Ofwat is seeking views on the options for the design and implementation of the proposed innovation competition which will make up to £200m of additional funding available for AMP7.

The consultation paper published by the regulator also  seeks views on a number of outstanding policy issues and provides a brief update on other complementary activities. These include development of the joint sector Innovation Strategy Ofwat has asked the water companies to lead on and the trialling of a One-Stop-Shop to provide regulatory advice and support.

In December 2019 Ofwat outlined its decision to make to up to £200m of customer funding available for the period 2020-2025 and to hold a collectively-funded innovation competition at least once a year over which the regulator will retain strategic control. 

Outstanding policy issues related to the innovation funding and competition include:

Intellectual Property Rights (IPR) and royalties

•  Open data and information
•  Risk sharing
•  Types of projects funded
•  Protecting the innovation funding
•  Partnerships and collaboration with third-parties
•  Protecting customers’ interests
•  Interactions with the price review

On IPR, Ofwat has suggested that where IPR exists prior to the submission of any bids - Background IPR - to the competition, each participant should retain all rights in and to its Background IPR, including where a bid involves more than one participant. 

For new intellectual property created through a project funded by the innovation competition - Foreground IPR - the regulator has proposed that this must be made available royalty-free and in perpetuity to all seventeen water and wastewater companies and new entrant water and wastewater companies. This is intended to ensure all customers benefit from the innovation competition, which is collectively-funded.

Data - Ofwat to take open by default approach

For open data, Ofwat will take an open by default approach to data and information generated through the innovation competition. The regulator takes the view that, wherever appropriate, data on infrastructure should be open. 

Ofwat also thinks data can help to drive partnerships between water companies and others operating in their local areas – for example, utility companies and local authorities sharing information about assets could lead to improved relationships around the management and development of infrastructure. 

The regulator expects open data to be a key theme of the water companies’ joint . Innovation Strategy.

Partnerships and collaboration a key theme 

Partnerships and collaboration where water companies work more closely not only with each other, but also with the supply chain, innovators and other stakeholders, across sectors and jurisdictions (third-parties) is also one of the key themes Ofwat has asked the water companies to explore in their strategy.

The consultation paper says that the first year of the regulatory period is critical to ensuring Ofwat sets up the competition and framework for funding effectively in the longer-term, in a way that achieves its wider aim of driving collaboration to address key strategic challenges. 

Ofwat’s proposed approach to the first year of the competition (2020-21) will involve piloting:

•  An Innovation in Water Challenge: targeted at smaller transformative projects, with a strong focus on supply chain participation;
•  A main competition: targeted at larger strategic collaborative projects;
•  Potential funding for enabling activities.

During the pilot year up to £40 million will be made available across three different types of activities:

• Innovation in Water Challenge 
• Main innovation competition 
• Enabling activities 

The seventeen regulated water and wastewater companies and new entrant water and wastewater companies will all have direct access to the innovation funding.

The regulator is planning to appoint an organisation to help implement the innovation competition, provide technical expertise in innovation in the shape of an independent expert panel, and administrative support in the delivery of the competition. Ofwat’s aim is to ensure that projects funded deliver genuine value for customers and that the competition is efficiently run.

Ofwat will retain strategic control and take a role in final decision-making for the Innovation in Water Challenge, the main innovation competition and any decision to fund enabling activities. Decisions will take into account the recommendations of an independent expert panel.

The regulator intends to go out to tender for support in implementing the innovation competition in the summer and work with the supporting organisation as soon as it is appointed to finalise arrangements for the pilot year of the innovation competition, including eligibility and assessment criteria. Ofwat would aim to publish these in the autumn in time for a winter competition. 

Ofwat has also highlighted innovation in the context of the the current COVID-19 pandemic,commenting: 

"We recognise that these are challenging times for all, and our priority is to support and challenge the water sector in ensuring all customers receive reliable water and waste water services. The current COVID-19 pandemic reinforces the important role innovation can play in addressing global challenges. With that in mind, we are still aiming to launch the first round of the innovation competition in winter 2020, so as to start delivering the intended benefits for consumers and the sector as soon as possible."

Deadline to submit responses to the consultation is 24 June 2020 - click here to download the consultation paper.