Innovation in the water sector

As we set out in our strategy, ‘Time to act, together’, the sector faces unprecedented pressures in the shape of climate change and population growth. At the same time they have big opportunities to change lives and improve our natural environment.

We consider that the adoption of innovative approaches is key to delivering long-term resilience and great customer service at an affordable price. And the sector will need to step up to make sure it can continue to deliver reliable, resilient and safe water that is affordable for all.

We also want to see companies work more effectively together, and with their supply chain, to better tackle these challenges.

Our overall approach to innovation includes the following.


Funding transformational innovations

Our £200 million innovation competition fund to encourage innovation to transform water and wastewater services.

Visit to get details on the latest competitions, previous winners and how to enter current and future competitions.

For general background to the fund, visit our water innovation competitions page.


Calling on innovators – our Water Discovery Challenge (closes 5 April 2023)

Our Water Discovery Challenge – which is open to anyone to enter (except water companies) – opened at noon on 25 January 2023 and closes on 5 April.

The Water Discovery Challenge is a £4m competition for innovators with bold and ingenious ideas that can help solve the biggest challenges facing the water sector today and in the future.

Key challenges include tackling leaks, preventing pollution, removing pollutants from waterways, improving water efficiency, reducing emissions, improving flood and drought resilience, finding sustainable uses for sewerage and wastewater, and supporting vulnerable customers.

Up to 20 teams of the most promising innovators from outside the water sector will be awarded £50,000 to develop their ideas, with expert support and mentoring from water companies. Up to 10 will go on to win £450,000 to turn ideas into pilots.

The Water Discovery Challenge is a new prize from Ofwat’s £200 million Innovation Fund which is rewarding new ways of working that go beyond business-as-usual innovation practices in the water sector.

To find out more and enter the Water Discovery Challenge, visit

Key information

3. Water Discovery Challenge key info

Calling on innovators

Water Discovery Challenge – calling on innovators from Challenge Works on Vimeo.


Providing advice to businesses and innovators

StreamLine, our joint advice service with the Drinking Water Inspectorate and the Environment Agency, gives businesses and innovators access to informal regulatory advice on current rules and regulations, as they explore  innovation opportunities. Get advice about your innovation from StreamLine


Challenging water companies to innovate

The mechanisms and incentives we included for companies in our decisions on the price, service and investment packages for the 17 largest companies for 2020-25 (the ‘2019 price review’). For example (among other things):

  • the process we used encouraged companies to put forward plans which are high-quality, ambitious and innovative; and
  • our outcomes and total expenditure approach facilitate innovation by giving companies the flexibility and freedom to adopt more efficient and effective means of delivery.

We’ve also made driving improvements through efficiency and innovation a key ambition of our 2024 price review – where we’ll be deciding services for 2025 to 2030. Find out more.


Supporting innovation through markets

The business retail market, which aims to improve price and services for business and other non-residential customers.

The new appointments and variations market to improve local price and services for customers at sites across England and Wales.

Other existing markets and opportunities for new markets.


Working with the sector to support innovation

Our work is also complemented by the sector’s own work:

  • UK 2050 Water innovation strategy’: The strategy seeks to guide innovation investment across the sector, and will provide insight for us in rolling out the £200m innovation fund. It also signals new opportunities for partners and suppliers of all sizes to innovate and collaborate more easily and efficiently across the whole sector.
  • Spring: the water sector’s innovation centre of excellence, which is expected to launch in December 2021. Spring will accelerate water sector transformation through innovation and collaboration.


Evaluating innovation in the water sector – and the impact of our innovation fund

To support evaluating the impact of our Innovation Fund in future, we commissioned the Centre for Strategy and Evaluation Services (CSES) to produce an ‘Innovation baseline in the water sector’ report for the level of innovation in the water sector in England and Wales, covering water companies and their supply chains.

The ‘Innovation Fund end of pilot period report’ sets out what the sector, supported by the Fund, has achieved during the pilot period. It sets out recommendations for how to improve the Fund over the next three years. The evaluation informed Ofwat’s consultation on the future of the Fund, Innovation Fund Consultation – Approach for 2022-25.

We will be doing further evaluation as we implement the approach for 2022-25. The evaluation will build on the findings from the pilot period report and the innovation baseline report and will include both process evaluation and impact evaluation as we look at in more depth the outcomes and impacts of projects as they progress.