Economic regulator of water services in England and Wales Ofwat has announced an “open access” competition through its £200mn Innovation Fund to encourage more diverse ideas to transform water services for customers, the environment and society.
Ofwat’s Innovation Fund incentivises and rewards collaborative innovation in the water sector that meet key objectives for the industry around one (or more) of its four innovation themes:
adapting to climate change and achieving net zero emissionsprotecting and enhancing the environmentdelivering long-term operational resilienceand improving the delivery of services for customers and society
In its first year, the fund awarded £63mn to projects, including those helping communities get involved in improving the health of their local rivers, and projects to improve the support available for people in vulnerable circumstances. As the pressure on the cost-of-living increases, Ofwat is encouraging new innovations to support vulnerable customers and put customers at the heart of future innovation.
Ofwat is evolving the innovation fund to meet customer, environmental and industry priorities in the years ahead. This will see a £38mn competition open in autumn 2022; the first £4mn open access competition open in early 2023 – and continue the fund to 2030. It 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.
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.”
The Water Breakthrough Challenge
The Water Breakthrough Challenge 3 will launch on 3 October 2022 – with an £8mn Catalyst stream and a £30mn Transform stream – and will run annually. Entrants to the Catalyst stream can bid for between £500k and £2mn, while entrants to the Transform stream can bid for between £2mn and £10mn.
New open access competition opening in 2023
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 £4mn 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 fund continuation
Ofwat is proposing to continue the innovation fund until at least March 2030, subject to the regulator’s consultation on its draft methodology for the 2024 price review. Over the coming months Ofwat will work with the water sector and other innovators to look at how the fund could continue to stimulate innovation up to 2030.
More details to come
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.