Ofwat sets out its three-pronged approach to £200m innovation fund

Game-changing innovation is about more than technology and could take the form of processes or better communication with different groups of consumers.

That is according to the team driving Ofwat’s innovation competition, speaking on a webinar about the next steps in the competition.

The long-debated initiative was confirmed in December, as part of the final determinations for 2020-25, as a £200 million fund to encourage collaborative working across the water sector.

John Russell senior director of strategy and planning at Ofwat, said the way the sector has reacted to the challenges of coronavirus highlights how essential innovation in water is and what can be achieved.

“The sector faces unprecedented pressures now because of Covid-19 and longer term because of climate change, population growth and demographic change – we need to step up to make sure it can continue to deliver reliable safe water while enhancing natural environment”, he said.

The competition will have three core strands: the main competition, an “innovation in water challenge” and enabling activities. Ofwat proposes starting all three of these in the pilot year but is seeking views on the most appropriate ways to run them.

The main competition will give water companies the opportunity to put forward bids for large projects – with collaboration between companies, the supply chain and other stakeholders actively encouraged.

Ofwat sees the “innovation in water challenge” strand as the main opportunity for the supply chain to be involved, although it expects collaboration in each strand. The regulator said water companies could identify specific key challenges and invite proposals from the sector and beyond to address those issues.

Water companies would select a project they want to sponsor then an independent expert panel would recommend which projects move ahead.

The specifics are yet to be decided, because Jonathan Read, director of strategy and policy, said: “We recognise the importance of this being owned and driven by the sector, we welcome ideas on how to take this challenge forward.”

The enabling activities would support the implementation of any ideas, for example by improving coordination and facilitating rollout of an idea, system or technology.

On this point Ofwat said it was essential for an idea to be scalable, so proof of concept would not be sufficient without a way to deploy it.

The next step in the funding competition will involve recruiting an independent and impartial organisation to support administration, and an independent panel of experts to advice Ofwat. Beyond that the first rounds will begin in the winter.

The team identified three main stumbling blocks, which it is working and consulting on:

• Intellectual property: the funding comes from billpayers money and there could be multiple collaborators, so it raises questions of ownership
• Risk sharing: Ofwat wants to see financial commitments from the companies involved and their shareholders. It suggested 10 per cent of the cost to be matched by the company but is conscious that smaller companies should not be shut out of the competition because of funding
• The nature of partnerships and collaborations. Read said Ofwat wants to see supply chain involved as well as collaboration between water companies

Read said: “The innovation funding is not just for water companies, it’s for all but the funding is rooted through the water companies to make sure that the customers will ultimately see the benefits of the funding. There should be a connection between funding and customers, so we are looking for ways to encourage partnerships between companies and innovators.”

The consultation process runs until 24 June.

To find out more about the innovation fund and how water companies can best take advantage of the opportunities, take a look at Utility Week and CGI’s latest report Grasping the opportunity