The ripple effect: further signs of impact from the Ofwat Innovation Fund

The Ofwat Innovation Fund (the Fund) was established by Ofwat to enhance the water sector’s capacity to innovate, address evolving needs, and deliver benefits to customers, society, and the environment. To achieve these goals, the Fund has to date conducted multiple innovation competitions, awarding funding to 93 projects. This includes:

• Restoring seagrass to improve biodiversity, reduce carbon and nitrogen, improve water quality and enhance the resilience of coastal ecosystems;
• Exploring the use of existing fibre-optic cables to detect leaks;
• Using new technologies to minimise water demand and offset water consumption in new housing developments.

As we move into the fifth year of the Fund, and Ofwat consider the future of the Fund through to 2030, we engaged with some completed projects (via survey and interview) to better understand the early signs of impact. This builds upon the research we carried out last year. Read on for an overview of what we’ve heard this year.

Further signs of impact from the Innovation Fund

Supporting a wide range of projects

On the whole, projects felt that the Fund has enabled water companies and their partners to pursue ambitious and riskier projects, leading to significant innovations in the sector. We’ll be taking an in-depth look at innovation maturity in a future blog – watch out for that.

Funded projects have demonstrated potential for broad and deep benefits beyond cost considerations, including societal and environmental impacts.

Enabling new projects

As well as funding a wide range of projects, the Fund has supported projects which would otherwise not have been delivered as soon or as quickly; or not been delivered at all.

Many projects reported that they could not have proceeded without the Fund’s financial support, which has allowed exploration of high-risk, high-reward projects that might otherwise have been overlooked.

Even for projects which might have been delivered without the support of the Fund, there is emerging evidence that the Fund is enabling them to proceed on accelerated timelines, or with a greater degree of scale, collaboration and ambition than they would otherwise have been able to.

Driving openness and collaboration

The Fund appears to have driven a significant shift in the water sector’s culture towards openness and collaboration. Projects reported developing new partnerships, as well as strengthening existing ones – to date, over 240 different organisations have been involved in funded projects – which has in turn facilitated greater knowledge exchange and resource sharing.

Projects also attributed increased staff motivation for innovation and a higher priority for innovation within organisational cultures to the Fund. There is evidence that the Fund has encouraged a more proactive approach to tackling sector-wide challenges, promoting a culture of continuous improvement and shared learning.

Considering cultural and structural challenges

However, sustaining cultural changes beyond the Fund remains a challenge.

The shift towards larger, collaborative projects has occasionally led to a delay in realising benefits – although this should yield greater benefits for customers across England and Wales, it should be acknowledged that this may mean delaying benefits for local customers.

Also, water companies reported that the increased workload associated with managing a larger innovation portfolio has strained some organisations’ resources. Smaller companies, in particular, are considered to face challenges in meeting the administrative demands of the Fund, potentially limiting their potential participation.

What next?

This evaluation, building on previous research, indicates promising progress towards the Fund’s objectives – while also shining a spotlight on the need for greater consideration of the long-term cultural changes needed to realise the full benefits of the Fund. This will be crucial in unlocking the adoption and roll-out of funded innovations at scale and remains a top priority for Ofwat.

As in previous evaluations, we acknowledge that these findings are informed by a relatively limited sample of completed projects; and that many projects may not expect to see their full benefits realised for some time. We will continue to engage with completed projects to share insights and learnings ahead of us carrying out a full and independent evaluation of the Fund in 2025.

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