Why we innovate

We are committed to identifying opportunities for the continuous improvement of our networks and to delivering value to our customers; innovation is one of the means through which we can achieve these aims. Find out below how we and our partners are contributing to the delivery of our innovation portfolio.

Innovation Funding Incentive (IFI):
Ofgem introduced the Innovation Funding Incentive (IFI) mechanism to encourage network operators to apply innovation in the technical development of their networks.

IFI provides us with the opportunity to fund projects that focus on the technical development of our networks at a time when there is a growing need to efficiently manage the renewal of network assets and provide connections for local generation activity.  Through the IFI we have been able to investigate a number of areas of our business and provide tangible improvements to our infrastructure and processes in order to continue to deliver value and service to our customers.

The reports below provide more information about our IFI project portfolio.



Low Carbon Networks Fund (LCNF):
As part of the electricity distribution price control arrangements that run from 1 April 2010 to 31 March 2015, Ofgem established the Low Carbon Networks (LCN) Fund. The Fund allocates up to £500 million of support to projects sponsored by the Distribution Network Operators (DNOs) so they can try out new technology, operating and commercial arrangements. The objective of the projects is to help all DNOs understand what they need to do to provide security of supply at value for money as Great Britain (GB) moves to a low carbon economy. There are two tiers of funding which are available under the LCN Fund. The First Tier is designed to enable DNOs to recover a proportion of expenditure incurred on small scale projects. Under the Second Tier of the LCN Fund, Ofgem facilitates an annual competition for an allocation of up to £64 million to help fund a small number of flagship projects. These projects involve the DNOs partnering with suppliers, generators, technology providers and other parties to explore how networks can facilitate the take up of low carbon and energy saving initiatives such as electric vehicles, heat pumps, micro and local generation and demand-side management, as well as investigating the opportunities that smart meter roll-out provides to network companies. As such the Fund should also provide valuable learning for the wider energy industry and other parties. The Low Carbon Networks (LCN) Fund aims to provide a financial catalyst for innovation on GB electricity networks, resulting in smarter, more innovative and reduced carbon networks. Under the RIIO-ED1 price control commencing in 2015, these two funding sources will be replaced by the Network Innovation Competition (NIC) and Network Innovation Allowance (NIA).

In July 2013, we announced our business plan for the RIIO-ED1 period (2015-2023). This plan will provide an overview of our strategic decisions for the next electricity distribution price control (RIIO-ED1). The review will set the revenue companies are allowed to collect for the eight-year period from 1 April 2015.

A core document to the business plan is our Innovation Strategy, and will set our direction up until 2023. It outlines that we are in a position to meet the efficiency challenges that we have set ourselves, by replacing assets reaching end-of-life with equipment which is more cost-efficient or offers more capabilities for the same price. Our plan should also demonstrate that we are taking an innovative approach to support the low carbon transition, and we are exploring levers at all stages in the value chain, from trialling financial incentives for customers able to suppress or shift their electricity demand, through increasing flexibility within the existing network, to building smarter or more capable networks when there is no alternative, all with the customer in mind.