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Aims of the Water Innovation Fund

Building the sector’s capacity to innovate

The Water Innovation Fund is a pioneering £600m programme, over 10 years (2020-2030) 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. 

To read more about the Fund, please see here 

 

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.

For more information about the new competitions, please read this blog providing an update as of September 2025.

To read more about our assessment and judging process, please read here. 

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.

Definition of Innovation

The Ofwat Innovation Fund exists to enable the sector to better meet the needs of, and create long-term value for, customers, communities and the environment. To achieve this, the Fund supports the development and implementation of innovative solutions and new ways of working. 

What do we mean by ‘innovation’? 

Innovation can refer to any new or significantly improved technology (e.g. Pipebots for Rising Mains), process (e.g. Mainstreaming Nature-Based Solutions), service (e.g. Stream) or business model (e.g. Unlocking Bioresource Market Growth). Specifically, the Fund is interested in supporting ambitious solutions that are novel in the context of the water sector in England and Wales, and which: 

  • Deliver greater value than current solutions: Solutions should have the potential to deliver substantially improved performance and efficiency for customers and the environment (as compared to current practices in the water sector in England and Wales) 
  • Advance the sector’s understanding: Regardless of whether a solution is proven successful or not, projects should deliver a clear learning outcome which enables further innovation and unlocks systemic change (both in terms of the solution itself, and the sector’s capability to innovate) 
  • Could not otherwise be funded: Solutions should not be ‘sure bets’, and should demonstrate that they cannot be funded through other means (either internally, or through external investment).  

The Fund supports innovations at varying stages of innovation, and with varying levels of risk, and each of our competitions will emphasise the above elements to different extents. Additionally, some competitions may set specific bounds with regards to innovation maturity or technological readiness. 

Our approach to risk and innovation

The Water Innovation Fund aims to support innovative solutions that deliver greater value than current practices in the sector; advance the water sector’s understanding; and could not otherwise be funded. 

Projects to deliver these kinds of solutions will carry some risk and uncertainty, and the Fund encourages this, in line with the following broad principles: 

  • Potential benefit for customers, community and environment – the Fund is open to accepting risk, where this risk is related to the potential benefits a solution could deliver. For example, the risk that a promising, but unproven technology fails to perform as expected – provided there are appropriate plans to capture and share robust learnings, ensuring there is still some benefit, even if the innovation is not proven successful. 
  • Proportional mitigations for the level of development – the Fund expects projects to have mitigations which are appropriate for their level of readiness and development. For example, a very early-stage solution may have identified a market need, and have a plan to validate this; whereas a project seeking to implement an innovation at scale should have a more detailed market strategy. 
  • Proactive management of compliance and regulation – the Fund can support projects where there is an element of regulatory uncertainty, for example if it remains to be proved that the innovation is compliant; or if there is scope for the project itself to help shape and inform future regulation. However, projects should have a clear plan for engaging with relevant regulators. 
  • Strong project management – the Fund expects projects to have robust controls in place to identify and mitigate potential risks (e.g. appropriate contingency and inflation budgets; environmental risk assessments; capable teams, including senior engagement; clear project plans). 

Theory of Change

How we believe the Fund is making an impact is outlined in the Theory of Change for the Fund – shown below. As of September 2025, this Theory of Change is currently being updated. Please sign up to our newsletter to get updates. 

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.

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