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Since that 2023–24 snapshot the Fund has expanded substantially. Ofwat now reports more than £250 million awarded to 143 projects under what it now calls the Water Innovation Fund, against £600 million available across 2020–30. That total includes projects funded through the Water Efficiency Lab, so it is not directly comparable with the 2023–24 figures below. This article uses the 2023–24 reporting year as its analytical baseline, because it is the last period for which Ofwat published a full delivery record. Ofwat described that earlier position across the Fund's three competition streams:
A deliberately broad portfolio of water sector innovation projects, from process chemistry to artificial intelligence, rather than incremental efficiency work. The largest illustration is Biopolymers in the Circular Economy, a £6.2 million project led by United Utilities that aims to bring innovative solutions to sludge management by extracting naturally occurring polymers from wastewater treatment bacteria; these can replace fossil-derived polymers in water treatment, paints, coatings, biostimulants and fire retardants. Dark fibre for leak detection uses fibre optic cable already in the ground to detect leaks in water pipes, improving maintenance efficiency without new infrastructure. River Deep Mountain AI applies artificial intelligence to improve data collection on water-body pollution, supporting environmental improvement decisions.
Table 1. Three funded projects illustrating the range of the portfolio.
On breadth, clearly; on proven outcomes, it is still early. In 2023–24, 12 projects completed, two of them receiving further funding to develop their ideas beyond the original award, and another 16 were due to complete in 2024/25. Participation is sector-wide. In the same period, water companies led 38 entries to the Water Breakthrough Challenge, involving 178 organisations. Every major water company and over half of the new appointees (NAVs) have taken part in at least one entry. Ofwat publishes annual reports and open data on funded projects so that what one project learns is available to the whole sector.
Table 2. The Innovation Fund at a glance, 2023-24.
Not the size of the cheque. Three barriers stand out in the water industry, and the first two matter most. Procurement rules obstruct both trialling and adopting new technology, particularly from smaller suppliers: many SMEs cannot meet water companies' supplier requirements, so a trial can succeed and go no further. Start-ups rarely survive five years without revenue, so those companies fold or move to another market, and the sector loses the capability. A risk-averse culture inside some companies slows adoption even where procurement is not the obstacle. Funding scale is the barrier Ofwat has most clearly addressed through the expansion of the Fund: it doubles to £400 million for 2025–30. Ofwat has also recognised the scaling problem and redesigned the second phase accordingly, with greater emphasis on scalability and deployability. The unresolved issue is whether those mechanisms will materially improve adoption, moving successful innovations beyond trials and into routine use across the sector.
Figure 1. Ofwat Innovation Fund allowance by regulatory period.
Support for the Fund’s objectives is broad; the requests concern the path from award to adoption. Water companies emphasise streamlined processes and support for scaling solutions. Innovators value the opportunity but point to complex application procedures and unclear pathways to market. Some ask Ofwat to allow for risk and create space for implementation, rather than funding only fully developed solutions. For customers, the Fund will cost about £2.13 per household per year over 2025–30, as part of the £104 billion PR24 package Ofwat published in December 2024.
Fix adoption before scale. The Ofwat Innovation Fund has proved it can convene the sector and finance ambitious projects; whether those projects change how the sector operates now depends on what happens after the trial ends. That, more than the size of the Fund, will determine whether the £400 million for 2025–30 delivers.
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