Ofwat Innovation Fund in AMP 8 – Growing in Size and Growing in Ambition: WATER MANAGEMENT Smart Class 2024 Retrospective


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Marc Hannis manages Ofwat’s flagship Innovation Fund, overseeing the delivery of the Water Breakthrough Challenge and Water Discovery Challenge competitions alongside stakeholder relationships and the strategic direction of the fund.

The Innovation Fund was introduced in 2019 as a first for the sector – a £200m fund to catalyse innovation with the overarching objective to support the sector to better meet the needs of, and create long-term value for, customers, society and the environment through innovation. Since then, it has awarded funding to over 75 promising solutions and helped the sector to better coordinate its innovation efforts to ensure best possible outcomes and value for customers.

With only a year of the current AMP to go and confirmation that the Innovation Fund will increase in size to £400m in AMP 8, Marc reflected in his keynote at WATER MANAGEMENT Smart Class 2024 on the successes and lessons learned and set out where Ofwat see the Fund going next.

Summary of presentation highlights:

  • Looking forward to AMP 8 – Scale of the challenge ahead…
  • Selection of Environment Improvement Plan (EIP) targets – 1) Storm overflows – reducing to an average of no more than 10 spills at all overflows by 2050 2) Phosphorus – reducing phosphorus from treated wastewater by 80% by 2038 3) Leakage – reducing leakage by 50% by 2050 4) Net zero by 2050 – UK government: 78% cut in carbon emissions by 2035; Welsh Government: 89% cut by 2040;
  • PR24 Business Plans – At £96bn, PR24 is largest requested/required investment since privatisation. Investment proposals includes: 1) £10bn to address impact of storm overflow spills 2) £5bn for nutrient removal 3) £6bn to improve the water supply demand balance; The scale of investment and number of individual projects needed to meet the EIP targets will be unprecedented – This will lead to a doubling of capital investment in the sector from around £6bn to around £12bn and a fourfold increase in the level of enhancement expenditure;
  • What is the Innovation Fund trying to achieve?
  • 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;
  • The fund aims to achieve this objective by driving impact in three main areas – 1) Accelerating the creation and roll-out of innovative products, services and concepts 2) Growing the capacity and capability of the sector to innovate 3) Embedding a culture that values, encourages and supports innovation;
  • Awarded £114 million to 77 projects since January 2021; Circa £80 million available to award by 2025;
  • What do Ofwat’s competitions look like?
  • Designed to drive ambitious, transformational innovation (and enable new approaches and ways of working) to equip the sector to address the big challenges we face now and in the future…
  • Water Breakthrough Challenge (WBC): Catalyst stream – Entry value £150k-£2m, Circa £8m available per round; Transform stream – Entry value £2m-£10m, Circa £30m available per round; WBC common design principles – Lead entrant must be a water company or NAV, entries must align with innovation themes, £30-£40m to award in each round, run annually, strong emphasis placed on collaboration;
  • Water Discovery Challenges (Discovery): Water companies excluded from entering, Circa £5m available to support early-stage solutions, each entry could be awarded up to £500k to develop their solution, includes a package of non-financial support and water company mentoring;

  • What are the reflections and lessons learnt?
  • Reflections – Fund has driven unprecedented collaboration between water companies and other partners (average of 13.5 partners per entry for Transform competition); Wide range of initiatives seen across the whole water cycle; Strong trust between water companies and Ofwat on innovation, leading to more collaboration and the co-design of the Water Discovery Challenge;
  • Learnings – Need to work together to meet the challenge ahead and achieve the best outcomes for customers; Need to be open to outside voices; Need to share information better than ever before;
  • Examples of projects funded so far…
  • A Net Zero Hub will upgrade a large, carbon intensive wastewater treatment plant into the world’s first Net-Zero site. For the first time, a number of the promising technologies to help reduce and avoid carbon emissions will be integrated together on one site to show the possibility of Net-Zero in action at scale (Led by Severn Trent Water);
  • Stream will unlock the potential of water data by putting in place technology and processes to remove the barriers to opening up and sharing water company data. Stream is not just focused on a single issue but will support hundreds of future data projects. Being able to collaborate around data is a key ingredient to drive innovation and improve sector performance (Led by Northumbrian Water);
  • Managing Background Leakage – This project aims to redefine the detectable limit of leakage to help pinpoint and repair hidden leaks and other factors contributing to background leakage (Led by Welsh Water);
  • Triple Carbon Reduction will use novel technologies to target a step change reduction in greenhouse gas emissions and electricity use in used water treatment and provide a new renewable energy source through green hydrogen production (Led by Anglian Water);
  • Mainstreaming Nature-Based Solutions will bring together multi-sectorial expertise and leadership to collaboratively create and test new solutions to enable the transition of nature-based solutions into business-as-usual (Led by United Utilities);
  • National Leakage Research Test Centre will develop a 5km buried water pipe network specifically for developing and testing inventions without disrupting customers’ supplies or affecting water quality. The network will include new and old pipes in a variety of materials and diameters just like a live water network (Led by Northumbrian Water);
  • Water Net Gain is a catchment-scale approach whereby farmers are paid to store water on their land. Restoring natural sponges, like healthy soils, woodlands and wetlands, can passively contribute water to summer base flows, but the creation of additional smart ponds and lakes can be used for farm demand management or active releasing flows during droughts. Alongside water purification, water retention solutions are designed to provide additional flood protection and aquatic biodiversity benefits (Led by South West Water);

  • Future:
  • The fund will continue to support development of innovative solutions, but will also look at enabling innovation more generally and support efforts to transition innovation into meaningful implementation;
  • 5 key areas Ofwat are consulting on for AMP 8 – 1) Continue with annual competitions – Breakthrough Challenge 2) Run the Water Discovery Challenge across AMP 8 x2 3) Supporting a culture of knowledge transfer in the sector 4) Introduce collaboration challenges 5) Facilitate more cross-sector working;
  • Working with the Sector: Water companies – can we see more ambition in the scope and scale of ideas proposed and clear plans for the transition to implementation?; Spring – positioned well to be a key enabling function for innovation in the sector; Other stakeholders – huge opportunity – are you ready?; Ofwat – will continue to evolve the fund to ensure innovation plays a decisive part in the overall programme of work in AMP 8;
  • Conclusion:
  • “We will begin AMP 8 in a good position but a step-change is needed to meet the challenges ahead – innovation is going to be crucial to the delivery and performance challenges of AMP 8”;
  • Ofwat want to hear from you/all stakeholders to help determine the following:
  • How we accelerate the roll out of proven innovations?
  • How we grow the capacity and capability of the sector to innovate?
  • How we embed a culture across the sector that values, encourages and supports innovation?
  • How we best share information, learn from each other and be open to new voices?

If you meet our regular delegate qualification criteria but were unable to join us at Greencoat Place Conference Centre, London, for the live in-person event on April 3rd, CLICK HERE and complete the short “Download form” (located at the bottom of the post) to receive a unique link enabling free access to the presentation video recordings and slides (including the film footage and slides from Marc’s keynote).

Those qualifying to receive the rich presentation content from this event include commissioning, procurement, innovation, trialling and partnering leads, senior influencers, strategic decision makers, environmental managers, policy makers and planners from UK water companies and utilities, wastewater and sewer operators, lead local flood authorities (unitary authorities and county councils), city/borough/metropolitan councils, district councils, combined authorities, highways authorities, prime contractors, general insurers, large water consumers, central governmental and regulatory bodies (e.g. Defra, DCLG, Ofwat, Environment Agency, DWI, SEPA), independent industry and consumer organisations (e.g. Water UK, CCW) etc.

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WATER MANAGEMENT Smart Classes show key buyer side stakeholders how deploying the latest digital technology-enabled solutions, data-driven strategies and best practices can help manage the distribution and management of water resources, and also offers utilities an opportunity to improve efficiency and customer service whilst reducing water scarcity and supporting the drive towards a net zero future.


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