ACCADUEO: the experts speak
Scientific Coordinator of H2O
Finally, we can meet in person!
So much time has passed during which we have only been able to reflect on the water industry remotely. Luckily, there have been many opportunities to communicate and in-depth webinars that have kept the debate alive, though meeting in person has been sorely missed. At H2O, from 6 to 8 October we can finally get together in person and resume a constructive debate that is useful to all stakeholders.
Despite the challenges posed by the pandemic, a lot has happened in the water sector over the last year, which has been challenging and full of contradictions, but also progress. This can only be a good sign.
A few years after its formation, the water authority has managed to organize and coordinate the sector with great credibility and authority, and institutions are strengthening their environmental policies through solid projects for growth (no longer just hopeful plans). Regulation has provided a long-term framework and has bolstered confidence in stable revenues. Now, we must urgently use equalization measures to set priorities (with incentives and penalties). The regulation of technical quality is a great training ground, even if its impact will not be immediately apparent.
It is worth remembering the relative objectives, which focus on the basic principle of raising the quality of services provided to citizens.
- Technical quality regulation model (minimum levels)
- Quality goals and incentives
- Specific standards. General standards (macro indicators) and prerequisites
- Service charter, development and dissemination
- M: system leaks, service interruptions, water quality, adequacy of the sewer system, landfill sludge disposal, purified water quality.
When it comes to technology, it is important to be aware that companies providing environmental public services are better equipped and more advanced than ever before. We’re moving towards a core of some 50 integrated multi-utility companies capable of increasing service quality (profitability indicators and financial soundness are also reinforced), even if small municipalities can no longer manage (we need to reinforce efforts to overcome parochialism), given that over 1,800 entities are still in operation.
The water industry has been strengthened in northern Italy in particular through mergers and acquisitions; the strategy is to reduce fragmentation and reinforce unified management. The framework that emerges is divided into categories: large groups, local medium-sized companies and small operators that are struggling. Regulation must now give a greater voice to those who cannot cope.
The volume of the scheduled investments is a useful indicator to understand how the water industry will evolve in the coming years. The country urgently needs investment, but the danger of a deep recession looms if investments fail to exceed the viable minimum, putting much-needed sustainable development at risk. In this two-year period, tariffs have remained dangerously low, especially in northern Italy where an industrial approach to the sector is being attempted. Over the next three years, a significant rise in the quality of investments is needed. If the prices (which, as is well-known, are currently the lowest in Europe) were to increase, the industry would gain an added 3 billion (reaching almost 10 billion, which would mean about €80/resident/year and would equate to about €20 million in economic impact over a four-year period (producing 0.27% of GDP and adding 200,000 jobs). The benefits for the industry could be significant, albeit certainly not sufficient. A finding which is confirmed by Utilitalia in its annual Blue Book report. An initial estimate (based on a sample of over 32,000 residents) suggests that the yearly average of gross investments actually made amounts to €37 per person, approaching €40 per person in the case of vertically integrated operators. Looking at the 2016-2019 period, between final balances and predictions, the weighted average of annual gross investments reached €45 per resident. There has clearly been a significant boost, related to the 2018-2019 programming and the technical-quality regulation introduced by ARERA, resulting in a major leap forward compared to 10 years ago when that same average was around €30 gross.’ Conversely, municipalities continue to face substantial difficulties in providing new investments.
There are signs of structural growth, with operators gradually introducing more efficient and larger industrial system structures via aggregation. This will result in better monitoring of the economic-financial balance, and thus industry improvement (especially in terms of economic and financial indicators). Principles of operating margins, financial ratios, ownership structures, capitalization and stable governance will be the topics of the future, along with regulatory capacity, now that the operative phase of supervision and increased quality has begun.
Financial indicators have improved in recent years but deep adjustments are expected in the near future, ushered in by consistent regulation and by governance that is having a positive effect on the system. Although we are still far from the €80/resident/year needed to close the country’s infrastructure gap and to align with European standards.
By Energia Media
H2O 2021 The entire water industry will be at BolognaFiere from 6 to 8 October 2021
The water industry is undoubtedly an area that is in full development, with growing investment, new regulation, and the introduction of advanced technology in the market. Looking beyond the economic aspects (which are fundamentally important including in terms of employment), the industry brings with it a series of paradigmatic values in relation to the overall development of the country: environmental, economic and social sustainability, resource conservation, maintenance of public/private heritage, and the regeneration of regions and remote areas. These principles find concrete expression in the models, visions, growth of skills, new information, and increased awareness, including among citizens, arising from the redevelopment of the water industry. It is an industry that could bring about a cultural process to be applied to every area related to the development of public utilities and related services. This is where a large part of Italy’s ability to attract funding from the EU Recovery and Resilience Facility will play out, achieving results through the submission of solid plans to the relevant EU bodies. For this and many other reasons, participation in this edition of H2O is both strategic and essential not only due to the event being relaunched with new pavilions, a new layout and a fresh perspective as we exit the pandemic, but also to the fact that the timing is particularly advantageous for the industry's broad range of stakeholders. From 6 to 8 October, the industry’s finest will be in Bologna to discuss the wealth that can be created through the introduction of new technology and an enlightened vision of utility providers that are increasingly committed to positive change, digitizing internal and external processes, and leveraging the infinite creativity that defines the world of research with a new capacity for dialogue with businesses and institutions.
Like the past events held in Ferrara, the 2021 relaunch in Bologna is also based on the relationships that will be built, with the creation of an industry community that is increasingly diverse and vibrant, in many different ways. The conviviality of our meeting in Ferrara, which created the conditions for accelerating agreements and dialogue, will be amplified in Bologna, maintaining the same spirit combined with new possibilities for professionals to come together.
A quick scroll through the programme is enough to see that in Bologna it will be possible to systematize cooperation like never before, constituting a model also for other sectors covered by the same trade fair.
Digitalization and the green transition, cornerstones of Italy's National Recovery and Resilience Plan, will guide the programme, focusing on environmental issues such as treatment, reuse and waste water, sludge, maintenance, the management of water mains and infrastructure, agriculture, irrigation, hydrogeological instability, and so much more. The concepts of sustainability and the circular economy will be reinforced thanks to the input of a broad panel of experts that will address these topics as they relate to new business models.
H2O will of course take place in full compliance with protocols and measures that have become standard at BolognaFiere, with checks at the entrances and continuous cleaning and disinfection of all facilities. This also conveys that a solid recovery is underway, that we can move in a new but effective way, with the will to overcome cultural barriers that once seemed indestructible. This aspect, which seems more symbolic than practical, is also a sign of an advanced community, able to exhibit its excellent products and capabilities in a number of different ways. For example, exhibiting companies can include their solutions in the ‘Innovation Guide’, the calling card of the 15th International Exhibition of Technology for the Processing and Distribution of Drinking Water and the Treatment of Waste Water. The trade show will also include the H2O awards, which will present the most innovative products/projects and services in water and gas developed by enterprises, the scientific world and utilities.
Lastly, two new areas of particular interest to attending companies should be highlighted. One week before the trade show, from 27 September to 5 October, a platform dedicated to exhibitors will host a B2Match created in collaboration with the Italian Trade Agency (ICE). This digital preview will increase networking and dialogue opportunities (a sort of introduction to the trade fair) between the exhibiting companies and the main operators in the water industry. The countries gathered online will be Germany, Spain, France, Switzerland, Austria, United Kingdom, Belgium, the Netherlands, Slovenia, Croatia, Israel, Turkey, Moldova and Kosovo.
Then there is the ‘H2O Utility Hub’, a new feature organized in collaboration with Energia Media, a space for talks and networking to highlight investment plans and best practices for utilities, and to create relationships helpful to businesses and development in an industry that is increasingly taking off.
Scientific Coordinator of H2O
A few important matters.
The water sector continues to be of great industrial interest and, in particular, of great environmental importance. The industrial sector consumes over 7 billion m3 of water, 18 billion are used by agriculture (50%), while 5 billion m3 are distributed via civil networks, although 9 billion m3 are taken from water sources, highlighting major issues in terms of leaks and resulting in calls for action from institutes and the public in relation to the water emergency. It is clearly necessary to launch initiatives to reduce water use and incentivise its reuse.
The situation with regard to water infrastructure and management systems is critical. Massive investment is needed to overcome chronic structural weaknesses, but the main problem lies not so much in evaluating where and how to get these resources, but rather in identifying investment priorities. The deficit in terms of systems and infrastructure can be summarized as follows: 4% of the population is still without suitable water mains and 7% is without a connection to a sewer. In terms of water purification, a dramatic gap emerges, with 15% of the population living without water treatment plants (21% of the polluting load), with southern Italy falling drastically behind.
In Italy, 24% of water mains are over 50 years old, as are 27% of sewers, whereas the useful life of the same is 40 years. 92% of all work done on water networks is unplanned, meaning it is done to repair damaged pipes.
In terms of investments, after a decade of inertia (€30/resident/year), there has been some improvement with signs of recovery (€45/resident/year), and predictions of growth reaching on average, over €50/resident/year. Things are changing but we are still nowhere near the €80/resident/year that is needed. An uptake in investment is key: from €3.2 billion/year (over €50/resident/year) to €4.8 billion/year (about €80/resident/year). There are many issues related in particular to the lack of water purification and treatment facilities, but also to the elevated operating costs of existing water plants (especially with regard to the disposal of sludge that is too wet and unstable) due to their high energy costs and their intense environmental impact (with limited recovery of nutrients).
Current maintenance does not seem to impact structural operations, so a modern, sustainable approach to the problem of quality is needed in order to move towards circular economic sustainability, with the baseline being the quality of holding tanks and basins, both in general and according to their specific use. Incentives must be provided to reduce waste, improve maintenance of the supply and distribution networks, reduce leaks, and encourage water recycling and the reuse of treated wastewater.
Innovation and technological research therefore play an important role, which is something we seek to highlight at H2O. We can summarize with a few points: Smart land use, IoT, transmission technologies, system integrators, verifiability of water transmission, smart grids and metering, monitoring, consumption indicators, field sensors, new meters (for which there is still a lack of regulation) and recycling old ones (brass, glass, plastic), monitoring of microbiology, use of recycled plastic, reduced energy usage and a resolution to the sludge problem (few alternatives to incineration).
If you take the time to look around the stands you will find that there is a growing focus on technology, innovation, investment, management systems and best practices, which are areas that require an integrated approach. We have an opportunity for dialogue and debate on cross-cutting and niche themes alike, including industry, agriculture, the chemical industry and the water cycle integrated with the civil sector.
It is important for the public to participate in H2O
Citizens are, without a doubt, more aware of and attentive to their needs. Large agencies know that users must be made aware of the need to save water for domestic use, but also of the need to reduce the waste of water (potable or otherwise) used for production and irrigation purposes, and to encourage and support targeted studies 'including with economic incentives’ to improve the use of water in production processes.
The development of an economic basis for public environmental services thus becomes essential. A greater focus on costs and, especially, on prices and fees is required. It is, therefore, a question of civil development, but also of developing the economic basis necessary for local public services.
The provision of information is therefore essential. The importance of the quality and cost of water services as perceived by consumers (see REF laboratory no. 116, March 2019) is an important point of analysis. Perception is shaped by the regularity of service, network losses (in terms of technical quality) and sometimes by commercial quality (in cases of contact). A wider-reaching Sunshine Act (making quality indicators public) is needed.
The pricing system thus becomes one of the more essential, and perhaps more critical, aspects of the environmental services management system. The value, cost and price of the service provided should be connected and interdependent. However, despite the progress made in recent years, the price of water is still less than half of that in the rest of Europe. Water pricing reform (quoting from a REF study) has had a lengthy gestation period and troubled implementation. The goal of rationalization certainly has been reached. As of writing, however, 40% of all areas have not adopted the national regulation guidelines. The remaining 60% has mostly opted for gradual transition. The concept of the ‘standardized tariff’, introduced in Italy in 1997 by art. 49 of the Ronchi Decree (which provided for the switch from tax to tariff starting 1 January 2000), has been presented on multiple occasions as a pricing model that would give more weight to Europe's ‘polluter pays’ principle and encourage behaviours that are in line with the objectives of prevention, reduction of non-recyclable waste and an increase in recycling. The per capita tariff is a reality for 1 in 4 Italians although payment arrears are a problem, according to REF. The map of late payments shows an Italy divided into three parts: the south (including Sardinia and Sicily), in which unpaid bills amount to 14% of revenue, with peaks of 27%; central Italy, where the average value of unpaid bills drops to 6% but still with peaks of 19%; and the north, where the maximum level does not exceed 6% of revenue, while the average settles at 2.4%
The ‘right price’ of water is an important incentive to encourage the sustainable use of the same (a well-thought-out pricing policy should regulate usage and more importantly assign the right value to the utility provided). At the same time, it is necessary to find ways to incentivize operators that encourage water savings. Explicit and implicit quality must be incentivized and rewarded - by means of appropriate pricing instruments - while penalizing delays and inefficiencies (service charters must become a contractual instrument and not serve merely as a marketing document). Rate increases should not just be connected to covering service costs, but also to quality parameters: the ARERA measures on contractual quality (Res. 655/15) and technical quality (Res. 917/17) are a step in that direction.
ACCADUEO SCIENTIFIC COMMITTEE - CONTENT BOARD
- Anzalone Claudio – HERA
- Battiston Massimo- cafc udine
- Belladonna Vito - Atersir
- Berardi Donato - Ref
- Berselli Meuccio - ADBPO
- Bevilacqua Cristiano - LUMSA
- Biancardi Alberto - GSE
- Bocciarelli Mauro - Ordine Chimici
- Bonoli Alessandra - UniBO
- Giuseppe Bortone - Arpae
- Brunone Bruno - UnivPG
- Carrettini Carlo - Award Fond Aqualab
- Castaldi Gerardo - Acquainfo
- Cirelli Andrea - coord. H2O
- Cristofanelli Sergio - Minambiente
- Fantozzi Marco - ISLE
- Franchini Luciano - Ato Veronese
- Franchini Marco - Unife CSSI
- Furlani Alessandra - Consorzio Bonifica Renana
- Galimberti Giacomo - Studio Majone
- Gargano Massimo - ANBI
- Ghetti Alessandro - ANBI E-R
- Maglionico Marco - CSDU UniBo
- Marangoni Alessandro - Althesys
- Matino Paola - Luel
- Mazzei Alessandro - Anea AutIdrTosc
- Mazzola Rosario - UniPa
- Mazzolani Gianfredi - AQP
- Monti Mauro - Bonifica Ferrara
- Perra Lorenzo - Publiacqua
- Petta Luigi - ENEA
- Peschiuta Andrea - Emiliambiente
- Pitzurra Lucia - ACEA
- Rolle Enrico commissario
- Rubini Andrea - Water Europe
- Segnalini Ornella - Direz. Dighe Infrastrutture Idriche Ministero Infrastrutture e Trasporti
- Viaggi Davide - Unibo Agr