Ofwat signals PR24 will factor in capital and operating net zero targets

Ofwat has published a Net zero principles position paper, to inform water companies' net zero planning and PR24.

The short paper covered the scope of action, how carbon reduction routes should be prioritised, target setting and communication. Among the key points from Ofwat were:

• company net zero targets should align with national government targets;

• company action on net zero needs to encompass both operational and embedded emissions; and

• companies should prioritise the reduction of emissions before using offsets.

The regulator welcomed the Water UK 2030 Routemap on net zero operational emissions, but said companies must go beyond this and reduce emissions from infrastructure construction. It called for plans to be clear, transparent and intelligible to the public. It said it would work with the sector to develop reporting requirements.

Ofwat said: “We will continue to engage with companies, and would welcome working with Water UK, to develop further our thinking on key aspects of our net zero policy and how we can collaborate as a sector to face the challenges of net zero. This will include engaging with companies on how we can best facilitate the transition to net zero, for example through our approach to cost assessment at PR24.”

PR19 did not specifically address net zero investment. The water industry adopted a net zero by 2030 operational emissions goal as part of the Water UK Public Interest Commitment, in April 2019.