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Aims of the Ofwat Innovation Fund

Building the sector’s capacity to innovate

The Ofwat Innovation Fund is a pioneering £200m programme to unleash a wave of innovation in the water sector and tackle some of the major challenges of our time – delivering transformative benefits for consumers, society and the environment.

The overarching objective of the Fund is that the sector can better meet the needs of, and create long-term value for, customers, society and the environment through innovation. 

 

The Fund aims to achieve this through driving impact in three key areas:

Accelerating the creation and roll-out of innovative products, services and concepts

Growing the capacity and capability of the sector to innovate

Embedding a culture that values, encourages and supports innovation

Read about:

Competitions

The Fund is delivering a series of innovation competitions as platforms to facilitate and incentivise its intended innovation objectives. Through the competitions, the Fund will:

  • Bring ‘what if’ ideas to life and help to scale solutions to major issues affecting customers, society and the environment
  • Turbo-charge the water sector’s response to major challenges such as climate change, net zero and conservation
  • Draw in new perspectives and fresh ideas from across the world of business and academia
  • Enable new ideas and new ways of working to come to the fore
  • Generate learning and insights about how innovation in the water sector can be further enabled and accelerated.

Innovation Themes

The Fund is seeking ambitious, game-changing innovations that address the profound challenges the sector faces. These include the climate crisis, more volatile weather, and population growth. Since the Fund’s launch, entries to our competitions have had to align with one or more of Ofwat’s innovation themes, which are intended to highlight key areas where innovative thinking is needed in the water sector.

Following feedback during the pilot period, Ofwat have revised these themes to more closely align with 2050 water innovation strategy, the Welsh Government’s updated priorities for Ofwat and the UK Government’s updated priorities for Ofwat:

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1. Responding and adapting to climate change including achieving the sector ambitions of net zero carbon, zero waste and zero leakage

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2. Protecting and enhancing the environment and natural systems, to protect current and future customers from the impacts of extreme weather and pollution

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3. Delivering long-term operational resilience and understanding infrastructure risks to customers and the environment, finding solutions to mitigate these in sustainable and efficient ways

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4. Testing new ways of conducting core activities to deliver the services customers and society need, expect and value both now and in the future

Innovation enablers

The Fund will support the development of both innovative solutions and also new approaches and ways of working. These new approaches should grow the capacity of the sector to innovate, creating a positive industry-wide innovation legacy and contributing to an industry culture which embraces and supports ongoing innovation.

We have identified some innovation enablers that we believe are, and will continue to be, critical to growing the sector’s capacity to innovate. The Fund will support initiatives that demonstrate and strengthen these enablers, including:

Collaboration

Building and strengthening collaboration and partnerships across companies, the supply chain and outside the water sector.

Openness

to sharing data, insights and ideas within the water sector and with other sectors.

Adaptability

Flexibility and openness to trying out new ways of working.

Innovation Risk Management

Delivering value from all innovation projects, particularly more experimental projects, even if they fail.

Scalability and Deployability

Improving the ease of scaling up and rolling out proven innovations within the sector.

Long-term view

Taking both a longer-term and broader perspective to better meet the evolving needs of customers, society and the environment.

Theory of Change

How we believe the Fund is making an impact is outlined in the Theory of Change for the Fund – shown below.

This is being continually refined as we learn and new evidence comes to light.

Click on the image to download a copy as a PDF.

A diagram showing the Ofwat Innovation Fund's theory of change - click the image to download as a PDF.

Evaluating the Fund

We are committed to evaluating the Fund, and making improvements to the competitions and how we deliver them.

We have conducted two interim impact and effectiveness evaluations – a summary of these evaluations can be found below:

Further insights and reflections from the Fund can be found on our Insights page.

Our approach to the delivery of the Fund, following the conclusion of its pilot period in 2022, is set out in the below documents:

  • The ‘Innovation Fund pilot year report‘ sets out what the sector, supported by the Fund, has achieved during the pilot period. It sets out recommendations for how to improve the Fund over the next three years. The evaluation informed Ofwat’s consultation on the future of the Fund, Innovation Fund Consultation – Approach for 2022-25. Ofwat’s headline decisions in response to this consultation are outlined in Innovation Fund consultation decision document – Approach for 2022-25.
  • The ‘Innovation Fund consultation decision document – Approach for 2022-25‘, sets out the headline decisions on the approach we will take for the Innovation Fund for 2022-25. Our decisions have taken into consideration the feedback provided by stakeholders in our recent consultation and wider feedback we received during the pilot period of the innovation fund. We have published the headline decisions primarily to ensure the water sector has clarity on, and therefore can plan towards, the opening of our next competition, Water Breakthrough Challenge 3, which will launch in October 2022. We expect to publish a consultation decision companion document in autumn 2022, which will set out further information on the headline decisions.
  • To further support evaluating the impact of the Fund in future, we commissioned the Centre for Strategy and Evaluation Services (CSES) to produce an Innovation baseline in the water sector report for the level of innovation in the water sector in England and Wales, covering water companies and their supply chains. The report has taken the 2019 price review (PR19) business plans as a starting point and used other sources of evidence (mainly surveys and interviews) to assess progress made since then.

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