Ofwat confirms new open access competition for innovators and seeks to extend Innovation Fund to 2030

Ofwat have announced their plans for the next phase of their Innovation Fund, including a new ‘open access’ competition to launch in early 2023 which will make £4 million available to innovators from any sector – from fintechs, to manufacturers, community groups or local government – allowing them to bid for up to £500,000 for their game-changing ideas for the water sector.

As well as the new open access competition, the next Water Breakthrough Challenge will launch in October 2022 with a total of £38 million available for innovative initiatives led by water companies and their partners.

Read more about our plans for the Innovation Fund below.

Evolving the Fund
Ofwat launched the £200 million Innovation Fund in 2020, to support innovative initiatives which deliver significant benefits for water customers, society and the environment. It aims to grow the water sector’s capacity to innovative, to enable it to better address challenges and meet the evolving needs of its stakeholders.

Over a 20 month pilot period, consisting of three competitions, the fund awarded £63m to projects ranging from bio-engineering solutions for ammonia and phosphorus pollution to remove pollutants from water whilst creating a circular economy for finite and useful chemicals, carbon capture initiatives to cut industry-related emissions to meet water industry targets of achieving net zero emissions by 2030, and cutting-edge research projects to develop green hydrogen from sewage, to create clean energy alternatives for the future.

Following a review of the pilot period (summarised in the End of Pilot Report prepared by the Fund’s delivery partners) and a consultation, Ofwat has unveiled how the innovation fund will evolve to meet customer, environmental and industry priorities in the years ahead:

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.”

Water Breakthrough Challenge returns autumn 2022
The Water Breakthrough Challenge 3 (Breakthrough 3) will launch on 3 October 2022 and will retain the two streams from Breakthrough 2:

• • The £8 million Catalyst Stream will allow entries seeking between £150,000 and £2 million. Entries will open at 12 noon BST on Monday 3 October 2022, and close at 12 noon GMT on Thursday 8 December 2022.
  • The £30 million Transform Stream will allow entries seeking between £2-10 million (with Ofwat exploring the option to allow bids over £10 million). Stage 1 entries will open at 12 noon BST on Monday 3 October 2022, and close at 12 noon GMT on Wednesday 9 November 2022.

Both streams maintain a requirement for 10% financial contribution, and require lead entrants to be a water company in England or Wales, however lead entrants to the Catalyst stream will be able to devolve project management responsibilities (including drafting the entry) to their partners.

Following a trial in the Catalyst stream of Breakthrough 2, background intellectual property rights for entries to either stream can now be licensed, however any foreground IPR developed through the competition must be shared with water companies in England and Wales.

We will be publishing more detail on how both streams will run when entries open.

New open access competition
Following overwhelming support in the consultation, the new open access competition will launch in early 2023. 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 £4 million in funding annually, with up to £500,000 available for individual entries, and there will be no mandatory 10% financial contribution, or requirement to license IPR.

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.

We will be publishing more detail on how this new competition will run, including an overview of the entry process, timings and eligibility criteria in autumn 2022.

Adapted innovation themes
Since the Fund’s launch, entries 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 the 2050 water innovation strategy and the UK Government’s updated priorities for Ofwat:

• Adapting to climate change and achieving net zero emissions
• Protecting and enhancing the environment
• Delivering long-term operational resilience
• Improving the delivery of services for customers and society

The future of the Innovation Fund

The consultation showed considerable support for the Fund continuing beyond 2025 as a way to provide certainty to the sector, foster long term partnerships, and continue to create a pipeline of new ideas. Ofwat is currently consulting on its proposal to keep the fund until 2030 – and will confirm its decision by the end of 2022.

Over the coming months, we will be working with the water sector and other innovators to explore how the Fund can continue to stimulate innovation through to 2030, including the size of the Fund, how it could operate, and whether it could be delivered in partnership with other sectors or funds.

To stay in the loop on all future developments, be sure to sign up to our newsletter.