Investment justification has always been the central challenge of the UK water sector’s price review process. Water companies must convince Ofwat, and under the reforms being shaped by the January 2026 Water White Paper, an eventual new single regulator, that the capital they are requesting is necessary, appropriately costed, and will deliver the outcomes customers and the environment require. It is a rigorous analytical process that demands both engineering credibility and planning sophistication.
The challenge for most water companies is that the design and analytical process that produces investment cases has not kept pace with the scrutiny those cases now face. Traditional methods, manual engineering estimation, sequential technology evaluation, planning-level cost modelling, were designed for a regulatory environment with different expectations. PR29, shaped by AMP8’s record £104 billion programme and the structural reforms recommended by the Independent Water Commission, will set higher expectations still.
Generative design offers a direct response to this challenge. By bringing engineering precision to the earliest stages of investment planning, it produces the kind of structured, auditable, evidence-based analysis that credible PR29 investment cases require.
What Regulators Look for in Investment Cases
Ofwat’s track record in PR24 provides useful guidance on what strong investment cases look like and where weaker ones fall short. Companies that built credible investment cases demonstrated three things consistently: that they had genuinely evaluated a range of options rather than defaulting to familiar approaches; that their cost estimates were grounded in engineering reality rather than planning-level approximations; and that there was a clear, evidence-based connection between the investments proposed and the outcomes they would deliver.
Companies whose investment cases were less well received typically exhibited the opposite characteristics: narrow technology selection, cost estimates with limited engineering substance, and outcome commitments that were asserted rather than derived from analysis. Five water companies appealed their PR24 determinations to the CMA, an outcome that reflects genuine disagreement about the adequacy of proposed investment, but also the difficulty of making investment cases that satisfy regulatory scrutiny under the current planning framework.
How Generative Design Strengthens the Options Evaluation
One of the most common weaknesses in PR submissions is insufficient optioneering. Regulators want to see that companies have systematically evaluated the range of technically viable options before selecting their preferred approach. In practice, this is difficult to demonstrate convincingly when each option evaluation requires significant manual engineering effort.
Generative design resolves this directly. A platform like the Transcend Design Generator can generate complete, engineering-quality designs for multiple treatment configurations in a fraction of the time required by manual methods. Each design option comes with detailed CAPEX and OPEX estimates, process specifications, civil quantities, and comparative performance data. The result is a genuine multi-option evaluation, conducted at engineering quality rather than planning abstraction, that demonstrates to regulators that the preferred approach was chosen on rigorous analytical grounds.
For PR29, where the regulatory direction emphasises evidence-based investment justification, this capability is directly valuable. A PR29 submission that can demonstrate systematic, engineering-quality evaluation of multiple options is materially stronger than one that presents a preferred option with limited comparative analysis.
Cost Estimation That Holds Up to Scrutiny
Cost estimation is another area where investment cases frequently fall short of regulatory expectations. Planning-level cost estimates, produced by applying cost factors to rough capacity assumptions, are inherently imprecise and difficult to defend under scrutiny. Regulators and their advisors are experienced at identifying the assumptions underlying cost estimates, and weak assumptions undermine the credibility of the entire investment case.
Generative design produces cost estimates that are grounded in actual engineering design. When TDG generates a CAPEX estimate, it is derived from a specific equipment list, a specific civil quantity takeoff, and a specific process configuration, not from a planning-level assumption about what a treatment facility of a given size typically costs. This engineering provenance makes cost estimates more accurate, more defensible, and more credible in a regulatory context.
This matters particularly for PR29 because the White Paper proposes clearly defining and ringfencing capital maintenance expenditure, with separate allowances for capital maintenance, operating expenditure, and enhancement capital expenditure. Investment cases will need to demonstrate, with engineering precision, how costs are allocated across these categories. Generative design tools that produce structured, disaggregated cost data are well-suited to meeting this requirement.
Demonstrating the Outcome Connection
Perhaps the most challenging aspect of investment justification is demonstrating a clear, evidence-based connection between proposed capital investment and the outcomes that investment will deliver: service reliability improvements, environmental performance gains, climate resilience enhancements, and customer service benefits.
Generative design contributes to this challenge by ensuring that the infrastructure being proposed is genuinely fit for the outcomes required. When design options are evaluated against specific performance criteria, the performance data generated, flow capacity, treatment efficiency, operational flexibility, energy consumption, becomes evidence that the selected option will deliver the claimed outcomes.
This connection between design quality and outcome credibility is one of the most important, and least fully exploited, dimensions of digital design in regulatory contexts. Companies that build outcome data into their design process from the outset, rather than bolting it on as a post-hoc justification, will produce investment cases that are more coherent, more credible, and more likely to withstand PR29 scrutiny.
Building the Evidence Base Now
The most important thing UK water companies and their engineering partners can do for PR29 right now is build the evidence base that strong investment cases will require. That means using AMP8 to generate engineering-quality data for every major investment decision, adopting design tools that produce structured, auditable outputs, and developing the analytical capability to connect investment proposals to outcome projections.
PR29 submissions will be built from the data that exists when submission windows open. Companies that are generating that data systematically, using rigorous design processes throughout AMP8, will have a material advantage. Those that rely on traditional planning methods and bolt on engineering analysis at submission time will find the bar harder to clear.
The investment in analytical and design capability required is modest relative to the capital sums at stake. The cost of a weaker PR29 submission, or a CMA appeal, is much larger.
To explore how Transcend’s generative design platform supports investment case development for UK water companies, visit transcendinfra.com/uk.
