Funding innovation for a future energy network

Blog
Luke Blackaby
Luke Blackaby
Head of Innovation Hub
Publication date
Industry sector
Distribution Network
Transmission Network

To deliver a decarbonised power system by 2030, it is crucial that we develop and deploy innovation at pace. Innovation can enable the transition to a low-carbon energy system that is smarter, more flexible and, most importantly, works better for consumers. Achieving the massive scale of transition at pace and at fair cost means creating space for innovation and developing new ways, incentives and funding mechanisms for it. 

The Strategic Innovation Fund supports network companies to innovate, with the aim to deliver the transition towards Net Zero while delivering net benefits to consumers. 

Started in 2021, the Strategic Innovation Fund is a £450 million pot designed to find and fund innovative, transformational projects that have the potential to contribute to the delivery of the energy system transition.  

Current projects 

Over the summer, Ofgem in partnership with Innovate UK approved funding for 12 large-scale, demonstration projects in the second round of beta applications. The successful projects have been awarded a total of £84 million through the Strategic Innovation Fund. The projects focus on four challenge areas:  

  1. supporting a just energy transition  
  2. accelerating decarbonisation  
  3. preparing for net zero 
  4. improving energy system resilience  

These projects were funded as Ofgem assessed that, if trialled successfully and then deployed on the networks, the projects have the potential to deliver significant environmental, social and financial benefits to consumers upon completion. 

Changes to improve efficiency

So far, the Strategic Innovation Fund has funded 213 projects over four annual rounds, each of which has four overarching innovation themes. 

We believe innovation should be agile and flexible, as should the Strategic Innovation Fund. 

After gathering feedback and reviewing internally, we recently introduced some significant changes to the fund that aim to drive innovation at pace by providing more opportunities and flexibility for networks and innovators to apply for funding. 

Three application windows each year for all phases

Rather than single, annual application processes for each phase, applicants/networks will now be able to apply for funding across all phases – Discovery, Alpha and Beta – three times a year. This will give the networks and project partners more flexibility to deliver on the project needs. The application window will now open every four months for around four weeks starting from this September/October then opening at the end of January, the end of May and then end of September again and so on. 

Flexible project start dates

Applicants will now be able to decide when to apply for the first and subsequent phases. Additionally, instead of successful applicants needing to start projects immediately upon receiving funding, they will now have flexibility to decide on the project start date, depending on their projects’ needs and the resources. For example, Discovery projects will now have up to five months from award to complete. 

Applicants will also now have the option to pause after they finish one phase before applying into the next, giving them more time and flexibility between phases. These new changes will come into effect in September 2024, with the first cycle opening on 23 September and closing on 23 October. 

Looking ahead

We are keen to deliver benefits to consumers, so we closely monitor projects to ensure they deliver significant environmental, financial and network benefits. The benefit mapping conducted by networks last year for Round 1 Beta projects suggests that the projects have the potential to deliver an estimated £2.6 billion financial savings and 7.1 mtCO2 e by 2035 if successfully trialled then deployed on the network.  

We are also exploring further improvements on how we can deliver the Strategic Innovation Fund better in the next price control period, RIIO-3. After extensive engagement with various stakeholders, we are looking to reform certain areas of the programme to develop transformative innovation and deliver on our net zero ambitions: 

  • streamline processes to address current challenges networks and innovator partners face in the Strategic Innovation Fund process 
  • consider options that make it easy for third parties (particularly small businesses/innovators) to engage with innovation funding 
  • take steps to better enable the deployment of innovation on networks 

Next steps

We continue to strive towards making the Strategic Innovation Fund a success, and it would be impossible without hearing back from networks and innovators.  

Thank you for engaging with us so far as we continue our Strategic Innovation Fund journey together. 

We look forward to hearing more from you on how we can improve the programme and accelerate the transition to Net zero for the benefit of all consumers.