Ofwat innovation fund annual report: over £100m of projects funded and lessons learned


After two and a half years, and with 77 initiatives now funded, Ofwat has published its first annual report into the Ofwat Innovation Fund (“the Fund”). Ofwat launched the £200 million Ofwat Innovation Fund in 2021 to grow the water sector’s capacity to innovate to better meet the evolving needs of customers, society and the environment.

The report seeks to reflect on the progress of the Fund since its launch, with case studies and analysis showing where the fund has made an impact and changes in the water sector. It also seeks to highlight where further improvements could be made in innovation performance in the water sector and outlines our next steps to continue enabling a culture of innovation through the fund.

Already, over £100 million in funding has been granted to innovative projects, with every major water company and over half of the new appointees (‘NAVs’) involved in at least one entry, with projects from using fibre optic cable to detect leaks, to recultivating native seagrass for carbon capture, to finding more effective ways of communicating with vulnerable customers completing in this first period – all three of these have case studies in the report! The impact of this funding is tangible and shows the Fund has been effective in fueling innovation.

As funded projects complete their work, we have highlighted the importance of companies sharing the knowledge and learning from their projects. The report showcases case studies that highlight the insights gained from projects, but also highlight that the learning resources generated by projects have not yet reached the standard we expect. A better culture of learning and improvement will ensure that future entrants can benefit from the lessons learned by their predecessors, and not repeat anything that doesn’t work. A greater focus on knowledge sharing will enhance the fund’s impact and is essential to embedding a culture of innovation across the sector.

As it continues, the Fund will encourage companies and projects to embrace bigger and bolder ideas. The progress made so far has been a step change in company behaviour, especially around greater collaboration and growing ambition. However, we believe that this can go further and will support companies that show greater ambition. As the Fund progresses, we will be looking at how we involve smaller companies and diverse voices more, seek innovation and inspiration from outside the sector, and ensure that companies are equipped to ‘roll out’ proven, demonstrable innovations across the sector.

As we head towards the end of the current regulatory cycle (2020-25) and with a commitment for the Fund to grow to at least £300m and run until 2030, the report celebrates the successes we have had so far, while hopefully raising awareness of the challenges which need addressing for innovation to flourish in the water sector.