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 LCN Fund allows up to £500m support to projects sponsored by the distribution network operators (DNOs) to 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 £64million to help fund a small number of flagship projects. In the first year, 4 projects were awarded Second Tier funding totalling £63.6million through the annual competition and 11 projects were registered under the First Tier. 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 provide to network companies. As such the Fund should also provide valuable learning for the wider energy industry and other parties.
We will be monitoring the learning which starts to emerge from these projects in order to understand its impact on the current regulatory framework.
The governance arrangements for the LCN Fund are set out in the LCN Fund Governance Document.
Year four of the LCN Fund competition is being held this year and the Initial Screening Process (ISP) is the first stage of the competition. We received eight bids to this year's competition. We have evaluated these submissions against the specific requirements and eligibility criteria. All projects have passed the ISP. More information on the projects can be found on the Second Tier projects page.
Following ISP, licensees can merge similar projects but cannot substantially alter the high level solutions or the method they wish to use. Further information can be found in the LCN Fund governance document. The deadline for Full Submissions is 9 August 2013.
We will run the LCN Fund and NICs in parallel this year. Further information can be found on the Innovation Stimulus webpage. We received eight ISP submissions for the Electricity NIC and seven submissions for the Gas NIC. All of these projects passed the ISP.