Innovation Fund end of pilot period report


In 2020, Ofwat, launched a pioneering £200m Innovation Fund to support innovative initiatives which deliver significant benefits for customers, society and the environment. It aims to ultimately grow the water sector’s capacity to innovate, to enable it to better address challenges and meet the evolving needs of its stakeholders.  

Our delivery partners for the Fund (Challenge Works, supported by Arup and Isle Utilities) produced a report, working collaboratively with Ofwat, to:

  • summarise what the sector supported by the fund has achieved during the first three competitions (the ‘pilot period’) of the fund.
  • set out recommendations for how to improve the Fund over the next three years.

The report informed Ofwat’s consultation on the future of the Fund, ‘Innovation Fund Consultation – Approach for 2022-25’.

Ofwat has since published it’s headline decisions on the future of the fund for 2022-25.

Below we set out:

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Download the End of pilot period report

Find out more by reading the full innovation fund end of pilot period report.

Summary of recommendations   

Design of the Fund  Recommendation 1: Consider introducing a new competition which encourages entries from early stage innovators and innovations from outside of the water sector, for example, by allowing entries from non-water companies. 
Delivery of the Fund  Recommendation 2: Schedule competitions carefully, with consideration to how they can be delivered at a sustainable pace, with entry processes as streamlined as possible. 

Recommendation 3: Increase the number of payment runs to winners, allowing water companies to sign winners’ agreements and receive funds as quickly as possible within current  quickly. 

Engaging with Fund stakeholders  Recommendation 4: Bring together all Fund-related engagement in a joined up plan that links to the Fund’s broader objectives, and explore more efficient and engaging ways to collect feedback from stakeholders. 

Recommendation 5: Engage with a wider range of stakeholders within water companies. For instance, working on existing relationships within water companies to create more ways for senior decision-makers and non-innovation teams (including operational, customer-facing and corporate services teams) to stay informed, and shape best practices. 

Supporting sharing and learning  Recommendation 6: Work with water companies to progress plans to manage and share intellectual property developed through the Fund. 

Recommendation 7: Consider ways the Fund’s mechanisms could further support winners to capture and share insights and lessons, and ensure innovation skills and knowledge are embedded within water companies and the wider sector (particularly in instances where external partners are responsible for significant components of an initiative). 

Recommendation 8: Explore how the Fund could leverage outside expertise to bridge skills gaps within the sector (for example, bringing in experts on open data, talent retention, and equity, diversity and inclusion etc.). 

Promoting Equity, Diversity & Inclusion (EDI)  Recommendation 9: In considering the diversity of water customers, review how the design of the Fund could help winners think about and apply EDI principles within their projects to ensure benefits can be realised by a wide customer base. 

Recommendation 10: Within the design and processes of the Fund, consider how EDI principles can be embedded in the Fund to ensure it is accessible to all, and to further minimise unconscious bias. 

Key achievements

  • Over the past 20 months, Ofwat and the delivery partners have delivered three competitions as part of the pilot period of the Fund and identified 41 highly innovative initiatives which together have been awarded over £63m.  
  • The winners represent a wide range of innovations, and present significant opportunities for the sector – from trialling new technologies to reducing greenhouse gases emitted during wastewater treatment to delivering the world’s first ‘water neutral’ housing development.
  • The winners have created the very systems needed to support long-term innovation in the sector, with shared testing infrastructure, data sharing frameworks, and a sector-wide innovation centre of excellence all receiving funding. 
  • Beyond these winning initiatives, there has been widespread engagement from the sector, with 23 of the 25 eligible water companies in England and Wales entering at least one competition.
  • These entries have been highly collaborative, with 298 organisations involved.
  • Promisingly, 95% of the entries to the two most recent Water Breakthrough Challenges were submitted by partners collaborating in new ways e.g.  either in newly formed partnerships, or by existing partners working together in a different capacity.