32
Examination of witnesses
Stuart Colville, John Marsh and Lawrence Slade.
Q33 The Chair: Welcome to the Built Environment Committee. This is the fourth evidence session of our inquiry into new towns, specifically about bricks and mortar. We are very delighted today to have three distinguished members of the profession joining us: Stuart Colville, the deputy chief executive at Water UK; John Marsh, the chief innovation officer at GTC, part of BUUK Infrastructure Group; and Lawrence Slade, the chief executive at Energy Networks Association.
We have quite a lot to get through, and we are looking forward to your evidence and the conversation with us. Please do not feel obliged to answer every question; we are avid for evidence and always welcome information in writing afterwards. Could you introduce yourselves very briefly before we start our questions, starting with you, Stuart?
Stuart Colville: Good morning. I am the deputy CEO of Water UK, and we represent all the water and wastewater companies across the United Kingdom.
John Marsh: My company is GTC and we are part of the BUUK Group. I started my life in utilities 46 years ago, working for what are referred to as incumbents: the traditional regional utilities, which were nationalised in those days. I had a 25-year career there. Then I spent the last 20 years in what we call independents because we do just new build and then we link into the grids that the incumbents run. We do multi-utility, so we have a slightly different role to the separate incumbents.
The Chair: You come at it at a different place in a different way?
John Marsh: Yes.
Lawrence Slade: I am chief executive of the Energy Networks Association. We represent the transmission operators and the distribution operators for the electricity networks in the UK and Ireland. We also work with an increasing number of independent network operators such as GTC and BUUK.
The Chair: You are very welcome. You have probably read some of the evidence on previous parts of the inquiry. As you can imagine, there is a great deal of anxiety about the delivery of infrastructure, when and how it is delivered, the connectivity between different parts of the industry, and the timing of everything in the context of where we are with the new towns now. This is a very important session for us. May I ask you to speak up slightly? That would be helpful for me as, although the microphones are good, the acoustics are not very good in this room. Our first question is from Lord Cameron of Dillington.
Q34 Lord Cameron of Dillington: Good morning. Thank you very much for coming. My question is the first, umbrella-type question. To what extent does the provision and connection of utilities represent a limiting factor to the building of new towns or to the delivery of domestic homes all round in general?
John Marsh: We call ourselves the independents just to get that distinction from the regional, incumbent, large-scale electric or gas companies. The independents now do 80% to 90% of the new-build market for electric and gas. The incumbents tend to look after the upstream—the grid capacity—which is so important.
I am talking for independents rather than just my company; there are several companies such as us bringing investment and delivering. This already works. We do sites of up to tens of thousands of homes: some sites are all new-build, some are just small 20-plot sites, and some, such as Ebbsfleet or the Brent Cross site, might be several thousand. So my big point is that if we get it right, this works now.
It works because we need a site-wide, joined-up utility structure for a full site, and the new towns are a wonderful opportunity for that. We are doing it now in the private sector with no government subsidy. It works today, so we have a great opportunity.
Lord Cameron of Dillington: Are you saying there are no problems at all?
John Marsh: There are very many problems of getting water and getting electricity on a big scale, without a doubt, but with the size and the timing of these sites, they are no different to some of the big private developments that we are doing now that have a master developer and then multiple parcel developers. The independents are connecting 7,000 or 8,000 new homes per week, which is volume build of housing. The key is to get very early engagement with the independents and the incumbents, and to get a right-sized capacity plan using smart energy—that is a wonderful world. This is happening today. I will talk a little about that in the examples, but get the right size electricity, get it phased, do the same with the water, and get talking to the incumbents very early on.
Lord Cameron of Dillington: Stuart, do you agree that, in terms of both water supply and receipt of wastewater, the water industry is probably not famous for its current success rating?
Stuart Colville: I would agree with John that the last mile or two of connection is not likely to be an issue. There is a market for delivering those connections that works pretty well. Where there may be a problem is in the upstream supply of water. To give you a flavour of that, as we sit here today, even before the addition of new towns, there are a patchwork of restrictions on the addition of new houses and commercial developments across parts of some counties in England: Kent, Essex, Suffolk and Sussex. The reason for that is that we have a system of regulation that historically has been really quite bad at looking forward and anticipating the demand that is coming down the track. We are already starting from that baseline position.
The strategic environmental assessment for the new towns programme, which was published in March by the Government, said that, without mitigation, development in these areas—new town areas—will have “a significant negative effect on water resources in the medium to long term”. That will add additional pressure to that baseline position I just described. The strategic environmental assessment published by the Government went on to assume that our system of regulation will fix that. We have these cycles of investment that will ensure that enough upstream reservoirs and water transfers will be in place.
My point to the committee is that there are some problems with that system of regulation. To illustrate the point: our plans do not foresee these new towns because they were prepared in advance of that. All right, maybe we can fix that, but they also explicitly exclude data centres, for example, as a source of demand; they just assume there will be no additional demand from that and that business demand will come down when the historic trend on business demand is flat. I am concerned that, as we prepare the next cycle of water plans for the reservoirs and all that upstream supply, we need to eradicate some of these optimistic blind spots and get the new towns in. It is actually fairly pressing, because we have about 18 months to write the next cycle of plans that will influence investment through to the mid-2030s.
Lord Cameron of Dillington: How long does it take to get a new reservoir, for instance? We have not built a reservoir in this country for decades, have we?
Stuart Colville: We have not built a major reservoir for about 30 years. It takes about 10 to 15 years to build, and we have one under construction at the moment in Havant Thicket, and a whole pipeline coming. They have been, and are being, designed in a way that does not reflect the additional demand from these new towns.
Lord Cameron of Dillington: What about wastewater? That is a serious issue.
Stuart Colville: Yes. There will need to be upgrades to wastewater plans as well. The wastewater plans are following a similar trajectory to the water ones. Again, we have about 18 months to fold in the additional demand that we expect to take place from these new towns and to work with the regulators to make sure that the investment needed is authorised and available—not least so that John and his colleagues can then put the connections in to get all these houses connected.
Lord Cameron of Dillington: What about energy? How do we fare on that front?
Lawrence Slade: Obviously I can only speak for the electricity side, but I can build quite neatly on John’s comments. It is a theme you are going to hear quite a lot throughout this morning’s session. From an electricity network point of view, the critical part of joining up to the local distribution network provider or transmission operator is around how early you can have that conversation. The earlier it is, the more we can ensure that it is in our future demand profiles for that particular region and network area, and I think this probably goes for Stuart and water as well.
Stuart Colville: Yes.
Lawrence Slade: How that works in a co-ordinated way is absolutely critical, whether you are talking about electricity, water, telecoms or transport infrastructure. Transport infrastructure is becoming even more important as we move towards electrification and EVs coming through. Understanding the future power demand of a new town, not just the EV side of things but also as we look towards electricity for heating et cetera, changes the whole demand profile of a house and of a new town.
As we look forward, we need to look at how we can manage that and work with the town planners—local planners in this respect—and how we can then look at saying, “Okay, this is the potential future demand and this is how we are going to work with flexibility around these issues and how we can manage that connection”. Early engagement is absolutely fundamental to this. While a lot of great work has been done with the Planning and Infrastructure Act so far, another area that we need to be sure of is the issue around how we can ensure that we are able to reinforce the local network in a timely fashion, so we have land access rights and planning consents, and then we can make the investment decisions to move forward.
Lord Cameron of Dillington: I seem to be getting the idea from all three of you that it is all very easy as long as the long-term planning gets a kick up the backside.
Lawrence Slade: I do not think I would ever use the words “it is all very easy”.
Lord Cameron of Dillington: You seem to be very, shall I say, relaxed.
Lawrence Slade: I do not think we are ever relaxed about connections. As we move to an electrified economy, it is one of the challenges that we have to manage and we have to keep pace with generation and demand connections. Right at the heart of this is making sure that you have that early level of engagement and that work proceeding and developing on planning, in terms of both an economic plan and a plan on the ground.
John Marsh: The air source heat pump has been the big swap from gas-heated homes. In general, the swap has been sold as a feature of the house and passed to the home owner. Air source heat pumps need double the grid capacity of a gas-heated home. There are solutions out now that we and others are deploying that do not need that double grid capacity—they only need the same as gas.
We are now deploying these at volume with no government subsidy. This is working as part of the electricity system, so we already have solutions that have very low, if not negative, energy bills, which is phenomenal. This is all achievable. It is there now at the same grid capacity as if it was gas-heated, so that problem has almost gone away.
Q35 The Chair: I will follow up with a couple of short questions. First, the short-term and long-term issues seem to be slightly contested in the sense that, when you come in, John, you would expect most things to be sorted; Lady Barran is going to pick up some of these questions in a moment. Have you been involved in these early conversations with the new towns yet, either at an institutional level with the task force, with MHCLG or with the individual developers? A short answer on each of those would be helpful.
Secondly, Stuart, you have given us some rather worrying information about our failure to plan coherently for demand in the future, which sounds very strange because is that not the definition of planning and future-proofing? Where does the failure lie here? What happened, for example, to the 25-year water plan that we had in 2005? Has something gone wrong with the planning of all this?
Stuart Colville: In response to the first question about involvement to date, there have been conversations between water companies, MHCLG and those involved in the new towns programme, but I would say that they are at a very early stage. When the water companies are looking at what additional investment might be needed within the current five-year investment period, which runs to 2030, quite often they are not able to say, “Well, this is the sort of solution we need to put in place”, because it is not yet clear what the demand profile will be, or which year the additional water or sewage capacity will be needed, for example. This relates to my point that we have about 18 months, ideally, to bottom that out and to make sure we do not miss the boat on the next cycle.
In terms of problems with the planning framework to date, there is a fundamental point about how water investment works. There is no commercial or cost reason for a water company not to make capital investments. Unlike most industries, its revenue tracks expenditure, so part of the bill formula is literally calculated on how much money is going in. For example, companies brought forward proposals for a reservoir in Abingdon in 2011, and a reservoir in Bristol—the Cheddar 2—in 2014. There have been previous proposals in Broad Oak in Kent, and through a combination of the developmental planning consent system and the water planning system, those have been rejected. In the case of the 2011 plans for the Abingdon Reservoir, the then Secretary of State concluded that there was “no immediate need”.
We have seen this scepticism about getting ahead of demand. It is a bit of a missed opportunity, because even when interest rates were low in the mid-2010s, rather than pushing investment into some of this infrastructure, our water planning framework said, “Well, there is no immediate need, let’s put it off”. We have missed some of the opportunities to get ahead of this. That is why we are now building 10 reservoirs all at a similar time, which of course has implications for the supply chain and all the rest of it. We are fixing it, but there is still a way to go to remove some of these blind spots in the planning framework.
The Chair: Do you think that we will have such a plan in 18 months?
Stuart Colville: There will be significant improvements in what we have seen before. In fact, if you read Sir Jon Cunliffe’s review of the water sector that came out not so long ago, for example, there is widespread recognition that, for too long, we were squeezing the existing assets too much.
In some parts of the country, headroom—spare water—is down to 2%. Clearly, if any shock comes along—if you have a new town or whatever it is—there is far too much fragility within the system. That has now been recognised. There are certain specific things the Government can do to fix it, not least through national resilience standards, as an expression of the risk that society is willing to bear.
The Chair: Thank you very much indeed. John and Lawrence, have you been involved in early conversations about the new towns?
John Marsh: Yes, we have been heavily involved, and we have issued the document “Infrastructure Ready”. Our approach is to appoint somebody who is going to be the regulated asset owner of those site networks very early on, which is the role that the independents play. We are Ofgem and Ofwat regulated and we run those networks; we call them the last-mile network.
We can take a long-term view of the regulated revenue streams because of that early appointment as the future asset owner, and we bring investment. We alone have invested £5 billion in last-mile energy and water networks over the past 30 years. The key for us is this: get the key enabling works for these big sites in, get the grid connection, get the off-site work done, put water and electric in the same trench where you can—you cannot always do that—get the intake substation, and get the spine mains around the site, and then parcels can plug and play. That is how we get volume. If we can fund it early on through a view of the long-term regulated revenue, we can get the site away. Cash flow is king for the house builders at the start.
The Chair: That is really interesting. Can you send us the “Infrastructure Ready” document? That would be very helpful.
John Marsh: Yes.
The Chair: Lawrence, do you have anything to add?
Lawrence Slade: Yes, is the basic answer. Going forward, it is important to understand how the ecosphere, if you like, of all these plans fit together. We are seeing the development of a centralised strategic network plan that will go out many years into the future, which gives a national heads up in terms of how our electricity infrastructure is being developed. Then, at a more regional level, we are working with the National Energy System Operator, or NESO. We have the regional energy strategic plan, going down a level again, which will help provide detail to help the local networks build up their business plans for the next five-year period. ED3 will kick in, in April 2028 through to 2033. Then we have the local area energy plans, which go down to the next level to the local authorities. The network operators at the regional area, as opposed to the independent area, need to make sure that they are engaging at all these levels and that, for a new town, they are feeding into those processes so that the loop gets completed in terms of the investment and business plans that then come forward.
Lord Ravensdale: Lawrence, I am interested in what you just said about the governance flow down in terms of electricity networks and the lower tier you mentioned: the local area energy plans. We understand that one limitation there is that they are fairly patchwork in nature across the country: there is no mandated approach to local area energy planning. Is that a limitation from your perspective? Does there need to be more of a coherent approach in how those plans are rolled out, taking into account things such as new towns?
Lawrence Slade: Yes. One of the challenges is making sure that everyone has sufficient knowledge and experience on the ground. Anecdotally, there are some local authorities that perform better than others in this respect, so your phrase, “fairly patchwork”, is probably quite appropriate in that respect.
Lord Ravensdale: If there were a more coherent approach, would that help with planning?
Lawrence Slade: Yes.
The Chair: I will bring Lady Barran in now because this is rather relevant to her.
Q36 Baroness Barran: We have definitely made a start on an answer to my questions. How can the Government and the new town delivery vehicles be most helpful to all of you? You have all talked already about early planning; you may have more to say on that, or perhaps there are other points that you would like to raise. What would be your absolute priority steps if you were advising them for the best outcome?
Stuart Colville: The main point would be to integrate and embed water management within the master plan from the outset. Quite often, you see development bringing in water towards the end and thinking about it as an afterthought.
There is an enormous opportunity with these new towns to think about the fabric of the buildings. For the first time in England, we might have a real opportunity to do proper community rainwater harvesting to clean the pavements, water the parks and so on. Integrating water properly is possible. Copenhagen, for example, has really thought about flood alleviation, water quality objectives and—going back to the sewage question—how to stop so much road run-off getting into the sewer network. Another opportunity is providing a raw water supply for non-potable needs in the local community. Really thinking about it from the outset will, in turn, reduce the amount of additional strategic capacity we need and therefore reduce the impact on bills, make it easier and faster, reduce disruption, and bring all sorts of biodiversity benefits.
Baroness Barran: Before we go to the others, you make such a good case for that, so why does that not happen? What is the blocker to that happening already?
Stuart Colville: There are a range of reasons. First, you need scale, particularly for things such as rainwater or greywater harvesting. You need to be there at the very outset, and you need enough units to make it worthwhile, really thinking through the technology and how it would work in the system.
Secondly, there are some policy barriers at the moment. The rules about the provision of rainwater within the home to flush a toilet are quite difficult to overcome. The various regulators, the Drinking Water Inspectorate and the Environment Agency, are working on the use of certain types of reclaimed water. We do not want to take too many risks: you clearly do not want to misconnect a rainwater pipe into a tap, because the consequences could be really severe.
Nevertheless, if we cannot do it with these new towns, we will never do it. To give a flavour of why it is important, if we can reclaim rainwater from the roof and use it for toilet flushing, it can cut household consumption by 25%. It is pretty clean; you have to take a little of the grit out, but this is the sort of thing that we should be exploring.
John Marsh: How the Government can help with the delivery is a great question. Again, they should look at the private sector where this happens now. My personal experience of some of the big public procurement is that you almost lose the will to live before it finishes, whereas the private sector is doing this all the time. I have some examples later on, such as Brent Cross, but this includes big, suburban, low-density sites as well. They tend to run a beauty parade where they say, “Look, we want a preferred bidder to now get into the detail”. It is short, quick and efficient. There is huge competition; we have lots of competitors. The incumbents are not our competitors—other investors are our competitors. What people will then do, in a short document, is say, “I want low water use. I want low electric use”. They are aware they have a grid constraint, and they will throw the challenge to us and we innovate. That is what we do.
We had the Ebbsfleet site, one of the first garden cities, which could not get going because the two suppliers—I think they were Southern Water and Thames Water—did not have capacity in the sewers. We knew that to win that site and the first 6,000 homes, we had to solve that problem for every utility. We did an on-site wastewater treatment plant run with regulation and that got that site away, because that was what was stopping it. My point is that there is a market out there that thrives with real competition. Independents win their jobs because of their success; not just by meeting the needs of the site and the community. If those networks do not perform, the house builder will not give them the next site or the next 10 sites, because they have let them down.
Baroness Barran: It is very interesting you should raise that because before you came in, we were talking briefly about that point about creating greater pressures on the broader network. You talked initially about your “last mile” description of what you do, but from what I have understood you to say—correct me if I am wrong—“last mile” also means resolving some of the wider capacity issues to allow the last mile to work.
It would be interesting for us to know the potential to address some of those wider infrastructure constraints through the kind of solution that you have just cited. Maybe this is something any of you could send us afterwards, unless there is anything you particularly want to say on that now.
John Marsh: The way it works is very simple: once that preferred bidder is in place—working with the master developer as the key—we then size the right networks and the right grid capacities. With electric, you can have a consultant working for a developer who doubles the capacity to make sure. The incumbent could take a slightly more pessimistic view. The best thing is for the regulated licence holder to run that network saying, “I have to win it by not over-egging it, but I have to run this for ever so it has to work”. We get the right capacity but then every week we apply to the incumbents for points of connection, and we will go in and have very co-operative, interactive conversations. We say, “No, I don’t need five megawatts today, that is in 15 years”, and the incumbent says, “Oh, well I can get you some capacity while you’re there”. Then we talk to the developer to say, “Don’t start building over there because the capacity is over here—build over here first”. You can get low-voltage and high-voltage connections, and that buys several years of development until the phased capacity comes off the grids.
We do everything at King’s Cross; it is unique in Europe. It has seven networks, including heat, cooling, water—everything. There are 2,000 homes and 5 million square feet of commercial space. We own every site network. That has two or three points of connection off the water network. We are coming at 132 kV off the UKPN. We have to deliver that for our client. Come on, there must be capacity there—there must be a better way of doing it.
Baroness Barran: I want to come to Lawrence, and I am sure there may be others who want to come in. This is too long a question for now but maybe you could share your response with us afterwards. For someone less experienced than others on the committee, like me, it would be interesting to know the kind of big infrastructure bottlenecks—you were talking about reservoirs and so on—that we read about in the press. Is there a scale of capacity constraint that just cannot be fixed locally in the way you have described? What percentage of those constraints can be resolved? Is there a division between, “This is fixable and this is not fixable”?
Somewhere at the back of my mind, I worry that, for some sites, there could almost be a lazy way through, which is to say, “This is all just feeling too hard, we’re not going to progress with this”. We have seen plenty of examples of that. One of the messages we might want to get out is more that there are ways through, even if they are not necessarily the conventional way that everybody immediately thinks of. If you have written something on that it would be very interesting to see it.
Lawrence Slade: I can probably neatly build on some of the things that both John and Stuart have already said. For the electricity network, the important things, as John said, are last mile and the independent—that is great, but they have to be on the ground early. All the things that we have spoken about apply. We are a little further upstream, which is where you have to make sure you understand the issues around where potential delays could happen and where they could come from.
In the Modern Industrial Strategy report, which was published last year, energy and electricity networks were seen as one of the key enablers of the economy—that is the underlying principle we take forward. If you flip back a little further to the Winser report from three years ago, the issue was around transmission lines taking sometimes over a decade to build. A quip from Scottish Power was that it was seven years in planning and three years in construction. The Winser report was about the challenge of how we could get that down to half. From our perspective, if you look at the interdependencies on connecting up a new town—making sure that the local substation has connections and the local grid supply point is sufficient; looking at the whole regional power area and how you can use flexibility to bring innovation and new technologies into this town—you have to make sure you are looking upstream at all the issues.
Then, for network operators, we need to make sure that we have the ability in the longer term not just to be able to make sure that we can plan our operations when we are accessing the network for extending substations or grid supply points and putting more availability in there, but also that we are not the only country in the world doing this. When we are looking at a new transformer or more cable, for example, we have to look years and years ahead. I would be happy to come back to the committee in a couple of months’ time when we publish our electricity network sector growth plan. That will take you through the economic impact of the work that we are doing and the plans going out into the next decade, which fits very neatly next to the agenda that you are looking at here.
The Chair: That is a very nice invitation, because, although we plan to write our report fairly soon, we still might be in time to see what you are planning. Lady Barran’s question about what is and is not fixable is a huge question. If you wanted to give some time and thought to that and give us an A4 page on what you think, it would be very helpful, because it is such a fundamental question.
Lawrence Slade: Yes.
Q37 Baroness Griffin of Princethorpe: I declare a non-financial interest in ADE, which is about heat networks—but I suspect that it will be about cooling networks as well. Also, I was not involved in inviting Lawrence, but Lawrence and I have worked together before.
Lawrence Slade: We have.
Baroness Griffin of Princethorpe: I led on energy poverty in the European Parliament and we did a lot of joint work, so I wanted to put that on the record.
The theory is great but how do we make it happen in practice? Is there enough grid capacity? How do we turn consumers into prosumers? How do we ensure that this helps to alleviate energy poverty? Why am I walking around new-build estates across the country at the moment where this stuff is not happening? How do we get our procurement right in terms of both the public and private sectors?
There was a very good article by Bill Esterson MP this week, in which he said the same as Lawrence: the motivation is economic but the outcome is clean and green and about alleviating energy poverty. If you do it that way round, the narrative is more easily understood. Can we have examples of good practice from other countries, because that would be really helpful?
Will there be enough grid capacity? Are we planning for it? Will there be enough engagement with local people and local communities? What are the challenges and opportunities associated with the delivery of distinct new towns in comparison to urban extensions, and how might these be overcome or capitalised on, respectively? How do we get this stuff right for the benefit of local people?
Stuart Colville: Let me briefly comment on the earlier bit of that. First, we have to make the new town programme happen. We are fully committed to that and we can do it. In highlighting some of these risks, I do not want to give the impression that we are going to throw our hands up and give up. One thing that would help a lot and that could be done relatively quickly is not the engineering but policy change. The engineering is possible; we can do all the infrastructure we need. A town of 40,000 people needs something like 13 million litres of water a day and we are building reservoirs that can deliver 10 or 15 times that, so we can do that, but it takes a little more time. What would help in the shorter term is a series of policy changes from the Government, some of which they have already committed to, such as the labelling of white goods for water efficiency purposes. That radically reduces water consumption and allows you to start building houses before the reservoir and the other bigger infrastructure are in place.
There are things you could do on abstraction and building regulations as well, but I can write with more detail on those if that would be helpful.
Baroness Griffin of Princethorpe: Thank you.
Stuart Colville: In the meantime, in terms of opportunities and risk specific to new towns, both are greater compared with incremental development. I talked before about how headroom varies between 2% in the worst case through to about 10% nationally. That means we have to get the water planning system right. As Lawrence and others have touched on, it means we need early notification, but the opportunity is much better and much greater, as I have alluded to.
In terms of international examples, I have already mentioned Copenhagen. There are tons of examples that we should be learning from. New York is pretty good at integrating multiple objectives; it designs its parks in a way that alleviates flood—it is on top of this. Cyprus recycles almost all of its treated wastewater. Malta has a third pipe network in addition to drinking water and sewage that takes highly treated wastewater and uses it for agriculture irrigation. Singapore has data centre standards that we can only dream about; it says to its data centres, which are obviously big water users, “Look, for goodness’ sake, you need a water efficiency plan, you can’t just take whatever you want”. There are loads of examples and what I hope is that, in the design of each of these areas, we look not just internally but out to what these international examples are doing as well.
John Marsh: From the challenge point of view, I go back to when I started in my career. I know I do not quite look old enough, but it was 46 years ago.
Baroness Griffin of Princethorpe: I could not possibly comment.
John Marsh: We had nationalised utilities then and they were fragmented: the water went in, then the gas, then the electric, and then in different regions you went to different companies. The world has moved on a lot now and it is multi-utility provision by what we call independents on the site, bringing investment. The risk for the new towns would be going back to a fragmented approach of looking at individual utilities. The opportunity is joining it all up. The electric is really important because air source heat pumps need double the capacity.
I am fascinated by your earlier comments about heat networks and cooling. A game changer for us has been that we can now use plastic heat networks, as Europe does. I went to see some in Denmark 20 years ago. In the UK, the temperature of hot water in homes under the building regs meant that we had to use steel because plastic deteriorated below a certain temperature. Now that homes take heat at 60 degrees centrigrade, we can use plastic.
We are a UK company and we employ 3,000 people. Our teams that were doing gas have now been skilled to put heat networks in on low-density housing sites. That is a lot lower cost than individual air source heat pumps. The magic of that solution—forgive me if you know some of this already—is having thermal stores in the centre, in what we call the community heat hub. There is a reason we call it “community”, which I will come back to. In the centre, there are big thermal stores, probably as tall as this building, holding three hours of hot water on the coldest winter day.
The magic there is the tunes we play with the grid. It is quite simple. We will not take electricity when the grid is busy and prices are high; we will take electricity at night when the wind is blowing and electricity is free, or we are being paid to take it. We can drop energy bills by 20% straight away for homes and then we can start to procure electric in a different way, and we reduce grid reinforcement. That joined-up approach is the huge opportunity here.
A big plea I would make is keep electric and heat together; they are the same thing. Heat is electric. The disaster is when big sites go, “Right, I have my electric, I’ve talked to the incumbent. Oh, I need a heat solution now”. It is even worse when you have parcels: “I’m doing it this way”; “I’m putting air source heat pumps in”; “I might do that”. We can fix this once, as we are trying to do today.
Baroness Griffin of Princethorpe: When I was a city councillor of a very poor ward in Liverpool, many years ago, I had to get a memorandum of understanding between utilities so that local residents were not having their streets dug up year after year after year.
Lawrence, do you have anything to add?
Lawrence Slade: Yes, and it is lovely to speak to you again. Probably the area that I can most usefully add to here is where we are in the process of building business plans for the next price control at distribution: ED3. We are also looking at things such as reforming national pricing, and we are talking to the ESNZ Committee about that.
We have spoken a lot about investment, and it is great that all of this is being done with private investment, but it is not just about building. We need to be really clear about this. When you are looking at new developments and new towns, there is a fantastic opportunity to look at flexible services, and John has explained that really well. That is not just because it helps us manage the network, that is definitely a central reason, but because it allows the end user—the householder in this example—to look at how they are saving money on their bill and how they are managing their energy. There are opportunities around how we make innovative use of a more digitalised electricity network, from the local grid right the way up to the transmission system that needs to be part of this—it needs to be part of the holistic planning for the system that National Energy System Operator is taking forward. That is really important.
The other thing is that we can sit here all we want, on either side of this table, talking about what we can do and the innovation we can bring to new towns, et cetera—but what we also have to do is ensure that we are making the right level of communication to the potential householders who are going to move in there. They are used to having a gas boiler and not used to having an EV, so they will need to understand the change that that makes, and ensure that, when they move in, they trust that all of this works. When it comes to heat networks, the awareness is about saying, “No, I do have my own thermostat in my own house; I’m not just reliant on the heat network”. It is totally and utterly different, and we have to make sure that we are communicating the benefits of a more net-zero orientated property to the potential householders.
Baroness Griffin of Princethorpe: Does this planning include the ability to turn consumers into prosumers?
Lawrence Slade: Absolutely, yes.
John Marsh: If it is better, I can talk later on about our site at Cosmeston Farm: 576 homes where people will have negative energy bills. That is happening now.
Q38 The Chair: Before we move on, I am going to load my own question into this. The specific question was: how does the new town itself compare with the extension in terms of the way you provide services? Are there hazards to either model that make it more difficult? Given a choice, would you rather be commissioned to work on an urban extension, because there is existing infrastructure, or a new build?
As part of that, my question is: given all the demands on your services—not least the planning ahead, connectivity, resource capacity and scope for innovation—how can you guarantee that the new towns are going to get priority?
Lawrence Slade: Sorry, just to be clear, what is the first question?
The Chair: First, what are the differences between trying to plan and provide for an urban extension—the majority of these sites are actually urban extensions—and greenfield sites? Secondly, given all the demands on you for new settlements and all the similarities that John has pointed out, to what extent can you guarantee that new towns are going to get priority in the great decision-making processes?
Lawrence Slade: I should probably point out first that I am not an electricity system engineer, and I am absolutely sure they would love to answer this question. From a higher-level planning point of view, obviously a new town is a blank sheet of paper, so you can go in there and hopefully plan quite a long way into the future with what you are doing. In that respect, it is an “easier” task, although you have to accept that there are upstream issues related to ensuring the grid capacity and the substations are there, et cetera. They are easier engineering issues to solve. In terms of the existing infrastructure, it is more complex because of the way the infrastructure was put in place in a lot of towns 20, 30, 40 or 50 years ago or more.
One of the issues we have going into the next price controls is looking at what is known as unlooping, for example, where you may have a cul-de-sac that just has one ring main going round, spurring off for each house. That was fine when you just had a fridge-freezer, a cooker and a washing machine, but now you start adding on to that heat pumps and EV charging points, and you need a connection to each property. We are facing issues such as that today, which will be a major part of the next price controls and the one after that, to ensure people can get the services that they need as we electrify our economy.
They each come with their own challenges, but a new town has the benefit that you start with a blank sheet of paper when you do the system plan.
The Chair: Do you think the new towns have sufficient clout, political energy or economic purpose behind them to be a priority for you?
Lawrence Slade: One of the things that is important to understand around a network is that we are agnostic to whom we connect. Whether it is a generation or a demand, we cannot pick and choose who we connect. There is that strategic issue that sits outwith the purview of an electricity network, so that will lie with more strategic things.
The Chair: That is interesting. Stuart, how does that fit in with your experience?
Stuart Colville: On the question of new big build versus incremental expansion, I have talked a little about some of the opportunities that are achievable on the site itself, if you are starting from scratch, to reduce water demand and do interesting things. Some similar opportunities exist upstream as well. Rather than incrementally adding to an existing treatment works, if you are going to add 40,000 homes, for example, it may be that new upstream infrastructure is required that could be more modern, and you could do things in a different way. Similar is true with the connecting sewers. At the moment, what tends to happen with new house building is they have separate pipes for road run-off and the foul sewer, but ultimately they then feed into some pipe that may have been in the ground for 100 years and combines them again. That is one of the reasons why you then see sewage spills into rivers. If you are doing it from scratch, you can have a properly separate system for the sewer network that then has benefits for water quality. Those are some advantages there.
In terms of prioritisation, the water industry is legally required to connect to any house that requires a connection. We are not able to distinguish between a new town house and non-new town house. The same is not true for non-domestic properties: if there is a lack of water, the water company has the ability to decline a connection. There is no competition between the geographical sites of house building. There is some pressure between houses and non-domestic properties in certain parts of the country.
The way to fix that is to get right those plans that I have spoken about. One of the quickest ways you could enable some of that non-domestic connection is through some of the policy changes I have talked about: a more sensible approach to abstraction—allowing the water company to take more water when river levels are extremely high and causing a flood risk, and when there is no environmental impact, rather than limiting it as is the case at the moment—or appliance labelling.
The Chair: If you had a greenfield site with a data centre on, would you still have the option of saying, “Sorry, we can’t connect”?
Stuart Colville: In principle, yes, though of course you would never want to be in a position of declining that connection, especially for something that is so important for growth.
The Chair: Is it the case that you do not see a contest between political choices, because that does not come into your frame of reference and you do what is required?
Stuart Colville: The Government have previously, through legislation, chosen to say that any house that is built will get a connection, and there is more optionality on non-domestic properties.
The Chair: John, do you work in urban extensions as well as greenfield sites?
John Marsh: Yes, hugely. We are doing King’s Cross and Brent Cross right now—the biggest regeneration sites. We are doing every utility on them. I will come back to you with those examples.
The Chair: Of course. We are longing to hear your examples. It is a bit further down the track.
John Marsh: I will bring my slideshow and presentations. I echo what the guys said that, from a regulation point of view, you cannot discriminate or pick and choose; you must provide connections.
What we do, as the independent coming in, is normally selected by the master developer on the biggest site, whether that is urban or new town. Then we right-size the water connection and phase it, because we do not need all the water on day one and there might be water available. We do the same with electric; we used to do it with gas. We have knowledge and visibility of the electric network. Often, we will go into the incumbent’s electricity grid and say, “We think there is some spare capacity there and you have a bit more—we’ll help with the solution”. We will do the same with the water, with slightly less visibility of the existing networks. Then we will do the off-site mains: we will lay kilometres through the middle of London or in a greenfield because we can never let a house builder down by failing to have power—electric or water—ready on the day when someone moves in.
The Chair: Your critical relationship is with the house builder. In the taskforce, we were assuming that the size of the new towns was 10,000.
John Marsh: That is the minimum, yes.
The Chair: In fact, it may well creep up, because that sounds like a very small settlement. I think you said that one of the reasons it was successful, from your point of view, was because it was a manageable number and that there would be capacity. What would happen if you had a greenfield site of 40,000? Would that be much more of an issue for you?
John Marsh: It would be. You can almost chunk it out. The 10,000-plot new home site could almost be four 2,500 plot sites. We have phases and stages. There is capacity over here and there is capacity over there, so we work with the developer to say, “Where you build it, we put in”. At King’s Cross, we take electric at 132,000 volts off UKPN and then we own all the site infrastructure. We have 11,000 volt circuit rings running around that site. It is the same with the water. It does not phase us: the bigger the better. We are all about growing the asset base and investing.
The Chair: Would you build that into the master plan?
John Marsh: Yes.
Q39 Lord Ravensdale: My question will play on the question from Baroness Andrews a little, but I will look at this from a more strategic level. Stuart mentioned data centres and water use not being factored into plans. I remember sitting down with the Secretary of State on the question of data centres and electricity a couple of years ago. The forecasts for the electricity we will need for data centres are changing all the time. There is then a wider question about transport, manufacturing and the electrification of industry. More broadly, how can the new towns programme be delivered alongside all these other competing demands for energy and utilities?
Stuart Colville: Data centres are important but a concern from a water perspective. It is quite hard to get figures on their water use, but they use the equivalent of 20,000 homes. If you believe the Government’s projections on the growth of the sector, they will be using something in the order of 60,000 homes’ worth of water by 2030. That, in and of itself, is absorbable with changes to the network and so on. The problem comes at times of peak demand. What tends to happen with some data centres is that they switch from air-based cooling, given the higher temperatures outside, to water-based cooling. As domestic demand goes up by about one-third on a hot temperature day, a data centre’s demand for water can go up by as much as eight times. Our concern is that, by 2030, you could have two Havant Thicket’s worth of additional demand on the network. Havant Thicket is one of the new reservoirs currently under construction. It is a material amount. That is not to say that we should stop data centres or other new industrial sources of growth and employment.
First, we need to factor them properly into our forecasts. We cannot just say, “It is difficult to predict and therefore we are going to leave them out”. If we are not sure, let us build in some headroom so that, depending on where actual demand gets to, we can absorb the additional demand and are not running to catch up. In the meantime, people are losing supply. We need a better system of forecasting and, if necessary, building headroom.
Secondly, it is no big deal for some industrial developments to be a little more efficient. That is what other countries are doing in continental Europe, and I mentioned Singapore previously. It often ends up saving them money in the long run. There is no reason to use highly treated drinking water to cool some new industrial uses. There are lots of examples of heavy industrial plants that suck in huge amounts of drinking water, take the chlorine out, and then spray it over hot machinery. The volumes involved are absolutely enormous. Whether it is data centres or something else, let us have proper water efficiency standards. Let us get them producing a plan to reduce use in peak demand in particular. That is the way forward.
Lord Ravensdale: You mentioned forecasting, which is difficult with an emerging technology like this. Are you considering evaporative cooling—for example, with data centres—which has huge water consumption? Some data centres are changing their method of cooling to use much less water. The headroom point you mentioned is key, but are you factoring technological advances into how water is being managed for cooling within data centres?
Stuart Colville: Yes. The figures I gave you are based on what we believe to be the average consumption for more recent technology. There are laggards in the sector that use more water based on older cooling technologies.
One thing that would be helpful is an agreement with that sector—and potentially some others such as hydrogen—to be a little more transparent about water use. At the moment, we have to guess how much water they are going to need. There are commercial reasons why some industrial companies would want to keep their designs secret. Ultimately, we need a little more forward visibility as to how much water they are likely to use over time, and we can then respond to that.
Lord Ravensdale: Lawrence, what are your thoughts from an electricity network’s perspective?
Lawrence Slade: The key thing from our point of view is that we are in a much better position than we have been previously in terms of co-ordination, mainly because of NESO now existing as a separate entity and the regional energy strategic planners. These are all good steps forward that help us plan and co-ordinate as we go into the next price controls.
We are still seeing examples where one aspect does not seem to be linked to the other, and data centres are probably one aspect where a lot of focus has been on electricity connections. That is fine; they use quite a lot of power. You are going to be looking at electricity connections, but you need to look at that with the other utilities. You need to make sure that, if we are looking at an AI growth zone, it has power connections and access to sufficient water. As Stuart has been asking: how does that link in with other developments in the area? There is still a hesitation to make sure that, rather than just looking at electricity, we look at utilities as a whole and what is needed in that respect. That would be my contribution to this.
Lord Ravensdale: Do you have any comment on the overall process that NESO is now managing—the spatial plan? Is it delivering what is needed?
Lawrence Slade: To be fair to NESO, and to be fair to us, we are still at the early stage and have seen that through to connections reform. The more you go into these processes, the more you understand some of the complexities, be they policy, regulatory or engineering related. NESO has to add lots of people into that. Day by day, it is getting better at what it needs to do, how it is impacting some regional plans and how it is benefiting us in terms of planning.
John Marsh: I can only add that every day we are chasing for points of connection, and I do not mean that in a negative way—that is our job. We are applying for site points of connection for electric, gas, fibre and water, for each of them. For the new towns, certainty is key. It is not my area but from a government point of view of assembling land, remediation and planning, once certainty comes, and once you appoint—in my ideal world—an independent to pull it all together in a master plan, then a real conversation can happen with local water and electric years ahead of when the big demand is needed. “I have a realistic plan and a realistic demand that is phased, what do you have?” We can play some tunes that will come to the solutions—as we have for heat—on how much electric we need, and we can avoid peaks. Certainty allows the real conversations for it to be a progress point of connection to the grid.
Lawrence Slade: If I may come in on that because John mentioned a key word: certainty. If, as part of our regulatory process, we are going to put investment into a new town or extension, then for the regulator to accept that, we have to be able to illustrate a level of certainty. We would need to say “I’m going to make £100 million investment or more” with certainty. “It’s going to happen. It’s going to be used”.
There is this balance between what is classed as anticipatory investment—“I’m investing now even though the demand may not be there fully until X years down the line”—and regular maintenance of the network investment which is just ahead of the curve in terms of need. It is getting that balance right and making sure that Ofgem in this case accept that argument and understand the reason why we are making that anticipatory investment. I can then give a commitment to John, and John can give a commitment to the builders, that this is all linked up and working and will be delivered on time.
Stuart Colville: The same is true in water: certainty and anticipatory investment.
The Chair: It is the mantra we hear from every witness who comes before us.
Baroness Griffin of Princethorpe: When we talk about hydrogen, are we talking about green hydrogen, and therefore hydrogen not derived from fossil fuels? When you talk about the use of plastics—obviously plastic pollution is a real issue—are you talking about the right sorts of materials?
Stuart Colville: When I mentioned hydrogen earlier, I meant non-fossil fuel hydrogen.
Baroness Griffin of Princethorpe: Marvellous, that is all I needed to know.
The Chair: Lord Bassam is joining us from Brighton.
Q40 Lord Bassam of Brighton: It is very kind of you to introduce me. Several of you referred to innovation and smart technologies. What emerging technologies, if any, do you see as the most promising to support the successful delivery of new towns and urban extensions in relation to our utilities? What more could the Government do? How can the Government help new towns’ delivery vehicles support these emerging technologies and embed them in new developments? Let us start with you, John, as you are a chief innovation officer.
John Marsh: Volume delivery has now gone beyond innovation. We have formal contracts with every major UK house builder to deploy non-gas solutions. After great frustration, the future homes and building standards came in. Everyone was waiting for it. We had orders for gas cancelled by house builders saying they were going to have to go for electric and to double the electric that they had allowed. That was a huge challenge. They then cancelled that order and went back to gas because of that delay. It is heartbreaking, in a way, that more gas has gone in. However, looking forward, it is 100% in the future home standards. If house builders have small sites, there is a little transition window that comes in next year. Some small sites will still be built out on gas, and we will still build those sites out. For now, it is predominantly different technologies.
The default was air source heat pumps, which are much more expensive. It would cost the house builder £5,000 to £6,000. A gas boiler was more or less free because we could fund the gas network and give them money for that. All of a sudden, it is £5,000 to £6,000 for a heat pump. The worry was about where they were going to be with energy bills. That is where the opportunity for innovation comes in. The solution is heat networks. We can use very well insulated sustainable plastic heat networks. It is an important point you make because they are now viable on low density. We had to use steel of eight to 10 metre sticks with a specialist weld before, which would cost £15,000 to £20,000 per house to do a heat network with low density. They were used only in cities because they had shorter lengths of pipe. That was the only reason; it was not physics or technology. Europe does that already with heat networks on low density.
Suddenly, heat networks have come in. What we have at the Westland Heath site—we have several sites—is people now living off these heat networks. We have large air source heat pumps in a community heat hub, but the magic is the thermal stores because, quite simply, when we go to the grid and ask, “Have you enough electric, please?”, and they say, “Sorry, we do not”. We say, “Just a minute, I am not going to use it in your peak time”. “Oh, there is plenty of electric then”. That is not always, but quite often, because we are not using the traditional morning and evening peaks that you used to see. We can avoid those. The nice thing is the energy prices we are buying off the grid to convert to heat and sell to customers. The heat network is clearly regulated by Ofgem, which is wonderful protection for everyone. We are buying electric when it is cheap, so heat prices are coming down. Heat networks are a wonderful opportunity for the new towns.
The other innovation now being deployed at volume, and I keep repeating this, is ground source heat pumps. No subsidy is needed. We are now working with Kensa on a lot of sites, which is Cornwall-based and made in the UK. It is a compact heat pump that fits underneath the water cylinder in the home. It suits every type of house; you do not need any outside kits. The magic is that we are getting 10-degree heat out the ground year-round; it is not minus five air in winter and lots of high temperature in the summer. Year-round, we get 10 degrees centigrade coming out.
What we do with the innovation is quite basic. We put boreholes in; they are about 150 metres deep. They work in most places in the UK. We are careful of mine excavation as there are gas pockets—the practice is there for safe delivery, but we link that pipe. They are not insulated. As it is 10 degrees centigrade, you are not worried about heat loss. It is very cheap pipe that our multi-utility guys are putting in while the electric, water and fibre are going in. The developer digs a trench with his JCB on site and our guys—a three-person team—pop up and put them in the ground. We will typically put a few hundred metres in and then come away. They will build those houses, and then we will extend. The magic is that it needs the same grid electric as if the house was gas heated because it is so efficient. It is cheaper than air source heat pumps, and bills are a lot lower.
Lord Cameron of Dillington: Can I ask a question about the use of geothermal heat going 500 metres down?
John Marsh: It is 150 metres.
Lord Cameron of Dillington: Is it 150 metres? Can you get 20-degree heat from that?
John Marsh: It is 10 degrees coming out.
Lord Cameron of Dillington: In a lot of parts of the country, you go down to 500 metres where you can get 30 degrees centigrade. Are you using that? It would only work if you had a community heat system.
John Marsh: On our system, we are going to about 150 metres.
Lord Cameron of Dillington: Is that for every house?
John Marsh: Yes. The magic is that one borehole will do three or four homes. That is the cost saving. That is the innovation for how we get a lower cost for the house builder and lower bills for the people living in the house.
There are two solutions around low density. The first is the use of heat networks. The building regulations’ future home standards have heat networks as one of the notional specs. The second is the use of heat pumps. We are using both. We are just using heat pumps in a different way instead of in every home. We are using the same grid electric.
At the Cosmeston site, we saved £600,000 in off-site grid reinforcement that helped win the job. What I am asking my colleagues in the incumbencies is: what would you like to pay, because you have saved money? That is called demand side response. We have an Ofgem project. It is a £9 million project to look at how it pays for demand side response when we have saved on reinforcement, and so there are much lower bills. I will finish on that—I could talk all day about it; it is a great project.
Homes now have mandated solar PV on the roof and lend themselves to adding a battery. We are now starting to see plug-in batteries that you will be able to order from Amazon in the future. That market is changing. The ability is for someone buying a house to say, “Go on, I will add a battery, please”. That is magical. We have a smart thermostat, and you get free hot water from the sun. It knows you need that water. It knows the sun is going to shine. It says, “I’ll tell you what, I’ll pop it through the heat pump. One unit in and four units out will provide free hot water at that period”. This is where we start seeing negative energy bills, up to minus £300 a year. This is being deployed today; this is not in the future.
The Chair: I am sure we are all completely gripped by this.
Baroness Barran: We all want to move to this house that has negative energy bills.
The Chair: I want one of these. Lord Ravensdale, do you want to come in on this? First, we must give Lawrence and Stuart a chance to reply.
Lord Bassam of Brighton: I was going to invite Stuart to respond next.
Stuart Colville: I will be very brief. There are three technologies that matter, all of which should be default in new towns. The first is smart networks. We are seeing increasing deployment of them. What they do, often using artificial intelligence, is move hydrological flows within the network in a more sensible way. For example, if there is a downpour of rain or heavy use of the network, it makes more use of the volume and you get more efficiency and better water quality outcomes out of that. The incumbent water companies will be able to handle that.
The second is smart meters. We are rolling out 10 million smart meters between 2025 and 2030. It is important that they are the default option in all dwellings within these locations, not least because four or five of these locations are in water-stressed areas.
The third is water reuse. The average per-person consumption in England and Wales at the moment is about 137 litres per person per day. If you look at Flanders, it is as low as 80. That is due to factors such as rainwater harvesting, which I have talked about, and community water reuse. We have to build that in as a default. To make that happen, there are some policy changes that the Environment Agency and the Drinking Water Inspectorate need to work with the industry on. I would love the Government to issue a challenge to say it should be the default in each of these locations unless there is a good reason not to do so.
Lawrence Slade: John has taken you through what can happen within a new town or site, but it is probably worth pointing out that he mentioned demand side response and I mentioned flexibility a little earlier. That is where we are moving to now. We will build new transmission and distribution infrastructure when it is needed, but it is a case of build and flex now. Where we can use flexibility, we will.
Last year, for example, the network operators in GB contracted out nine gigawatts of flexibility. If you think of Hinkley Point C or Sizewell C, we actually contracted two or three nuclear power stations in terms of flexibility. We and the National Energy System Operator—NESO—see that growing as we go forward. It needs to be grown in a way so that not just networks are doing it but also suppliers and energy retailers. As John said, people can start automatically engaging in these markets, so that a house is free to run at certain times or is paying you.
As we move forward into the future, how we are using innovation and flexibility will be critical to this. There is a great role for Ofgem here in incentivising, through price controls, those people who are bringing forward innovative solutions.
Lord Ravensdale: Can I get a brief clarification from you, John? You said there is an additional £5,000 to £6,000 in costs for air source heat pumps.
John Marsh: That is for everything: the plinth that the heat pump sits on, the plumbing and the wiring. It is the full cost.
Lord Ravensdale: Are you able to give an equivalent figure for the low-density heat pumps you were talking about?
John Marsh: It is significantly lower—that is all I can say. It is lower and there are lower bills as well.
Lord Ravensdale: Are you able to follow up with some more detail?
John Marsh: I will, yes.
Lord Bassam of Brighton: Having heard what the three of you have said, it seems to me that you get higher upfront capital costs with developments, but the new towns and urban extensions have the potential to generate, for example, much lower energy and utility costs. Is that right?
John Marsh: Yes. By nature, new homes under the building regulations’ future home standards are well insulated. The main energy use will be for hot water not heating because they have PV for 40% of the floor area on the roof—if that makes sense—so it is a significant contribution to power. You will definitely have low bills.
Lord Bassam of Brighton: There will be higher upfront capital costs but lower bills in the future for those households.
Stuart Colville: The same is true for the three technologies I mentioned.
Lawrence Slade: I will make a very quick comment on that; I am always putting on my old fuel poverty hat. One important thing here is that it needs to be done so that all parts of society can access these benefits. You have a huge opportunity, when you have a new development, to make sure you have affordable housing that is equipped with all these elements. At the moment, you will see a lot of take-up for solar by those who can afford it as opposed to those who could really benefit.
The Chair: That is a very important point. Are you all right with that, Lord Bassam?
Lord Bassam of Brighton: Yes, that is fine. It answered my point quite well.
Q41 The Chair: I have a question that is far too long for you to answer, but you can think about it and let us have something in writing. We have not talked about whether the planning system is likely to enable this, or whether the legislative frameworks around regulation are likely to enable innovation or be a brake. Could you give some thought to that and let us have your comments? It will link to earlier parts of the inquiry. Lawrence has mentioned the Planning and Infrastructure Act, which was designed to free up things so that there would not be unconscious delays. If there are still going to be obstacles, it would be very useful for us to know, so that we can put them in the framework as well.
Baroness Barran: The competition reform Bill is coming up, and one of you used a phrase about regulatory blind spots. Outside this committee, if there are specific issues around regulation that we can take up, please let us know.
Lawrence Slade: We would be very happy to respond to that because there are issues. We are trying to see that the energy independence Bill includes land rights, consents and wayleaves. There is a bizarre imbalance, as electricity networks do not have the same access rights as, for example, telecoms and water.
The Chair: Is that an historic issue?
Lawrence Slade: Yes.
The Chair: We would be interested in anything you want to say about the whole regulatory structure going forward, and whether it is going to make this easier or worse. Lord Gascoigne would want that to happen.
Q42 Baroness Janke: Quite a lot of my question has been answered. How can the utilities serving new towns be made resilient in terms of climate change, national security and the economy?
I have been impressed by the innovative practices you have described, which very much contribute to those questions. There have been great advances in infrastructure production. You mentioned batteries, storage and a more beneficial use of renewables. If there is anything you want to add to what you have already said, it would be very helpful.
I was particularly interested in the answer given about water management, which has been a huge issue. As has been said already, we want to know how we can make sure that the examples you have given us are introduced in the new towns. You often hear of marvellous things that can be done that do not actually happen. The Chair was talking about impediments to new towns or urban extensions having these innovations. It would be helpful to know how practices can be embedded in development. I am happy to hear from each of you, but if one of you wants to reply on behalf of the others, that would be okay.
John Marsh: Building on the earlier point, and conscious of your time, the good news is that the framework for smart energy is really progressing, which is mandatory smart controls on heat pumps, EVs and batteries. smart controls are interoperable and open protocol. Energy retailers have time-of-use tariffs because prices will fluctuate a lot more as the wind blows when it wants to blow. Through open protocols, they will make time-of-use tariffs available. Our heat pump knows and will access your retailers tariffs. You choose your energy supplier—your retailer. The heat pump will access it when it is cheap and put the heat on at say 3 am because your home is well insulated, so when you get up it will be nice and warm and you will not be taking power when it is expensive.
The framework is progressing well. It is less about planning and more about the ability for someone to move into any house at the right insulation levels, with PV, a heat pump and smart appliances ready to be linked up. For the bit that we are doing, the Government created the Virtual Lead Party, an aggregator that can get all the smart appliances and play tunes with the grid. That happens now. Our aggregator will be regulated; people can choose which one they appoint. They will say, “You want me to stop using a heat pump or you want me to use it for a few seconds”—that will not impact the outputs, but the grid will reward them. That is where you get to negative energy bills. It is good that thisinnovation is already flowing through.
Stuart Colville: From an upstream water perspective, the single biggest thing that would make a difference is legally binding national resilience standards. It is something that Sir Jon Cunliffe talked a bit about as well. At the moment, there is no target or metric for peak water demand. How much can water demand go up by before you start having problems? There are no rules about that. There are no rules about the health of infrastructure. You must make sure that asset health maintains a minimum level. There are no rules about single sources of supply. For goodness’ sake, do not have a massive town with a single water connection going into it.
It is common sense but the way the water industry works is that you need a standard to invest in, and to talk to the regulator about. Otherwise, you see what we have seen across history: “Well, let’s kick the can down the road. Let’s not do it”, and suddenly these risks catch up with you. Having proper legally binding national resilience standards on the health of infrastructure, the level of drought we should be resistant to, and not leaving communities vulnerable to single sources of connection are absolutely fundamental to making sure that all the downstream stuff works and we are not leaving people stranded.
Lawrence Slade: We are very lucky because of the work that goes into making sure we have a 99.99% resilient electricity system. However, there is an awful lot of work that sits in the background to maintain that. Obviously, as we increase electrification, that work is going to increase more and more.
Two things stand out in my mind. The first is how we are now using the network in a smarter fashion and using batteries at a community level, particularly for those communities further away from a centre of population—namely, more isolated communities. It helps when we do have power outages caused by storm events, et cetera.
The second is how we manage the network locally. We have digitalised so we can now route power around a failure to keep people on supply. We can use that system and flexible tools available to us, such as batteries and demand reduction, to make sure that we can do it faster and more effectively. We can also identify faults in advance of them happening by local monitoring, which was not there a few short years ago. Everything is making it easier and faster for us to work on this.
One thing that is worth mentioning that we do all the time now is that there is scope for us to use what is classed as statutory voltage reduction. It reduces the voltage across the whole of the UK network. It allows faster connection of low-carbon technologies. It allows better management of the system across peak times to the direct benefit of consumers. It is something we are actively talking to DESNZ about at the moment.
Baroness Lawrence of Clarendon: I am listening to all the positive things you are doing now—how you can increase them—and the good things that are coming in. Thinking about things that have happened recently around spillage, where a household has not had water for many days, will you be able to minimise them in this new way of doing things, so that people are not suffering from spillage by not having water in their homes?
Stuart Colville: If you look at the pattern since at least 2010, there has been historic underinvestment in the water network. There are lots of reasons why that has occurred, which I can go into, if helpful. Essentially, the regulator decides what gets invested in. For various reasons, there has not been enough money going in.
One advantage of a new town is you can start from fresh. One thing I talked about earlier is that you can have a separate sewer system. If you do that right and get the wastewater treatment works in the right place, for example, you should not need to have spills going into rivers in the same way we do on the existing network. You can separate the rainwater and road run-off from the foul sewer, as it is far more predictable and so should not be surging and overwhelming the network.
There is an enormous amount of money going in now: £104 billion over this five-year price control period. That is going to sort out a lot of the problems. For the new towns, being able to do things fresh—not relying on that Victorian infrastructure, doing things properly to begin with, baking that into the fabric of the buildings and thinking about things holistically—should avoid many of the problems we have talked about. If you combine those with the resilience standards I have touched on, where you do not have a single source of supply, then you are able to meet the peak demands. When it is hot weather, people turn hosepipes on and so on. You need to be able to deal with that. The fact that we have new sites, plus the legal changes I have talked about, will ensure that these communities enjoy the best possible service.
The Chair: You said something really important about standards: we need standards to be set. Who is responsible for setting standards and why has it not been done before?
Stuart Colville: The Government should set the standards.
The Chair: How should they do that: through legislation and regulations?
Stuart Colville: Legislation.
The Chair: Should it be through primary legislation in an Act of Parliament?
Stuart Colville: The Government should take the power to set standards on the face of primary legislation in the form of the UK clean water Bill, which was in the King’s Speech. Precise standards could be set through a statutory instrument or some other regulatory guidance. It is important that it is legally binding. The Government have to be the ones doing it, because they would be saying, “Here is the risk that society will bear. We must be able to resist a one-in-100-year, or a one-in-200-year, drought”. There is a trade-off with cost and delivery. It is for a democratically elected Government to make that trade-off and then instruct the regulator: “Here is what companies need to be investing to. We will accept this much risk and no further. On a single source of supply, perhaps no community above a certain size should be reliant on a single pipe”. It has to be for the Government to express the level of risk on behalf of society.
Baroness Janke: What we were asking for a few minutes ago was written evidence on these kinds of impediments: things that need to be introduced to ensure that we are now getting this embedded into all developments.
The Chair: Forgive me, I should know this, did we have a clean water Bill in the King’s Speech?
Stuart Colville: Yes, it was announced in the King’s Speech.
The Chair: Do you think that that should be the vehicle? Is something like that already in this Bill?
Stuart Colville: We have not seen the Bill yet, but my recommendation to Government is that they take the power to set standards.
The Chair: We all take the point about this Bill, the implications of it and the opportunities it might present.
Baroness Lawrence of Clarendon: I want to ask whether, with all the things you are now talking about, it would be better if water came into public ownership from where it is at the moment?
Stuart Colville: The question of ownership does not make much difference to the resilience you are investing in. Ultimately, it gets paid for by the bill. It is for the Government to say, “Here is how much we are willing the water bill to go up by in order to invest in these things” or not. The same questions arise for Scottish Water, which I represent, or for the French water services that I speak to on a regular basis. They have to make a decision about the level of risk they are willing to bear and the amount of money they are willing to trade off against that risk.
The Chair: We have two quick questions, one from Lady Barran and another from Lady Griffin. We will then hand over to the proper Chair—Lord Gascoigne—for questions near the end of the meeting.
Baroness Barran: In Baroness Janke’s question, there was a point about cyber security. I understand very little but the little I understand is that our existing connections—where the major cables come out of the sea and plug in, in my simple language—are already significantly compromised by the Chinese and others. How worried are you about that in relation to a new town? Is there anything relevant to this conversation that you want to add about what you are doing in relation to state or other terrorist actors in terms of the security of our networks?
Lawrence Slade: Those questions are, to a certain extent, outside my purview. What I would say is that, in terms of cyber security, all the electricity networks—and, to the best of my knowledge, the utilities—are incredibly high on the watch list. The protections that are in place across the board are there because, in the main, it is critical national infrastructure. I am happy to point you in the direction of other people who can give you a better answer, but all I would say is that it is absolutely top of the priority list in terms of how it is taken seriously by the networks.
Baroness Griffin of Princethorpe: Lady Barran mentioned the competition reform Bill. There is the energy independence Bill, which does not yet have a timetable, but which would be incredibly useful. The legislation is coming over the hill because it was in the King’s Speech. Could we have a very simple diagram as to which bits of legislation we should influence in order to achieve this to the best of our ability? This is not about new towns but the point you made, Lawrence, about energy efficiency: the cheapest fuel is the fuel that you do not use at all. We also need to look at renovation and existing stock, because it is often where our poorest people live.
The Chair: I now hand over to Lord Gascoigne for the final questions.
Q43 Lord Gascoigne: I am sorry I could not be with you. It is a brilliant session. I am really sorry not to be there, and thanks for coming in.
Many of the questions you have been answering do not apply just to new towns. The final bit is to focus back on new towns and to get out of you, if possible, specific recommendations that you can give us—crucially, those that are real, deliverable and measurable.
There has been a lot of good language. I have heard things such as better co-ordination, better forecasting and better engagement. What does that look like in real life? How does that materialise? Is it something that is deliverable, so we are not spending decades waiting for reservoirs, HS2 or Hinkley Point C to be built? Is it something that can happen within our lifetime? Who is it? What is it?
Stuart, you talked very recently about national government and possible legislation. Is it the arm’s-length bodies? Do we need to streamline them? Do we need to do something similar to what is happening with the water companies in other sectors? Is it that the Government have to bite the bullet and lead on this? Do you have one or two specific recommendations to get new towns going and deliverable?
Stuart, you gave us some really good international examples. A few of us went to Copenhagen. You know greywater far better than me. I do not understand it but, with my very limited knowledge, I have constantly been told by various people that it happens in other countries. It does not happen in this country. Are you saying that things such as greywater can now happen with new towns because it is, in theory, a new town and not an urban expansion? Do you have two specific examples of things that can happen in this country that other countries or cities are doing?
Lawrence Slade: One recommendation is not to reinvent the wheel here. I have mentioned the National Energy System Operator and the regional energy strategic plan. We should ensure that we are making full use of those. They are just coming into being. We are learning how to use and understand them. The earlier the engagement you have there, and the earlier it feeds into the network business plans for the next price control and beyond, the more you allow the networks to go into the financial markets and raise the billions they need to in the most efficient manner and in the best amount of time. Full use should be made of those. Advanced knowledge helps planning and end costs to the consumer in terms of how we are delivering these projects. That is critical.
It is boring when we say it so much, but it is fundamental that we continue planning reform. We have to make sure that, when a new town receives approval, the upstream infrastructure that the town relies on has also received planning or can get that planning approval at pace, so that upstream utility issues do not cause any delays. The more we streamline, the easier and more cost effective it will be to deliver this new infrastructure, whether it is for new towns or something else.
The last recommendation is the easiest of all: just engage with utilities as early as humanly possible. Even if it is something that might happen in 15 years, at least come and say that this could happen. Then, as it becomes more certain, it can go into regional plans.
Stuart Colville: I will try to be as specific as possible and talk briefly about three things. First, the plan the water industry uses to invest in water infrastructure means we have about 18 months to try to properly reflect on some of the demand profile from these new towns. As best as we can, we need to bake it into these plans that the Environment Agency is responsible for and fix some blind spots that I was talking about earlier. We must reflect and assume demand from data centres. We cannot just assume that business demand is going down when it is not what the historic trend has been doing. We cannot assume that every single one of the leakage targets is going to be met when, on average, we meet two-thirds of them because otherwise we are not going to have enough water in the future. If it is helpful to the committee, I can set that out in a bit more detail. Effectively, getting that plan right in the next 18 months, and working with the Environment Agency, is very important.
My second point is about planning. I echo some of Lawrence’s concerns. I could talk for ever about planning hurdles, but I will not do so. About half of the duration of a reservoir build is caught up in environmental assessments and regulatory machinations. Some of that is important. You do not want a water company to say that it is going to cost a random amount of money. There has to be scrutiny, and you have to understand the environmental impact, but there are things you can do that would not lose any value or impact but would speed up the process. That is not a finished job.
There are two very quick things to say on that. First, there are permitted development rights. We are currently installing 3,500 water quality monitors in rivers. That number will probably go up with the new towns programme. Is it necessary to apply for individual permissions for each? They are basically the same and do similar things in similar places. They have very similar impacts. You can imagine how much that gums up the planning system.
Secondly, the Government have tools to instruct or encourage the regulators to engage positively with the infrastructure needed for these programmes. There is something called a strategic policy statement of issues, which is legally binding on Ofwat. It can issue instructions to the Environment Agency. In some cases, it is getting better, but in other cases, it can be quite risk averse. Encouraging it to say, “Yes if…”, rather than “No because…” or deferring decisions constantly, would be really helpful. That is an important area.
We can free up water very quickly to begin building homes if we make a series of policy changes, some of which the Government have committed to already. Government have been talking since 2019 about introducing an appliance label. It is reannounced every few years. We have to get on and do it, to improve the water efficiency of these labels.
You talked about greywater. It can absolutely happen. To be specific about the enablers for that, the Environment Agency and the Drinking Water Inspectorate are working on ways to permit and enable it. Some of that might require primary legislation, and other bits would require a regulatory decision. We can write to the committee with some suggested specifics, if that would be helpful, but it absolutely can happen. There is no technological or societal reason why it cannot happen.
Finally, building regulations currently use a modelled water consumption reduction as a result of introducing efficiency measures. It does not work. One of my concerns is that houses are built assuming a certain level of consumption that does not flow through. If it is helpful, I can set that out for the committee.
Lord Gascoigne: Before I hand over, I wonder if I could pick you up on two very quick things? You mentioned labels—we should have mentioned the 18-month planning point before—and very early on you were talking about optimistic blind spots. What is the problem there? When you say that we can do it—I do not want to point fingers—why is it not happening? Who needs to do this? You are optimistic. You have ideas and a plan, so why is it not happening?
Stuart Colville: Sometimes, the wheels of government move very slowly, and many of these are cross-departmental issues, if you are going to touch buildings and internal market issues. This new towns programme is a way of catalysing some of the political attention and leadership that is required to drive them through.
Lord Gascoigne: If greywater is a realistic thing that we can recommend among many others, please do tell us and we will put that in.
Stuart Colville: We will write specifically on that.
John Marsh: First, on a practical level, I reiterate that you need to integrate heat and electricity. They come together. Do not have separate strategies for the sites; go for a site-wide solution. There is huge opportunity if it is approached at a site-wide level.
Secondly, I echo that you should engage early, but make sure you engage independents because we do the majority of the last mile infrastructure for all utilities. We bring innovation and investment, and then we dovetail in with the upstream grids to make sure it comes together. When you get that independent model working, we can bring early investments and enable the critical infrastructure, the off-site hook up to the grid, the intake substations and the spinal ring. You can then have plug and play for multiple developers. That is happening today. It is a model that works in the private sector. Please engage early with independents as well as the incumbents.
Thirdly, unleash the smart energy model. Our mantra internally is: smart home to smart grid. The framework is there. The smart secure electricity systems plan pulls it together. The mandated open protocol access to smart appliances, access time of use and the virtual lead party are consumer-led flexibility in action. They are reducing house bills by about £600 a year for a new home by saying, “Heat pump, play with the grid for a couple of seconds. EV, play with the grid”. It does not affect your outputs. It is happening, so just unleash it.
The Chair: Thank you so much. John, you mentioned some examples. You mentioned Brent Cross and King’s Cross. It would be great, if it is not too much trouble, if you could put those in an envelope to us?
John Marsh: Yes.
The Chair: That would be grand, because everything you have said has illustrated the innovation that you are involved with, and it is very exciting. That is the end of the session. Thank you very much indeed. It has been really energising and very interesting. We have had the macro and the micro. I have been impressed by your optimism, as well as your determination to face the real challenges at the ground level, and the consensus between you as to what needs to be done to deliver. You passionately believe in the purpose of new towns and their capacity to be exemplars for new ways of living and using energy and resources. That is exactly the sort of thing that we wanted to hear and come away with. Thank you so much for that.
