As we set out in our strategy, ‘Time to act, together’, the sector faces unprecedented pressures in the shape of climate change and population growth. At the same time they have big opportunities to change lives and improve our natural environment.
We consider that the adoption of innovative approaches is key to delivering long-term resilience and great customer service at an affordable price. And the sector will need to step up to make sure it can continue to deliver reliable, resilient and safe water that is affordable for all.
We also want to see companies work more effectively together, and with their supply chain, to better tackle these challenges.
Our overall approach to innovation includes the following.
- Funding transformational innovations
- Funding a transformative, sustained, and measurable reduction in water demand across England and Wales
- Providing advice to businesses and innovators
- Challenging water companies to innovate
- Supporting innovation through markets
- Working with the sector to support innovation
Last updated: 12 December 2025
Funding transformational innovations
Our £600 million Water Innovation Fund is designed to encourage innovation to transform water and wastewater services.
So far we have awarded more than £190 million to 109 projects across England and Wales that are pioneering solutions to improve the water sector’s environmental impact – from monitoring coastal and inland bathing water quality using drones and AI models, to converting biosolids into sustainable aviation and marine fuels.
Since 2020, the Water Breakthrough Challenges have seen water companies form new cross-sector collaborations with utility providers, universities, charities, SMEs, tech giants, local and foreign governments and community organisations.
Previous winners have included robots that patrol water and wastewater pipes to pinpoint cracks, carbon capture technology to convert CO2 into household products, seagrass meadow restoration off the Welsh coast, and projects to power city buses with gas extracted from sewage.
Visit https://waterinnovation.challenges.org/ to get details on the latest competitions, previous winners and how to enter current and future competitions.
For general background to the fund, data related to winning projects or evaluating the impact of the fund, visit our water innovation competitions page.
Funding a transformative, sustained, and measurable reduction in water demand across England and Wales
The Water Efficiency Fund (WEF) is a £100 million initiative by Ofwat aimed at stimulating a transformative, sustained, and measurable reduction in water demand across England and Wales by using a range of water efficiency approaches. It aims to foster collaboration and innovation on water efficiency at a scale never seen before.
The WEF includes:
- The Water Efficiency Campaign (WEC) to promote behaviour change that encourages people and businesses to use less water
- The Water Efficiency Lab (WEL) to fund the development of new technologies and processes for water efficiency
The £25 million Water Efficiency Lab (WEL) will fund the development of new technologies and processes for water efficiency
The first £5 million round of the WEL (‘WEL1) is now open for entries – and closes on 10 March 2026. Find out more and enter at https://waterinnovation.challenges.org/water-efficiency-lab/
This year’s theme is Actionable Insights – using data to inform customers and change behaviours. Further themed annual WEL competitions will run during 2026-30.
Find out more about Ofwat’s Water Efficiency Fund
Providing advice to businesses and innovators
StreamLine, our joint advice service with the Drinking Water Inspectorate and the Environment Agency, gives businesses and innovators access to informal regulatory advice on current rules and regulations, as they explore innovation opportunities.
Get advice about your innovation from StreamLine
Challenging water companies to innovate
The mechanisms and incentives we included for companies in our decisions on the price, service and investment packages for the 16 largest companies for 2025-30 (the ‘2024 price review’). For example (among other things):
- the process we used encouraged companies to put forward plans which are high-quality, ambitious and innovative; and
- our outcomes and total expenditure approach facilitate innovation by giving companies the flexibility and freedom to adopt more efficient and effective means of delivery.
We’ve also made driving improvements through efficiency and innovation a key ambition of our 2024 price review – where we’ll be deciding services for 2025 to 2030. Find out more.
Do you have an existing solution, technology or other innovation you’re looking to introduce to the water sector? Reach out to the team at Spring – the water sector’s innovation hub. Spring’s Brokerage Service may be able to help introduce your solution to the water industry if it aligns with a water company’s innovation priorities. Brokerage connects water companies with suppliers and innovators who can provide solutions to water industry challenges. Visit https://spring-innovation.co.uk/ or fill in the typeform https://form.typeform.com/to/qLSzjSH1?
Supporting innovation through markets
The business retail market, which aims to improve price and services for business and other non-residential customers.
The new appointments and variations market to improve local price and services for customers at sites across England and Wales.
Other existing markets and opportunities for new markets.
Working with the sector to support innovation
Our work is also complemented by the sector’s own work:
- ‘UK 2050 Water innovation strategy’: The strategy seeks to guide innovation investment across the sector, and will provide insight for us in rolling out the £200m innovation fund. It also signals new opportunities for partners and suppliers of all sizes to innovate and collaborate more easily and efficiently across the whole sector.
- Spring: the water sector’s innovation centre of excellence. Spring accelerates water sector transformation through innovation and collaboration.