Ofwat Innovation fund consultation – Approach for 2022-25

We need your #WaterBrightIdea

Water is vital for life. Everyone depends on water every day.

In England and Wales big challenges like climate change threaten the water we rely on. There are also big opportunities to improve lives and the natural world.

Innovation is crucial to meeting these challenges and opportunities. And monopoly water and wastewater companies in England and Wales need to play their part. At Ofwat – the economic regulator of those companies and services– we’re pushing them to do more.

That is why we started our £200 million innovation fund to grow water companies' capacity to innovate, enabling them to better meet the evolving needs of customers, society and the environment.

But we can’t work alone. We need everyone's #WaterBrightIdea to improve life through water. And that includes you!

Our competitions: fund innovations, benefit water customers, build partnerships and commercial opportunities

The main part of our fund is a series of innovation competitions, run for us by Nesta Challenges with Arup and Isle Utilities. The competitions are designed to look for innovations that:

- spark ambitious innovation to enable new ways of working that go beyond business-as-usual;

- equip the water sector to address the big challenges it faces (Water 2050 strategy and innovation priorities);

- drive far-reaching and long-lasting benefits to customers, society and the environment;

- will help to develop and strengthen the sectors innovation enabling activities;

- increase and improve collaboration and build partnerships both within and outside the water sector; and

- are at any stage of innovation maturity.

Entries are encouraged from water companies in England and Wales, alongside partnerships with universities and institutes, retailers, start-ups, technology companies, charities, and small businesses.

Under the standard terms and conditions for our previous competitions:

- a water company had to be the lead entrant;

- entrants for winning projects must make a 10% financial contribution to the project; and

- while winning partnerships keep the overseas commercialisation rights to innovations they develop (including Scotland and Northern Ireland) – they must make the intellectual property freely available to all English and Welsh water companies that we regulate. This is so they can improve services in their areas. It means that English and Welsh household water customers, who pay for the fund, benefit from better services – but do not pay again to access innovations they helped to develop ('they don't pay twice').

Previous winners: from multinational IT businesses to environmental charities and many more

We're already seeing the difference the competitions can make, with over 100 organisations involved in the competitions over the past 12 months, a wide variety of innovation projects coming forward and unprecedented levels of collaboration between water companies, and with other partners in the supply chain, academia, and those outside of the sector.

- 11 winners of the £2 million Innovation in Water Challenge received up to £250,000 each for initiatives such as converting waste into green energy and using artificial intelligence and CCTV to spot leaks.

- Nine winners of our £36 million Water Breakthrough Challenge 1 received up to £10 million each for projects such as creating Hydrogen-power from sewage and clean river tech.

- 13 winners of our £5 million Water Breakthrough Challenge 2 Catalyst competition received up to £1 million each to develop innovations such as using robotics, smart sensors, open data and novel engineering solutions to cut leaks, reduce pollution and improve water quality.

You can find details of all previous winners on the water innovation fund website at: https://waterinnovation.challenges.org/winners-2/

We are due to announce the winners of our £34 million Water Breakthrough Challenge 2 Transform competition in April 2022.

Encouraging even more innovation through future competitions

We propose to run Water Breakthrough Challenge 3 in Autumn 2022. We also propose to run Breakthrough 4 in 2023 and Breakthrough 5 in either 2024 or 2025. And we are considering running competitions beyond 2025.

We are asking for your views on what changes we can make to our competitions to make sure we award £120 million to the best innovative ideas that come forward.

We want to maintain some parts of the competitions that have been working well, but also consider changes that will enable the fund to:

- support more early-stage ideas; allow innovators to have greater access to the fund;

- encourage a wider range of innovations to come forward, including from other sectors;

- reduce barriers to accessing the fund; and

- continue to encourage new relationships and collaborations between water companies and others.

We'd welcome your views on the changes we plan to make (details at the end). But we've set out the two main changes we're making below.

Main change 1: open a new annual £4 million competition for early-stage ideas direct to innovators

We propose to allocate a portion of funding (about £4 million a year) to a new competition focused on enabling and supporting earlier stage idea development.

This new competition will target primarily innovators and not require a partnership with a water company to enter.

We would invite entries of up to £250,000 and impose minimal eligibility criteria, such as no intellectual property rights conditions or mandatory financial contributions.

We also intend to make it as easy as possible to enter, with a short entry form.

Main change 2: maintain the annual £36 million competition, with adjustments to some entry rules to encourage wider participation

In our Water Breakthrough Challenge 2 competition, water companies in England and Wales and their partners could bid for funding through two streams.

- Catalyst Stream: Approximately £5 million was available. Individual entries could bid for £100,000 – £1 million. And it had a slightly relaxed intellectual property rights (IPR) arrangements: owners of background IPR were able to charge a licence fee, where this was required to deliver the benefit of the foreground IPR.

- Transform Stream: Approximately £30 million was available. Individual entries could bid for £1 million – £10 million. Our standard IPR arrangements applied.

More information is available on each of these streams on the water innovation fund website: https://waterinnovation.challenges.org/breakthrough2/

For future competitions, we propose to:

- maintain the Water Breakthrough Challenge with Catalyst and Transform streams for each competition during 2022-25;

- for Catalyst (entries between £250k and £1million), make about £6m available annually, not require a partnership with a water company to enter and allow background IP to be licensed.

- for Transform (entries between £1m-£10m), make about £30 million available annually and allow background IP to be licensed.

Tell us your views on our main changes (or all of our changes)

We're interested in your views on our main changes and a number of other areas we are exploring in our consultation.

We want to make it easy as possible for you to respond to our consultation.

You can choose to respond in two ways.

1. You can complete our online response form

2. You can send your comments to innovationconsultation@ofwat.gov.uk.

You don't have to read our full consultation to respond, but you can access it here.

Make sure to follow Ofwat on Twitter and LinkedIn, and subscribe to our Newsletter to stay up to date.

This is also the best way to stay up to date on news about future opportunities to partner and get involved in our competitions. We expect to share news of Water Breakthrough Challenge 3 over the Summer – don't miss out!