Ofwat has published its Annual Report  on the Ofwat Innovation Fund for 2023-24, setting out progress since its last report in July 2023, further improvements which could be made in innovation performance in the water sector and outlining next steps for the fund.

Introducing the report, Helen Campbell, Senior Director of Sector Performance at Ofwat comments:

“There are big challenges in the water industry that must be solved, some are well known and others are less so. Through the Ofwat Innovation Fund we aim to find solutions with potential to deliver wide-scale, transformational change for customers, society and the environment. While innovations are risky and some will fail, we need to make sure every penny of customers’ money that we use delivers the greatest impact.”

Since it was first established in 2020, the a total of 94 projects have received funding, including 27 innovative projects awarded funding over the past year.

These include:

• multiple projects looking for greener, more sustainable solutions to sewage sludge;
• projects looking to better monitor sewer problems via self-driving robots in pipes;
• potential alternatives to chlorine for disinfecting drinking water; and
• using AI and machine learning to improve management of water and wastewater systems.

The most active water companies (as partners or lead entrants) are:

1. Thames Water – involved in 25 entries including 4 winning entries

2. Southern Water – involved in 17 entries including 2 winning entries

3. Dŵr Cymru Welsh Water – involved in 15 entries including 1 winning entry

During the year 12 more projects have concluded – several of which have progressed to develop their ideas further than originally funded.

With another 16 projects due in 2024/25, and a pipeline of work continuing well into the latter part of this decade, Ofwat expects to see more results delivered in the coming years than before.

The last round of competitions under the current Fund will be awarded in spring 2025 – Ofwat has already confirmed that the Fund will continue for another five years with a proposed £400 million Fund for the period 2025-30.

Looking ahead, future activities include:

• Supporting a culture of knowledge transfer in the sector: Ofwat see effective knowledge transfer as a key pathway to implementation and scaling a
• Exploring options for an implementation fund: Ofwat has heard that it can take many years for companies to adopt an innovation and that part of the Fund could be targeted to help speed up the implementation of new products, services and concepts.
• Introducing greater collaboration: Ofwat is looking to introduce a new ‘collaborative challenge’ stream, in which it can call upon the sector (or sub-groups of the sector such as water and sewerage companies, water only companies, new appointees or Retailers) to coalesce around a single idea and present a proposal to Ofwat on how to address that issue as a collective.
• Facilitating more cross-sector working: Ofwat sees opportunities to bring into water ideas and funding from other sectors. The regulator wants to build on work begun with adjacent sectors, such as energy via Ofgem’s Strategic Innovation Fund, to explore whether more formal, joint challenges could support the identification of solutions which are beneficial to both sectors.

In early 2024 Ofwat consulted on the future of the Fund to ensure it does adapt to meet changing context and future needs – the regulator received an unprecedented number of responses to the consultation.

Ofwat is currently considering the responses and expects to publish a summary of responses later in this summer. Final decisions on plans for the Fund in 2025-30 will be published at the end of 2024.

The Ofwat Innovation Fund is delivered in partnership with Challenge Works, Arup and Isle Utilities:

Click here to download Ofwat innovation fund annual report 2024