Table of contents:
Ofwat, the economic regulator for England and Wales, is delivering a £600 million, 10-year Innovation Fund to grow the water sector’s capacity to innovate, enabling it to better meet the evolving needs of customers, communities and the environment. The Fund is delivered in partnership with Challenge Works (formerly Nesta Challenges) and supported by Arup and Isle Utilities.
Aims of the Fund
To read more about the aims of the Fund, please refer to this page.
Impact of the Fund
Since its launch, the Fund has invested over £190 million across 109 projects involving almost 300 partners, ranging from water companies and universities to environmental charities, local governments and other utilities.
You can read about the initiatives we’ve funded to date on our Winners page. You can also read about previous rounds of our competitions on the Past Competitions page.
History of the fund
The Fund is designed to complement Ofwat’s existing approach to innovation and to support delivery of Ofwat’s strategy which highlights the role of innovation in addressing many of the challenges the sector faces.
At PR19, Ofwat, the Water Services Regulation Authority for England and Wales created the Innovation Fund to encourage companies to collaborate to drive innovation in the water sector. This was seen as a way to complement their price review incentives and broader policy work to give companies stretching but achievable performance commitments and set strong incentives to do things differently to meet them.
The Innovation Fund is investing £600 million over 10 years (2020-30) to grow the water sector’s capacity to innovate. The fund runs different types of competitions to award funding to innovation projects that deliver benefits to customers, communities and the environment.
Led by Ofwat, the Water Innovation Fund is being delivered by Challenge Works (a Nesta enterprise), in partnership with Arup and Isle Utilities.
Innovation fund 2020-25: development and embedding
Launched in November 2020, the original £200 million Innovation Fund delivered seven competitions between 2020-2025: the Innovation in Water Challenge, the Water Breakthrough Challenges 1-5, and the Water Discovery Challenge.
In this period, the fund has supported 109 projects involving almost 300 partners, including water companies, universities, environmental charities, local governments, civil society organisations and other utilities.
You can read about the initiatives we’ve funded to date on our Winners page. You can also read about previous rounds of our competitions on the Past Competitions page.
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. Ofwat’s headline decisions in response to this consultation are outlined in Innovation Fund consultation decision document – Approach for 2022-25.
Innovation fund 2025-30: expansion and growth
Following an open consultation, Ofwat confirmed in January 2025 that the Fund would continue for another five years to 2030, with £400 million available to support projects that could transform the water sector to meet and solve the many challenges it faces. The challenge facing the water sector is significant and requires a step change in investment, not just for 2025-30, but for decades to come. The scale of the challenge for the water sector is growing with new targets and tighter environmental targets, climate change and we cannot afford to operate in the same way the sector has in the past. Innovation is critical.
This funding will be delivered through:
These competitions will be focused on funding initiatives in line with the aims of the Fund, that deliver innovation aligned with the Water Innovation Strategy themes.
For more information, please read here.
Independent Water Commission
Following the Independent Water Commission’s (IWC) review and the UK Government’s decisions on future regulation, we know this is a time of change for the water sector. The IWC and the government have made it clear that the arrangements for the current price control will remain in place and that includes continuing the Innovation Fund.
We’ll keep working with others across the sector to encourage innovation that can benefit customers, communities, and the environment.
Annual reports
Since 2023, Ofwat have published an annual report containing their reflections on the previous 12 months of the Fund, and their expectations for the year ahead. These can be found at the links below:
Building on our progress in the first five years of the fund, and following a consultation held in 2024, the next five years will see the delivery of an array of competitions and initiatives which: support water company-led innovations; create pathways for new innovators to the sector; convene stakeholders (from across sectors) around strategically important challenges; and enable the implementation of proven solutions:
The Water Breakthrough Challenge, Water Discovery Challenge and Water Innovation Missions are being delivered by Challenge Works, Arup and Isle Utilities. Isle Utilities are leading the delivery of the Implementation programme.
For specific information about each competition stream, please read the detailed blog here.
Alongside the Water Innovation Fund will run the Water Efficiency Lab, established by Ofwat as part of its £100 million Water Efficiency Fund to drive a transformative, sustained, and measurable reduction in water demand across England and Wales. The Water Efficiency Lab (WEL) will make up to £25 million available through annual competitions to fund the development of new technologies and processes for water efficiency. The first competition opens on 25 November 2025 and will call on innovators to develop solutions that deliver personalised water usage insights that drive a reduction in water consumption for both households and businesses in England and Wales.
Learn more about the Ofwat Innovation Fund & its impact in the 2025 Annual Report
We regularly evaluate the Innovation Fund to understand how well it is achieving its intended outcomes and impacts.
Our evaluation of the Water innovation fund is based on the Fund’s original theory of change (2020–25) and has tested how far the Fund is helping the sector to innovate in ways that benefit customers, communities, and the environment.
The evaluation uses a theory-based approach, applying contribution analysis to build a narrative of the Fund’s impact from observed evidence. Data collection includes surveys and semi-structured interviews with project leads and partners, alongside insights from project monitoring reports. These methods build on earlier interim evaluations, while also adding new data to give a fuller picture of the Fund’s effectiveness and impact.
Ofwat has now commissioned ICF to carry out a full independent evaluation of the Fund. Their work includes the development of a revised Fund’s theory of change. ICF will provide interim findings in March 2026 and a final report in November 2026.
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.
Data on previous winners
After each round of competition, we publish some data about our winning projects. The spreadsheet sets out data on the winners, partners, themes and funding amounts awarded in the Water Innovation fund up to and including our Water Breakthrough Challenge 5 innovation competition. We are publishing it openly for transparency, to encourage best practice in publishing open data, and to give better information on Ofwat’s work encouraging innovation that benefits customers, society and the environment. We will periodically update this spreadsheet with winners from our next competitions. The latest update is from July 2025. You can access the data here.
