Even a small utility can be carbon neutral, with Pav Policar, Chairman, VAK HB Plc., Czech Republic

2025-04-29 episode 27 Even a small utility can be carbon neutral, with Pav Policar, Chairman, VAK HB Plc., Czech Republic
[00:00:00] Piers Clark: Welcome to the Exec Exchange 15-minute podcast, in which a leader from the water sector shares a story to inspire, educate, and inform other water sector leaders from around the globe. My name is Piers Clark and my guest today is Pav Policar, the chairman of VAK HB Plc. in the Czech Republic. Pav, wonderful to be with you
[00:00:22] Pavel Policar: Nice to see you.
[00:00:24] Piers Clark: We've been good friends for a ridiculously long time, and I know you, I've been to your home, I've seen you in action and you are an action man, and I'm hoping that in this podcast that's going to come across. So, let's go back and talk a bit about your background. What did you do before you became chairman of VAK HB Plc.?
[00:00:44] Pavel Policar: I actually graduated from Charles University in Prague in natural science, always oriented to hydrology. Then I was teaching at the university in Prague. Then I was invited over to Imperial College, London for a master degree in environmental technology. No surprise water again. And I graduated in 91, doing my final thesis for what used to be Northwest Water.
[00:01:09] Piers Clark: The company that I used to work at, which I think was our first connection. We weren't there at the same time, but we did both work at Northwest.
[00:01:15] Pavel Policar: I think they liked it. And I got an invitation right in 91, I stopped teaching, and I joined Northwest Water in core business, in the water quality. After five years within the core business, I was promoted. Invited to join what used to be Northwest Water International Company that took over international activities of the group: BOTs, privatizations, X, Y, and Z. In the meantime, Welsh Water got involved in privatization in my country, in Czech Republic, and bought significant stake in the biggest Czech water company called North Bohemian Water Company; 1.2 million population supplied. And I was invited to go and chair their operations in central Europe, which I did after my eight years abroad.
[00:02:00] Piers Clark: You said that was Welsh Water. At the time, it was Haida, wasn't it?
[00:02:02] Pavel Policar: Welsh Water became Haida after they bought SWALEC South Wales electricity. Then the multi-utility concept, what was a fashion at the time, became a Haida group. So, I was the center European Director of Haida Group.
[00:02:17] Piers Clark: Its funny people listening to this podcast might be pulling together the pieces of the jigsaw. 'cause it was only a few weeks ago, we spoke to Steve Wilson, who's the managing director of Wastewater at Welsh Water, and he told his side of that story of how Haida had gone international and then came back in again. Now, as your career progressed, you started pursuing a variety of things outside of water, yet you always kept your foot into water. I know you've got some business interests in other sectors than water. Yet you've maintained this link in water such that you are now the chairman of VAK HB Plc., which is a relatively small water company, yet an incredibly dynamic and thought leadership utility, which I think is down to your background and what you've brought to it.
[00:03:01] Pavel Policar: Piers, if you allow me 20 more seconds, I'll do the very final bridge between what used to be Welsh Water operations in Czech and my small water company.
[00:03:10] Piers Clark: Go for it!
[00:03:11] Pavel Policar: Thank you. After six years of what I believe was a brilliant operation, they had financial issue over in the UK. They had to sell each and every project and investment they had around the world. And I didn't wanna join competition. I had offers of course, and my local water company and the mayors, they addressed, "hey, can you go on board, and with all your international background and experience, share this little tiny Cinderella type of company with small water companies supplying about a hundred thousand population on drinking and waste water, which was less than one division of my 1.2 million population operations." This is about a hundred kilometers southeast from Prague. And I said yes, I will chair this strategy; be the best in tariffs, be the best in infrastructure. We'll have brilliant relationships within the company. Zero politics. Mind you, that this company is 90% owned by the municipalities. My initial clause was there's never gonna be any politics in the company; no traffic or boots for privileged people. Zero. That was my mission. And I did. We've achieved remarkable stuff for 20 years, which we will talk about. In the meantime, I've got a mechanical engineering company, family business, doing some world records on specialized elevators.
[00:04:28] Piers Clark: So now we get to what I wanted to talk about today. You've had this international experience and I think the reason why VAK HB Plc. has been so impactful and so innovative has been because you've brought that experience and that expertise to it. That's enabled the organization to do things that are absolutely out of kilter with what you might have expected.
[00:04:48] Pavel Policar: Effectively, this is my rebellion to prove that normally municipalities or state companies are the least efficient, most bureaucratic, political, and cannot compete with truly private operators. I wanted to say that's true, except for one exception and I wanted to build it and we build it.
[00:05:05] Piers Clark: Basically, it was just you being bloody minded to try and prove that a municipal company could be as efficient and as slick as a private organization. I want you to list out three projects that you've done that you are most proud of.
[00:05:18] Pavel Policar: Number one, it's the tariffs. We're running 20% below national average without any competitive advantage on infrastructure or production cost. Profitability: 60 plus percent every year from non-regulated business, we pay bloody good dividends, but not out of water. We pay our people very well as a result. Nobody asked us to do so. That's just a self-motivating drive to achieve and be the best. So, tariffs and profitability, zero politics, and stability of main shareholders. I've got six other mayors of main municipalities right across political spectrum in my board for 20 years. Every model is only as good as people inside, and the atmosphere is brilliant even with the trade union. We've got about 160 employees and we had some rocky times. At the very beginning, they started to call me Butcher because I said I'll cut every hat in case I find less than eight honest hours of work. We always treat drinking and wastewater to European standards. We've got no hidden mis investment or lower investment than need is. We've developed the first heat pumps in the country and we recover megawatts of heat. As a result, we discharge into the river, on annual balance, the same temperature as the river is. Those megawatts of energy we transfer from heat pumps, we transferred into our digestion. We changed statically, the digesters from mesophilic to thermophilic, and we normally had classical co-generation. Changing was part of the strategy. We are capable of developing significantly more biogas than we were before, but our co-generation infrastructure was only capable of doing the increased amount. We now inject super green natural gas into the national grid and it's self-financing, making brilliant money. All this took us years to design and implement. We're now operating it for one year.
[00:07:07] Piers Clark: So glad you chose that as one of the three. 'cause I was hoping you were going to talk about the technology adoption. This is a utility that serves a hundred thousand people in a relatively rural part of Europe. You don't have 20 wastewater treatment works to play with. You've got a relatively small number of assets. Yet on those assets you've installed a heat recovery system that's recovering all of the excess heat that's in the sewer, such that, as you said, the discharge is pretty much the same temperature as the river, and you are using that recovered heat to boost the performance of your anaerobic digesters, to take them from mesophilic to thermophilic...
[00:07:43] Pavel Policar: Sorry to interrupt. From 44C to 55C!
[00:07:47] Piers Clark: Truly thermophilic. Anyone who's got a biology background will understand that, with every 10 degrees C increase in temperature, biological activity doubles. So, you can see how that temperature increase rapidly speeds up the digestion process. Really innovative stuff. Done, not by burning more fossil fuels, but by recovering heat from the wastewater. And if that wasn't enough, you then take the excess biogas that's being generated and you are cleaning that up using novel membranes such that you are then discharging a green, clean gas into the network.
[00:08:17] Pavel Policar: The whole concept was designed 10 years ago. It was gradually built by designing individual pieces step by step. And we are now one year operating into a great satisfaction; very clean gas. We had to go through a practical operational learning curve. We are first in the country. The big boys are watching us. Some of them are saying impossible. Some of them are trying to copy us with five, seven years delay. And that's it.
[00:08:43] Piers Clark: That's wonderful. What you've been doing in the digestion side.
I know you've also been doing things in photovoltaics and you were one of the very first utilities to do things with photovoltaics.
[00:08:53] Pavel Policar: 14 years ago, we were the ones physically implementing on all our roofs or space on the ground of all our wastewater plants that were not subject to potential development, we could spare for photovoltaics. We designed 16 years ago and 14 years ago, we implemented half a megawatt peak hours photovoltaic. On all our roofs, on all our land, whatever we could. We simply dropped photovoltaic panels.
One small plant, it was a pumping station totally isolated from the grid and by DC motors directly from the panels. We designed the concept using a nearest service reservoir as a battery, and we do this for 12 years.
[00:09:36] Piers Clark: The impact of innovations like the DC solar powered pumps and the heat recovery thermophilic digestion has enabled VAK HB Plc. to be carbon neutral.
[00:09:46] Pavel Policar: Absolutely correct. It's actually the main wastewater plant that's got about 130,000 population equivalent. And European legislation is coming that these plants should be carbon and power neutral within probably 15 years. Proudly, I can say that we are 15 years ahead of legislation.
[00:10:04] Piers Clark: We like to finish with a personal question, what do you owe your parents?
[00:10:09] Pavel Policar: My mom was a secondary school teacher. She was extremely tough. She was much tougher than with her students. And my father was full of ideas and a crazy sportsman. He was the one with inventions, fun... Up to my 15 years age, I had a brilliant childhood. So that's what I owe them.
[00:10:25] Piers Clark: Now I like that, that you've said your mother was pedantic, and for those people listening to this podcast. You probably don't realize how many times Pav has interrupted me as we've done the raw recording, which will have been cleaned up by our editing team because he's been quite pedantic on this call. And also, anyone who knows Pav will be aware that he is a absolutely bonkers sportsman that he's obviously picked up from his father. The phrase that the apple doesn't fall far from the tree is resolutely true with you Pav. If you could go back 40 years, what advice would you give yourself?
[00:10:58] Pavel Policar: I'm 62. I'm still doing competitive sports: skiing, motocross, ice hockey, volleyball... Sport is a brilliant partner for life. It'll never let you down. Do collective sports because they teach you how to be member of a team. Work very hard, be open and honest, always say the truth and respect other opinions.
[00:11:16] Piers Clark: Thank you very much, Pav. You have been listening to the Exec Exchange with me Piers Clark. My guest today has been Pavel Policar, the chairman of VAK HB Plc. in the Czech Republic. I hope you can join us next time. Thank you.