impact on innovation would also bring up factors like the portfolio of innovation types one wants to address, e.g. incremental and/or breakthrough, for simplicity’s sake.

These characteristics go beyond the remit of the current project Technopolis is engaged with, no doubt. Nevertheless it would be interesting to know if anyone has done this degree of system characterisation as a foundation for regulatory impact assessment on the topic of innovation. As I’ve said, it’s an aspect that is typically overlooked but is vital to the long-term vitality and sustainability of water utilities.

At any rate, kudos to Technopolis and their sponsors for at least giving it a go. I’ll be keeping an interest in the outcomes of this particular investigation, for sure.

Lastly, in spite of heavy rain (and later food poisoning) it was also nice to be in Brussels. My walk back to the train station took me through the park below that had several lovely water features – a nice coincident demonstration of yet another facet of our everyday relationships with water to ponder…

Photo: Park in Brussels on my walk back to the train.
Photo: Park in Brussels on my walk back to the train.

Duncan Thomas

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