Key performance indicators to explain energy & economic efficiency across water utilities, and identifying suitable proxies

Water sector resilience in the United Kingdom and Ireland: The COVID-19 challenge

The outbreak of COVID-19 led to restrictions on movements and activities, which presented a serious challenge to the resilience of the water sector. It is essential to understand how successfully water companies responded to this unprecedented event so effective plans can be built for future disruptive events. This study aimed to evaluate how the water sectors in the UK and Ireland were affected from a holistic sustainability and resilience-based perspective. Using pre-COVID data for 18 indicators of company performance and comparing them to the first year of the pandemic, the direction and magnitudes of change varied across companies. Financial indicators were significantly negatively affected, with interest cover ratio, post-tax return on regulated equity, and operating profit, exhibiting the greatest average declines of 21%, 21%, and 18%, respectively, a trend that would be dangerous to provisions and company operations if continued. Despite this, service and environmental indicators improved during the first year of the pandemic, exemplified by unplanned outage, risk of sewer storm flooding, and water quality compliance risk decreasing by a mean average of 37%, 32%, and 27%, respectively. Analysis using the Hicks-Moorsteen Productivity Index concluded that average productivity increased by 35%. The results suggest that the water sector was relatively resilient to the COVID-19 pandemic in terms of services, but adverse effects may have manifested in a deteriorated financial position that could exacerbate future challenges arising from exogenous pressures such as climate change. Specific advice for the UK water sector is to scrutinize non-critical spending, such as shareholder payments, during periods of economic downturn to ensure essential capital projects can be carried out. Although results are temporal and indicator selection sensitive, we recommend that policy, regulation, and corporate culture embrace frameworks that support long-term resilience to since the relative success in response to COVID-19 does not guarantee future success against differing challenges. This study generates a timely yet tentative insight into the diverse performance of the water sector during the pandemic, pertinent to the water industry, regulators, academia, and the public.

Towards green economic recovery: how to improve green total factor productivity

Achieving green economic recovery is crucial to improving environmental quality and sustainable development. This study examines the influence of new digital infrastructure on green total factor productivity (GTFP) using panel data from 30 regions in China from 2008 to 2019. The results are as follows: (1) New digital infrastructure has a significant improvement effect on GTFP. After a series of robustness tests, the conclusion is still valid. (2) The improvement effect of new digital infrastructure on GTFP shows significant heterogeneity. In regions with high industrial agglomeration, high environmental regulation and strong government environmental preference, the improvement effect of new digital infrastructure on GTFP is more obvious. (3) New digital infrastructure improves GTFP through green technology innovation and factor allocation optimization. The government should strengthen the fiscal incentives for green technology development while increasing R&D investment in fiscal expenditure, thus promoting green economic recovery.

Energy efficiency of drinking water treatment plants: A methodological approach for its ranking

Drinking water treatment systems (DWTSs) are energy intensive facilities, and are an example of the water-energy nexus. Benchmarking energy efficiency is a valuable tool for improving the economic and environmental performance of such facilities. Data envelopment analysis (DEA) is typically used to assess efficiency, allocating flexible weights (FSW) to variables that maximise energy efficiency scores for each DWTS (DEA-FSW). It means that different conditions are applied to each DWTS. Moreover, the DEA-FSW approach has finite discriminatory power which limits cross-unit comparison of energy efficiency hindering the benchmarking of DWTSs. To overcome these limitations, our study explored the effect of estimating the energy efficiency scores of DWTSs by allocating common sets of weights (CSW) within DEA (DEA-CSW). This approach was applied empirically on a sample of 146 DWTSs. Evaluated DWTSs had poor energetic performance based on both DEA-FSW and DEA-CSW estimates (low energy efficiency scores: 0.329 and 0.163, respectively). Even in the optimistic scenario, the average energy efficiency score was low (0.220), with potential electricity savings of 78 % by DWTPs when energy efficient. Unlike DEA-FSW, DEA-CSW allowed energy efficient DWTSs to be distinguished from the 146 facilities. Significant differences in the weights allocated to electricity and pollutants removed from raw water were reported for both approaches, and contributed to diverging energy efficiency scores. In conclusion, this study demonstrated the relevance of using suitable methods to generate comparable results for water companies, allowing the energy performance of DWTSs to be objectively evaluated for benchmarking purposes.

Assessing the determinants of renewable energy and energy efficiency on technological innovation: Role of human capital development and investement

With rising global production and population, the globalized globe has also seen severe environmental damage. This is why renewable energy sources are important for the planet's future and human progress. In order to fight climate change and decrease emissions, promoting energy efficiency is one of the most valuable strategies. Trade patterns across borders, however, have significantly evolved. This analysis provides new evidence regarding the influence of technological progress, and more specifically, industrial innovation, on the OECD countries' international competitiveness. This article aims to analyse the effects of international commerce, FDI, and human capital on the development of renewable energy sources, energy efficiency measures, and cutting-edge technologies. In this analysis, we look at how different variables, including GDP per capita, trade, FDI, human capital, and urbanization, affect one another. To conduct the analysis, researchers used a pool of annual time series data from 2000 to 2019 for OECD economies. The long-term relationship between the variables is estimated using the AMG estimation, Cup-FM, and Cup-BC test. AMG estimation, Cup-FM estimation, and Cup-BC estimation were all used, providing valid results for the investigation. Research shows that energy efficiency, renewable energy, and technological innovation are negatively affected by FDI and urbanization but positively affected by GDP per capita, trade, and human capital. There is no statistically significant effect of human capital on the dependent variables. The estimated results also provide important policy consequences for the chosen and the other emerging economies in creating an adequate route ahead to sustainable development.

Can Green Economy and Ecological Welfare Achieve Synergistic Development? The Perspective of the "Two Mountains" Theory

China’s high-speed economic growth and severe environmental problems have resulted in a poor Environmental Performance Index and have affected China’s sustainable development and ecological welfare improvement. Therefore, exploring whether there is a certain relationship between the two and their influencing factors is an important way and a breakthrough to solve the problems regarding green economic progress and ecological welfare enhancement. To this end, by using the undesirable slack-based measure (SBM) model, this paper measures the ecological welfare performance and the green economic efficiency of 11 cities in Zhejiang Province, China, from 2000 to 2019. Through the methods of spatiotemporal evolution, coefficient of variation, coupling coordination degree, and the Tobit model, we found that: (1) The development trend of urban green economic efficiency and ecological welfare performance were both in a “U” shape that first fell and then rose; (2) The coupling coordination degree between green economic efficiency and ecological welfare performance showed a wave-like upward trend as a whole and most cities have entered a more advanced coupling coordination stage during the study period. The coefficient of variation revealed a downward trend; (3) The urbanization level, industrial structure, and government investment can promote the regional coordinated development, while the industrialization degree and the opening level had a negative impact on it; (4) The “Two Mountains” theory was beneficial to the improvement of regional urban green economic efficiency and ecological welfare performance and their coordinated development both in theory and practice. Finally, according to the findings, we offer relevant suggestions on making good use of the country’s preferential policies and informatization means from the perspective of the regional coordinated development.

Technology imports, independent innovation, and China's green economic efficiency: an analysis based on spatial and mediating effect

Environmental quality and economic growth are important factors that need to be balanced for sustainable development, especially in developing countries where technology is relatively backward. Many studies have shown that technology imports may be beneficial to economic growth, but once the resources and environment are taken into consideration, the role of technology imports becomes blurred. Based on provincial panel data of China from 2004 to 2019, this paper investigates the influence mechanism of domestic and foreign technology imports on the green economic efficiency (GEE) of 30 provinces in China. There are two main conclusions: First, GEE is spatially related and the impact of technology imports on GEE has a significant spillover effect. Besides, the relationship between technology imports and GEE is non-linear, both in terms of direct and indirect effects. Second, independent innovation plays an important role in the influence mechanism of technology imports on GEE. As the level of independent innovation increased, the impact of technology imports on GEE turns from negative to positive, and it is strengthened through the channel of "transfer-absorption-diffusion-re-innovation." In this regard, some measures should be taken to enhance the role of technology imports in improving GEE.

Estimation of greenhouse gases shadow price in the English and Welsh water industry

Moving to a more sustainable and low-carbon footprint urban water cycle is essential in the light of climate change. In this paper, we estimate the implicit cost of reducing greenhouse gas (GHG) emissions for several English and Welsh water companies from 2013 to 2019. Using econometric techniques, we compute the shadow prices of direct and indirect CO₂ emissions associated with the provision of drinking water. This methodological approach also allows us to investigate the impact of a set of environmental variables on the costs of water companies and therefore on the costs of reducing GHG emissions. We then compute the returns to scale, technical change, and technical efficiency of the water companies. The empirical results show the following: (1) the average shadow price of CO₂ across years was 0.114 £/kgCO₂, which means that the English and Welsh water industry needs to spend an extra £0.114 in operating expenditure to prevent the emission of one kilogramme of CO₂; (2) the cost of reducing GHG emissions is very variable among water companies and across years; (3) water taken from boreholes and average pumping head increases cost requirements and therefore the inefficiency of water companies; and (4) the water industry may lower its production costs and thus the costs of reducing GHG emissions by improving its daily operations and adopting new technologies. From a policy perspective, this study evidences that in the English and Welsh water industry, a market-based approach may be more suitable to reduce GHG emissions than a carbon tax policy.

Benchmarking the economic and environmental performance of water utilities: a comparison of frontier techniques

Purpose

The purpose of this paper is to estimate and compare the efficiency of several water utilities using three frontier techniques. Moreover, this study estimates the impact of several qualities of service variables on water utilities’ performance.

Design/methodology/approach

The paper utilizes three frontier techniques such as data envelopment analysis (DEA), stochastic frontier analysis (SFA) and stochastic non-parametric envelopment of data (StoNED) to estimate efficiency scores.

Findings

Efficiency scores for each methodological approach were different being on average, 0.745, 0.857 and 0.933 for SFA, DEA and StoNED methods, respectively. Moreover, it was evidenced that water leakage had a statistically significant impact on water utilities’ costs.

Research limitations/implications

The choice of an adequate and robust method for benchmarking the efficiency of water utilities is very relevant for water regulators because it affects decision making process such as water tariffs and design incentives to improve the performance and quality of service of water utilities.

Originality/value

This paper evaluates and compares the performance of a sample of water utilities using three different frontier methods. It has been revealed that the choice of the efficiency assessment method matters. Unlike SFA and DEA, a lower variability was shown in the efficiency scores obtained from the StoNED method.

Pitfalls in international benchmarking of energy intensity across wastewater treatment utilities

The collection, treatment and disposal of wastewater is estimated to consume more than 2% of the world's electrical energy, whilst some wastewater treatment plants (WWTPs) can account for over 20% of electrical consumption within municipalities. To investigate areas to improve wastewater treatment, international benchmarking on energy (electrical) intensity was conducted with the indicator kWh/m³ and a quality control of secondary treatment or better for ≥95% of treated volume. The core sample included 321 companies from 31 countries, however, to analyse regional differences, 11 countries from an external sample made up of various studies of WWTPs was also used in places. The sample displayed a weak-negative size effect with energy intensity, although Kruskal-Wallace analyses showed there was a significant difference between the size of groups (p-value of 0.015), suggesting that as companies get larger; they consume less electricity per cubic metre of wastewater treated. This relationship was not completely linear, as mid to large companies (10,001-100,000 customers) had the largest average consumption of 0.99 kWh/m³. In the regional analysis, EU states had the largest average kWh/m³ with 1.18, which appeared a result of the higher wastewater effluent standards of the region. This was supported by Denmark being the second largest average consuming country (1.35 kWh/m³), since it has some of strictest effluent standards in the world. Along with energy intensity, the associated greenhouse gas (GHG) emissions were calculated enabling the targeting of regions for improvement in response to climate change. Poland had the highest carbon footprint (0.91 kgCO₂e/m³) arising from an energy intensity of 0.89 kWh/m³; conversely, a clean electricity grid can affectively mitigate wastewater treatment inefficiencies, exemplified by Norway who emit just 0.013 kgCO₂e per cubic meter treated, despite consuming 0.60 kWh/m³. Finally, limitations to available data and the analysis were highlighted from which, it is advised that influent vs. effluent and net energy, as opposed to gross, data be used in future analyses. The large international sample size, energy data with a quality control, GHG analysis, and specific benchmarking recommendations give this study a novelty which could be of use to water industry operators, benchmarking organisations, and regulators.

Hydraulic performance benchmarking for effective management of water distribution networks: An innovative composite index-based approach

Hydraulic performance assessment and benchmarking of water distribution networks (WDNs) impose a major challenge to water utilities worldwide. Presently, benchmarking strategies for WDNs are not fully developed, especially for analyzing intermittent systems commonly encountered in non-developed nations. To overcome these limitations, this paper proposes an index-based benchmarking strategy for WDNs, comparing their actual hydraulic performance and expected serviceability. A robust Hydraulic Performance Index (HPI) is developed as a global metric to account for the combined impact of multiple hydraulic outputs, concerning their benchmark values. The applicability of this index is verified on a numerical benchmark network, and its usefulness is demonstrated on a real-world intermittent WDN located in Kolkata (India) by coupling the HPI-based framework with hydraulic models using the EPANET-MATLAB programmer's toolkit. A scenario-based analysis is conducted using extended-period simulation to obtain the HPI for diverse service levels and leakage conditions of the WDN models. The HPI is designed to effectively capture the localized pressure reduction during peak flow, prioritize hydraulic outputs based on regional constraints, and penalize systems with unsustainably high hydraulic output. The developed strategy is also effective in performance benchmarking of WDNs of different nations with diverse serviceability and threshold parameters on a common platform. Finally, the practical efficacy and generalizability of the HPI-based results in the context of case-specific performance management of WDNs, along with limitations, recommendations and future perspectives are elucidated upon.

Comparing Operational, Environmental and Eco-Efficiency of Water Companies in England and Wales

The assessment of performance of water companies is essential for their regulation. In doing so, several variables and models can be employed. This study evaluates and compares the performance of a sample of English and Welsh water companies from the operational, environmental and eco-efficiency perspectives by applying the non-radial data envelopment analysis range adjusted measure model. This methodological approach allows integrating greenhouse gas emissions as undesirable output. The results indicated that the water industry performed well from an operational perspective. However, environmental inefficiency considerably exists which illustrates the difficulties of the water companies in reducing greenhouse gas emissions. The average eco-efficiency was 0.783 which means that while expanding water services, water companies could further reduce costs and carbon emissions by 11.7% on average. Other factors such as water treatment complexity and population density significantly affect water companies’ eco-efficiency. Several policy implications are finally discussed.

Aligning efficiency benchmarking with sustainable outcomes in the United Kingdom water sector

The provision of fundamental services by water and sewage companies (WaSCs) requires substantial energy and material inputs. A sustainability assessment of these companies requires a holistic evaluation of both performance and efficiency. The Hicks-Moorsteen productivity index was applied to 12 WaSCs in the United Kingdom (UK) over a 6-year period to benchmark their sustainability, based on eight approaches using different input and output variables for efficiency assessment. The choice of variables had a major influence on the ranking and perceived operational efficiency among WaSCs. Capital expenditure (utilised as part of total expenditure) for example, is an important input for tracking company operations however, potential associated efficiency benefits can lag investment, leading to apparent poor short-term performance following capital expenditure. Furthermore, water supplied and wastewater treated was deemed an unconstructive output from a sustainability perspective since it contradicts efforts to improve sustainability through reduced leakage and consumption per capita. Customer satisfaction and water quality measures are potential suitable alternatives. Despite these limitations, total expenditure and water supplied and wastewater treated were used alongside customer satisfaction and self-generated renewable energy for a holistic sustainability assessment within a small sample. They indicated the UK water sector has improved in productivity by 1.8% on average for 2014-18 and still had room for improvement, as a technical decline was evident for both the best and worst performers. Collectively the sample's production frontier was unchanged but on average companies moved 2.1% closer to it, and further decomposition of productivity revealed this was due to improvements in economies of scale and scope. Careful selection of appropriate input and output variables for efficiency benchmarking across water companies is critical to align with sustainability objectives and to target future investment and regulation within the water sector.