Following two consultations, Ofwat has published its final decision paper setting out its preferred approach to the Water Efficiency Fund (WEF) and the proposed two-stream approach.
Image source: Ofwat
The two-stream approach includes a Water Efficiency Campaign (WEC) and a Water Efficiency Lab (WEL) which together make up the WEF. The scope of the WEF includes both business and household customers.
The paper sets out:
- Background to the policy area, including Ofwat’s aims, previous consultations and reasoning for the final decision
- Ofwat’s overall approach to the Water Efficiency Fund
- Further detail on how we see the Water Efficiency Campaign working
- Further detail on how we see the Water Efficiency Lab working
- Ofwat’s approach to cross cutting areas including governance, evaluation, financing, and achieving a legacy
- Timescales and next steps
Introducing the paper, Ofwat said that despite plans on water efficiency and smart metering being funded in the 2024 price review (PR24) final determinations and forthcoming policies to support water efficiency, there are concerns that demand will not reduce as expected.
The latest estimates of water need, compiled from water company data by the Environment Agency, suggest a shortfall of nearly 5 billion litres per day by 2050 for companies in England, with smaller deficits also predicted in Wales.
The deficit in England is more than a third of the 14 billion litres of water currently put into the public water supply network.
Almost two-thirds of the required capacity will come from demand reductions, including efficient water use, metering, and leakage reduction. The remaining capacity will come from new supply options like reservoirs, desalination, waterrecycling, and upgrades to water treatment works.
The Water Efficiency Fund (WEF) was announced to address this, with up to £100 million allocated to stimulate a reduction in water demand through various approaches. The WEF includes a Water Efficiency Campaign (WEC) and a Water Efficiency Lab (WEL), aimed at promoting behaviour change and developing new technologies and processes for water efficiency.
To manage risks from a behaviour change campaign, the WEC will start small, focusing initially on planning and evidence gathering before scaling up. The WEL will support projects that improve water efficiency beyond current plans, with tiers for funding projects of different sizes.
Tasks for 2025 include finalising governance, onboarding partners, and designing competitions.
The WEF is aiming to achieve a significant reduction in public water supply demand in England and Wales through effective, large-scale, innovative, and insightful projects which should be additional to existing water management plans and are likely to involve collaboration across sectors.
The fund's financing will follow a similar approach to the Innovation Fund, with contributions based on the size of water companies' customer bases.
Intellectual property and data sharing will be managed to ensure open access and collaboration, while conditions and sanctions will be available to protect the funds and ensure compliance.
Ofwat announced the Water Efficiency Fund (WEF) in its final methodology for the PR24 price review which said:
"PR24 will introduce a fund of up to £100 million to help stimulate a transformative, sustained and measurable reduction in water demand nationally, using a range of water efficiency approaches.”
Click here to download the final decision document
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