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 https://waterinnovation.challenges.org/ to get details on the latest competitions, previous winners and how to enter current and future competitions.

For general background to the fund or data related to winning projects, visit our water innovation competitions page.

 

Future of the Ofwat innovation fund: 2025-30

The Ofwat Innovation Fund has been running for three years and continues to fund innovation in the water sector. There are now 94 projects that are developing solutions to address problems the water sector currently face or will face in the future.

We have confirmed that for 2025-30 the Ofwat innovation fund will be at least £300 million. We carried out a consultation on the future of the fund in spring 2024. We will publish a summary of the responses we received in summer 2024 – before publishing our final decisions in December 2024.

 

 

Water Discovery Challenge: the winners

We’ve announced 10 winners of our Water Discovery Challenge, a competition to reward innovators from outside the water sector with bold solutions that can tackle its biggest challenges and benefit customers, society, and the environment.

Read more about all of the projects: Discovery: Meet the Winners – Ofwat Innovation Fund (challenges.org)

 

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 our consultation and decisions on the future of the fund for 2022-25.

In July 2023 we published our first ‘Ofwat innovation fund: annual report‘ to reflect on the progress of the Ofwat Innovation Fund since its launch in 2021, 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.

We will be doing further evaluation on our 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.