Ofwat is expected to launch a consultation next week on how it can support innovation in the water sector.
The regulator confirmed to Utility Week that the industry will be asked its opinion on the subject but refused to comment on the parameters.
However, a former director of Ofwat has set out his vision for a £35 million-a-year ring-fenced innovation fund and the creation of a dedicated centre of excellence.
Trevor Bishop, who was director of planning and strategy at Ofwat and before that deputy director of the Environment Agency, said technology, leakage and climate change resilience were key areas in which the industry rapidly needed to develop new ideas.
Bishop, who is now a director of Water Resources in the South East (WRSE), stressed that while there had been some great initiatives across the sector, they had tended to be “small-scale, localised and risk averse with not as much co-ordination as we would like”.
WRSE worked with 20 organisations to develop a submission to Ofwat’s emerging strategy entitled ‘innovation – delivering for customers, society and the environment’.
The proposal is based around a modification of Ofgem’s Networks Innovation Fund, and Bishop said that if taken up it would be “the biggest boost to innovation we have ever seen in water”.
He told Utility Week: “The end goal is to have a professional and co-ordinated approach to innovation. We looked at the energy sector and we looked internationally at some great examples where industries have come together to achieve something that individual companies alone would never be able to.
“One of the examples that really inspired us was Enterprise Ireland, which doesn’t just give money out but looks at innovation projects and takes them right the way through the process.”
The proposed model put forward by WRSE would centre around a ring-fenced water fund to target gaps in the current innovation landscape. It suggests a fund of c£35 million – roughly comparable with Ofgem’s Networks Innovation model – to support this. This would be sourced from a proportional, additional allowance made by Ofwat in its final determination of company business plans.
On the areas where innovation needs to be targeted, Bishop said: “We are quite a way behind other industries in terms of digital innovation – we need to be talking to the likes of Microsoft and IBM.
“Leakage and per capita consumption are also massive areas. Most companies will need to innovate to find that 15% leakage reduction they have signed up to.
“There is so much that needs to be done around climate change resilience and uncertainty. We know where we need to go over the next few decades but we need to be putting plans in place now as to how we are going to get there.”
On the subject of a centre of excellence, the WRSE submission sets out a plan for a team of experts to manage and monitor progress on projects coming through the innovation fund and define the criteria for success.
The group stresses that the governance of the fund should be separate from any current water sector organisation.
Ofwat declined to comment on the WRSE submission. However, when asked by Utility Week if she would willing to introduce a specific innovation fund, chief executive Rachel Fletcher confirmed: “We will be going out to consultation next week.”