Ofwat has announced a new “open access” competition for innovators as its £200 million Innovation Fund evolves to encourage more diverse ideas to transform water services for customers, the environment and society.

The water sector regulator’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;
• improving the delivery of services for customers and society

In its first year, the fund awarded £63 million in its first year to a wide range of projects, including:

• 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
• cutting-edge research projects to develop green hydrogen from sewage, to create clean energy alternatives for the future.

Ofwat has now 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.

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

In 2022 Ofwat commissioned The Centre for Strategy and Evaluation Services (CSES) to produce a baseline report for the level of innovation in the water sector in England and Wales, covering water companies and their supply chains.

The report assesses the level of innovation in the water sector and its supply chain before the introduction of the £200 million innovation fund - the regulator is using the report to help measure the impact of the fund.

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. ”

Water Breakthrough Challenge returns Autumn 2022 and new open access competition coming 2023

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

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.

Innovation to 2025 and beyond

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 the regulator said it 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. ​

​Click here for more information about Ofwat’s Innovation Fund and to register interest in future competitions

Click here to download Ofwat Innovation Fund Pilot Report 

Click here to download the full Innovation in the Water Sector Baseline Reprt