Water regulator Ofwat says the adoption and roll out of innovation and move from trials and pilots to mainstream activity remains a challenge in the sector.

Commenting in Ofwat’s 2025 Innovation Fund Annual Report reviewing progress since the 2024 Annual Report, Ofwat CEO David Black says:

"The challenges facing the sector from climate change, population growth and rising expectations mean that innovation is more important than ever.

“Innovation is integral to supporting economic growth, enhancing operational efficiency, customer service and operational performance…..

“Adoption and roll out of innovation and moving from trials and pilots to mainstream activity remains a challenge in the sector.”

The report states:

“For innovation to have impact, water companies need to deploy and scale innovative solutions, and we call upon water companies to be bolder in committing to this. We will play our part by introducing a new implementation programme in 2025-26, which will make £40 million available across 2025-30 to accelerate the deployment of proven innovations.”

Launched in 2020, to date the Fund has provided £200 million in funding through seven competitions: the Innovation in Water Challenge, five rounds of the Water Breakthrough Challenge, and the inaugural Water Discovery Challenge. The competitions have supported 109 projects involving 286 partners, with funding ranging from £50,000 to £10,000,000.

Projects include hugely accelerating the detection of cryptosporidium in water systems, helping leak reduction through micro satellites and machine learning and transforming sludge into sustainable aviation and marine fuels.

The report states:

"We recognise that innovation inherently involves taking risks. Some funded projects may not meet their full potential, we recognise that these projects present rich learning opportunities. Learning from these projects may be as valuable as from projects that succeed."

For 2025-2030, the Innovation Fund has been doubled to £400 million and Ofwat says it is moving beyond simply backing new ideas, to actively shaping a broader, more mature innovation ecosystem. The regulator is also shifting focus towards scaling and embedding successful innovations.

Looking ahead to 2025-26

Ofwat will be designing three new programme areas: the collaborative challenge, the implementation programme and the cross-sector programme – water companies and the wider sector will be invited to support the design work over summer and autumn 2025.

The report says the next 12 months are set to be “the most pivotal yet” for the Fund, with a huge number of projects scheduled to conclude.

Ofwat says that with that comes a significant opportunity to share learnings across the sector and for successful innovations to be adopted, benefiting both water companies and customers.

The report is set out in the following sections:

• Ofwat reflections on the past year
• Evaluation
• Water Breakthrough Challenge
• Knowledge sharing
• Looking ahead to 2025-26
• Water Breakthrough Challenge 5 winners
• Case studies of completed projects
• Winning projects completing by June 2026
• Water Discovery Challenge
• Water Efficiency Fund
• Ofwat looks forward
• Next steps
• Final thoughts

Ofwat intends to carry out an independent impact and value for money evaluation of the Fund for the period 2020-25, ensuring it reports in time to feed into policy development for the next Price Review in 2029.

Click here to download Ofwat’s Innovation Fund Annual Report July 2025