PN 26/22 Ofwat confirms new open access competition for innovators and seeks to extend Innovation Fund to 2030

  • New “open access” competition (to launch in early 2023) to make £4m available to entries up to the value of £500k – allowing innovators from any sector – such as fintech, manufacturing and materials, community groups and local government – to apply with their game-changing ideas for the water sector
  • The next Water Breakthrough Challenge will launch in October 2022 with total of £38m available for innovative water companies and their partners
  • Ofwat publishes headline package of changes to water innovation competitions to widen participation and encourage more diverse ideas
  • Regulator’s £200m Innovation Fund incentivises and rewards collaborative innovation to transform water services for customers, the environment and society

Tuesday 12 July 2022 (London) – Ofwat, the economic regulator of water services in England and Wales, has announced a new “open access” competition for innovators as its £200m Innovation Fund evolves to encourage more diverse ideas to transform water services for customers, the environment and society.

Ofwat’s innovation fund incentivises and rewards collaborative innovation in the water sector that meet key objectives for the industry around one (or more) of Ofwat’s four  innovation themes:

  • adapting to climate change and achieving net zero emissions;
  • protecting and enhancing the environment;
  • delivering long-term operational resilience;
  • and improving the delivery of services for customers and society.

In its first year, the fund awarded £63m to projects ranging from bio-engineering solutions for ammonia and phosphorus pollution to remove pollutants from water whilst creating a circular economy for finite and useful chemicals, carbon capture initiatives to cut industry-related emissions to meet water industry targets of achieving net zero emissions by 2030, and cutting-edge research projects to develop green hydrogen from sewage, to create clean energy alternatives for the future.

Ofwat has unveiled how the innovation fund will evolve to meet customer, environmental and industry priorities in the years ahead: a £38 million competition to open in autumn 2022, the first £4m open access competition to open in early 2023 – and continuing the fund to 2030. It follows a consultation by the regulator on the future direction of the fund – and work to review the fund and innovation in the water sector.

John Russell, Senior Director, Strategy, Finance and Infrastructure at Ofwat said:

“We need greater innovation in the water sector to tackle the significant challenges it faces. The Innovation Fund has inspired multiple collaborations between companies in and outside of the water sector. The ambition of the winning entries to date demonstrates the sector’s commitment to build a resilient water system that benefits the environment and customers. Over the next three years we will distribute approximately £120m to more innovative initiatives. I’m pleased to announce the return of the Water Breakthrough Challenge this autumn, plus an entirely new competition open to innovators from any sector with ideas capable of positive transformation for the water industry to follow early in 2023. We’re also currently consulting on continuing the fund to 2030. ”


The Water Breakthrough Challenge 3 will launch on 3 October 2022 – with an £8m Catalyst stream and a £30m Transform stream – and will run annually. Entrants to the Catalyst stream can bid for between £500k and £2m, while entrants to the Transform stream can bid for between £2m and £10m.


Launching in early 2023, the open access competition element of the fund will be a new initiative launched in response to the post-pilot consultation. Unlike the Water Breakthrough Challenge, there will be no requirement for organisations to partner or receive sponsorship from a water company to enter the competition.

It will primarily target early-stage innovation, allocating approximately £4 million in funding annually, with up to £500,000 available for individual entries.

As with other entrants to the Innovation Fund, entries to the new open access competition will need to align with one or more of Ofwat’s four innovation themes.


Ofwat is proposing to continue the innovation fund until at least March 2030. This is subject to the regulator’s consultation on its draft methodology for the 2024 price review. Over the coming months Ofwat will work with the water sector and other innovators to look at how the fund could continue to stimulate innovation up to 2030.


Ofwat expects to publish a full consultation decision companion document in autumn 2022, which will set out further information on the headline decisions. It will include more detail on the new open access competition, which will be developed in further consultation with the water sector in the coming months. ​

​To find out more about Ofwat’s Innovation Fund and to register interest in future competitions, visit


Notes to Editors

For media enquiries, please contact Andrew McKay ([email protected]) and Robyn Margetts ([email protected]), +44 (0)20 7754 3610

Headline decisions

Ofwat’s full headline package of improvements are available in ‘Innovation fund consultation decision document  – Approach for 2022-25’ on the Ofwat website

Ofwat is currently consulting on how it will set water companies’ service and bill levels for 2025-2030. This includes its proposals to encourage more innovation in the water sector – including continuing the innovation fund to 2030. The PR24 draft methodology consultation is available on the Ofwat website.


In response to the consultation, the four themes of the Water Innovation Fund have been revised to better reflect the 2050 water innovation strategy, Welsh Government strategic priorities and UK government strategic policy statement.

  • Responding and adapting to climate change including achieving the sector ambitions of net zero carbon, zero waste and zero leakage
  • Protecting and enhancing the environment and natural systems, to protect current and future customers from the impacts of extreme weather and pollution​
  • Delivering long-term operational resilience and understanding infrastructure risks to customers and the environment, finding solutions to mitigate these in sustainable and efficient ways
  • Testing new ways of conducting core activities to deliver the services customers and society need, expect and value both now and in the future

About Ofwat’s Innovation Fund

Ofwat has established a £200 million Innovation Fund to grow the water sector’s capacity to innovate, enabling it to better meet the evolving needs of customers, society and the environment. It is encouraging new ways of working that go beyond business-as-usual innovation practices in the water industry, in particular, increasing and improving collaboration and building partnerships from within and outside the water sector. Entries are encouraged from water companies in England and Wales, alongside partnerships with universities and institutes, retailers, start-ups, technology companies, charities, and small businesses in sectors such as energy, manufacturing, health, or financial services.

The Innovation in Water Challenge, Water Breakthrough Challenge 1 and Water Breakthrough Challenge 2 (Catalyst and Transform streams), were delivered by challenge prize experts Challenge Works (the new name of Nesta Challenges) in partnership with Arup and Isle Utilities. Following these pilot competitions, Ofwat received 40 submissions in response to its consultation about the future direction of the fund.

The innovation fund forms part of Ofwat’s approach to innovation in the water sector. Ofwat with the Environment Agency and Drinking Water Inspectorate also runs StreamLine, a joint service for innovators and businesses to get informal regulatory advice

To contact Ofwat’s press office, please call 07458 126271 

Evaluation of the fund and innovation in the sector

Ofwat and its partners reviewed the first year of the innovation fund and identified recommendations that are informing regulator’s final decisions – and further work on the design of future competitions. A copy of the report is available at:

Ofwat commissioned the Centre for Strategy and Evaluation Services (CSES) to carry out research on the level of innovation among water companies in England and Wales – and its wider supply chain – before the fund was introduced. A copy of the report is available at:

About Challenge Works

Challenge Works is the new name of Nesta Challenges. We are a social enterprise founded by the UK’s innovation agency Nesta. For a decade, we have established ourselves as a global leader in the design and delivery of high-impact challenge prizes that incentivise cutting-edge innovation for social good. In the last 10 years, we have run more than 80 prizes, distributed £84 million in funding and engaged with 12,000 innovators.

The world finds itself at a critical juncture. Together, we face multiple compounding problems, but there is enormous opportunity to discover solutions and expand innovation frontiers. The impact of climate change is felt more harshly by the year, but innovation can mitigate this impact; the growth of chronic health conditions and the widening global inequity in access to healthcare can be reversed; an ever more complex, connected and digitally driven world poses a multiplicity of societal challenges but also makes rapid, positive, life-changing technological change possible – if harnessed and directed properly.

We believe no challenge is unsolvable. Challenge Works partners with organisations, charities and governments around the globe to unearth the entrepreneurs and their innovations that can solve the greatest challenges of our time.

Challenge prizes champion open innovation through competition. We specify a problem that needs solving, but not what the solution should be. We offer large cash incentives to encourage diverse innovators to apply their ingenuity to solving the problem. The most promising solutions are rewarded with seed funding and expert capacity building support, so that they can prove their impact and effectiveness. The first or best innovation to solve the problem wins. This approach levels the playing field for unknown and previously untested innovators so that the best ideas, no matter their origin, are brought to bear on the most difficult of global challenges. Visit us at

About Arup

Arup is an independent firm of designers, planners, engineers, consultants and technical specialists, working across every aspect of today’s built environment. Together we help our clients solve their most complex challenges – turning exciting ideas into tangible reality as we strive to find a better way and shape a better world. With a community of over 1700 water professionals, Arup is leading global thinking across key areas like innovation, resilience, net zero carbon and sustainable water management.

About Isle Utilities

Isle is a global team of independent scientists, engineers, business and regulatory experts with a common drive to make a positive environmental, social and economic impact through the advancement of innovative technologies, solutions and practices