Ofwat announces details of £400m fund to spur water sector transformation in next five years

The Ofwat Innovation Fund will double to £400 million to support projects that could transform the water sector to meet and solve the many challenges it faces.

Established in 2020, the original £200 million Ofwat Innovation Fund has been awarded to collaborative projects which see water companies working with promising innovators from across different sectors and around the world to develop and deploy solutions to the water sector's biggest challenges. Today's announcement will extend the fund for a further five years to 2030.

The fund was highlighted by the Chancellor of the Exchequer following a meeting of UK regulators on 16 January as one of a number of promising ways in which regulators are supporting the Government's plan for economic growth. Investment expenditure is set to quadruple over the next five years as part of a wider £104 billion plan for the sector.

Helen Campbell, Senior Director for Sector Performance, Ofwat, said:

“There's no question that the water sector faces many urgent challenges – reaching net zero emissions, ending the overuse of storm overflows, preventing leaks, and adapting to the impact of climate change – all while ensuring customers are properly served and enabling economic growth. Our £400m commitment to continued investment in innovation will support highly collaborative projects to develop and deploy solutions to these enormous challenges.While the first five years championed nascent technologies and new approaches to demonstrate their future potential, the next five years must see them scale and deliver a lasting and beneficial impact for customers, society and the environment”. 

Through multiple competitions (four Water Breakthrough Challenges, the first Water Discovery Challenge - plus the pilot Innovation in Water Competition in 2020), the fund has so far supported 93 projects involving more than 240 partners, including water companies, universities, environmental charities, local governments, civil society organisations and other utilities. The fifth Water Breakthrough Challenge is underway and the winners will be announced in Spring 2025.

Previous winners have included robots that spot cracks from inside pipes, seagrass restoration projects, citizen science initiatives, partnerships to help communities adapt to increased rainfall and new ways to process sewage sludge to destroy forever chemicals.

The funding for the next five years will see further annual Water Breakthrough Challenges, focused on innovative ideas from consortia led by water companies, and at least two more Water Discovery Challenges, seeking groundbreaking ideas to revolutionise the water sector from companies outside the industry. It will also introduce three new funding streams to support the implementation and scaling of successful innovations, solutions which require collaboration across the entire sector, and challenges across other sectors.

The water sector must transform its environmental impact whilst encouraging growth, and innovation is crucial to end the overuse of storm overflows, cut greenhouse gas emissions and reduce leaks. It must innovate to continue improving services for customers, provide value and meet the high standards that the public demands. Collaboration is at the core of the innovation fund – it fosters new thinking and new approaches to develop effective solutions that are fit for the future.

The Ofwat Innovation Fund will be delivered by innovation prize experts, Challenge Works (a Nesta enterprise), in collaboration with Arup and Isle Utilities.

Natalie Wadley, CEO of ChangeMaker 3D, a partner in Water Breakthrough Challenge 3 winning project, Water Industry Printfrastructure, said: 

“The Ofwat funding has quite simply been game changing for both our company and the development of Printfrastructure as a positive impact for the UK water sector. The funding has unlocked new jobs for our business, five new products, a patented design and a significant opportunity to add value in the next five years. We are incredibly proud to work alongside all of the project partners, United Utilities, Scottish Water and Print City, in what has been the most trailblazing project to date. This project has truly delivered several UK firsts, pushed all of the technology boundaries and demonstrated how we can return tangible value to water customers.”

Paul Lavender, UK Water Utilities Director at Royal HaskoningDHV, a partner in Water Breakthrough Challenge 4 winning project, Biopolymers in the Circular Economy, said:

“As a technology provider, we highly value this centralised innovation funding approach for its role in supporting the development of large, impactful projects. We've witnessed strong collaboration among partners who share a unified vision to address major industry challenges, effectively bridging gaps across the supply chain. We're excited about the next steps, as engagement with the water company project partners and widespread industry dissemination will help us to develop new opportunities.”

Professor Ana Soares from Cranfield University, a leader and partner on multiple Ofwat Innovation Fund winning projects, including Water Discovery Challenge winner, Innovative Coagulant Free Phosphorus Removal Technology, said:

“Having participated in three Ofwat Innovation Fund challenges, I have witnessed firsthand how the programme nurtures collaborative innovation, transformative projects addressing strategic challenges, and the introduction of fresh perspectives from new innovators. The programme is inclusive, supporting every stage from the conception of new ideas to their practical implementation. It supports ambitious projects that address long-term challenges such as climate change, resource efficiency, and resilience, while embracing inclusivity, leveraging leading-edge technologies and services, and ensuring tangible benefits for customers, communities, and the environment.”

To find out more about the Ofwat Innovation Fund and its previous winners, visit waterinnovation.challenges.org

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Notes to Editors 

For all media enquiries, please contact waterinnovation@seven-consultancy.com or call +44 (0)20 7754 3610

About the Ofwat Innovation Fund

In December 2024, Ofwat published the final determinations for the 2024 Price Review (PR24) – a £104bn package over the next five years, designed to accelerate work to deliver cleaner rivers and seas along with improved services and strengthened supply resilience for customers. The boosted Innovation Fund is a part of this package and will cost each household in England and Wales about £2.13 per year between 2025 and 2030.

Ofwat consulted on changes to the fund, including doubling its size to £400 million for 2025-30, in March-April 2024. Ofwat will be appointing an evaluation specialist to undertake a full impact evaluation and value for money evaluation of AMP 7 (2020-2025). Ofwat will review the approach to the Innovation Fund in 2027 using feedback from the impact evaluation and value for money study.

The Ofwat Innovation Fund aims to grow the water sector's capacity to innovate, enabling it to better meet the evolving needs of customers, society and the environment. It is encouraging new ways of working that go beyond business-as-usual innovation practices in the water industry, in particular increasing and improving collaboration and building partnerships from within and outside the water sector. It is delivered by challenge prize experts Challenge Works in partnership with Arup and Isle Utilities.

The Innovation Fund forms part of Ofwat's approach to innovation in the water sector. Ofwat with the Environment Agency and Drinking Water Inspectorate also runs StreamLine, a joint service for innovators and businesses to get informal regulatory advice.

Current and previous competitions and winners

• In spring 2025 we will announce the winners of our Water Breakthrough 5 competition, who will win a share of £40 million
• In May 2024 we announced the 17 winners of our Water Breakthrough 4 competition, who won a share of £40 million
• In February 2024 we announced the 10 winners of our Water Discovery Challenge competition, each winning up to £450,000 to further develop their innovation
• In July 2023, we announced the 20 finalists of our Water Discovery Challenge competition, who each won up to £50,000 to develop their innovation. Ten winners will then win up to £450,000 to develop their innovation even further.
• In May 2023, we announced the 16 winners of our Water Breakthrough Challenge 3, who won a share of £40 million
• In April 2022 we announced the seven winners of our Water Breakthrough Challenge 2 Transform stream competition, who shared £20 million of funding
• In March 2022 we announced the 13 winners of our Water Breakthrough Challenge 2 Catalyst stream competition, who shared £5.1 million in funding
• In September 2021 we announced the nine winners of our Water Breakthrough Challenge 1 competition , who won a share of £36 million
• In April 2021, we announced the 11 winners of our Innovation in Water Challenge. who won a share of £2.1 million