The Water Innovation Fund is opening its doors to innovators from outside the water sector to enter bold solutions to the urgent challenges facing the industry in England and Wales, as it announces the return of the £7.5m Water Discovery Challenge.
Following the success of the first Water Discovery Challenge in 2023, Ofwat's Water Innovation Fund will accelerate the development and adoption of promising new innovations for the water sector to benefit customers, communities, the environment and the economy.
In particular, it is inviting ideas from innovators across multiple sectors and disciplines – including energy, cities and transport, construction, agriculture and farming, as well as AI, digital, data and internet of things.
The challenge is run by innovation prize experts Challenge Works, part of Nesta, in partnership with Arup and Isle Utilities. It is open to innovators from outside the water sector and around the world, to bring in fresh thinking and ideas with the purpose of helping entrants break into the water industry.
The water sector faces many challenges that must be solved – achieving net zero emissions, preventing leaks, ending the overuse of storm overflows, tackling pollution, restoring nature and adapting to the impact of climate change – all whilst ensuring that customers are properly served.
The entry period for the second Water Discovery Challenge opened on 20 January 2026 and closes on 8 April 2026. There is no requirement for organisations to partner or receive sponsorship from a water company to enter, but entrants must be a UK-registered entity.
Twenty successful entries will be progressed to a finalists’ stage in June 2026, receiving up to £100,000 in seed funding and a package of non-financial support and sector mentorship to develop their solutions.
Ten winning teams will go on to be awarded up to £550,000 in funding in April 2027 to further develop their solutions, and an additional five-month package of non-financial support and sector mentorship, to maximise the chance of the innovations launching and succeeding in the water sector.
Dr Jo Jolly, Director of Environment and Innovation, Ofwat, said:
“The Water Innovation Fund supports bold, scalable solutions to the sector’s toughest challenges. Breakthrough technologies can make a real difference, but the sector can be hard to access for new innovators. The first Water Discovery Challenge proved there’s a talented community of innovators raring to make a difference. Whether it's improving services to customers, helping build water secure communities, improving water quality or something else entirely, I'm excited to see the ideas that come forward to deliver transformational benefits to customers, communities and the environment - and act as an engine for economic growth and a people- and nature-positive future.”
The first Water Discovery Challenge named 20 finalists in June 2023 and 10 winners in February 2024. Winners include Waterwhelm, which developed a breakthrough water re-use and desalination technology that operates using waste heat at wastewater treatment works and other industrial sites to produce freshwater for the sites own use while achieving a world-beating reduction in electricity consumption and CO2 emissions.
During the Winner’s Stage, Waterwhelm partnered with AtkinsRéalis Water Division to identify where the technology could be deployed for water re-use across wastewater treatment works in England and Wales.
As a result, it is now a central component of the Net Water PostiHyve project, led by Northumbrian Water, which was awarded £2 million by the Water Breakthrough Challenge in May 2025. The project is scaling up the new technology to increase recycled water for industrial consumption, sustainably produced using waste heat and wastewater, addressing increasing industrial freshwater demands, including for hydrogen production.
Dr Alireza Abbassi Monjezi, CEO & Founder, Waterwhelm, a previous winner of the Water Discovery Challenge, said:
“The Water Discovery Challenge gave us access to funding and expert industry support to help us implement our technology for water reuse and desalination. Taking part raised our company profile, helping to establish important connections in the water sector that have been invaluable as we scale. Two years since taking part, we are now working with Northumbrian Water, Anglian Water, SSE Thermal, and AtkinsRéalis to demonstrate our technology at 740 cubic metres per day in a live environment, transforming the sustainability of water used by industry.”
As a finalist in the first Water Discovery Challenge, The Fish Friendly Hydropower Company Ltd developed the PicoStream Turbine – a lightweight, recyclable polymer turbine that can be easily fitted to water transfer channels and outflows at wastewater treatment plants, capable of generating 8,900kWh/year of green energy. With the water sector consuming 3% of the UK’s electricity, the floating “plug and play” turbine is a sustainable and cost-effective means of increasing the water sector’s energy recovery capacity.
Henry Reily-Collins, Founder and Technical Director, The Fish Friendly Hydropower Company Ltd, said:
“Taking part in the Water Discovery Challenge was a pivotal moment for The Fish Friendly Hydropower Company Ltd. It allowed us to refine our PicoStream technology and gain valuable insights into the water sector. Since the challenge, we have successfully partnered with one of the largest water treatment companies, via WGM Engineering (their framework contractor), to trial our system – demonstrating its potential to generate always-on sustainable energy without disruption to the treatment process flow. We’re excited to continue scaling our technology and contribute to a greener, more resilient water industry.”
Coinciding with the launch of the Water Discovery Challenge, the Water Innovation Fund is sponsoring the Building Centre’s upcoming ‘Water: Resilience & Innovation for the Built Environment’ exhibition from 22 January to 10 April 2026.
The 11-week event will explore innovations and solutions shaping the future of water in architecture, engineering and urban design. It showcases cutting-edge technologies, pioneering projects and ideas that are driving a new, water-wise approach to building for resilience and sustainability – including those that have been enabled and supported by the Water Innovation Fund.
The launch of Water Discovery Challenge 2 follows quickly on the heels of the launch of the first Water Efficiency Lab competition by Ofwat, seeking innovative solutions to help people reduce their water consumption, which is open to entries until 10 March 2026.
Find out more about Water Discovery Challenge 2 here.