Electricity distribution price control ED2

Details of outcome

We sought views on proposed updates to the Strategic Innovation Fund (SIF) governance arrangements for Distribution Network Operators (DNOs) for the remainder of the ED2 price control period.

The aim of these proposals was to ensure the continued effective operation of SIF over the final two years of ED2, in line with the governance arrangements for RIIO-3.

These proposals were informed by stakeholder feedback, including input received from DNOs at a webinar held on 18 March 2026 to ensure consistency in the delivery of innovation projects.

Having carefully considered the responses provided, we have decided to proceed with the proposals as set out and discuss the points of interest outside of SIF Governance. The updated governance arrangements will therefore apply for the remainder of ED2.

Read the full outcome 

The ED2 SIF Governance aligns with the RIIO-3 SIF Governance. The key changes for the purposes of the ED2 SIF Governance are as follows:

• A new Programmatic Approach for addressing long-term strategic challenges in RIIO‑3 (outlined in chapter 2).
• Adjustments to reflect the role of NESO as the independent energy system planner and operator that takes a whole system view (outlined in chapter 5).
• Technical amendments to refine processes, based on feedback we have received. These range from increased amounts for the Discovery, Alpha and Beta Phases, to increased guidance for reporting and monitoring.

Please note that the Deployment Phase which was introduced for RIIO-3 does not apply for the remainder of ED2.

Read the updated Strategic Innovation Fund (SIF) governance for RIIO-3.

Original consultation

We are seeking views on proposed updates to the Strategic Innovation Fund (SIF) Governance for Distribution Network Operators (DNOs) for the remainder of ED2.

The proposals will ensure the continued effective operation of SIF for the remaining two years of ED2. They will bring governance arrangements for DNOs into alignment with those already in place for RIIO-3. This will help to maintain consistency and provide clarity for the delivery of innovation projects.  

The consultation includes:

• changes to project reporting and monitoring requirements
• small increases to funding limits at the Discovery, Alpha and Beta stages
• refinements to processes for Innovation Challenges and engagement with the Programmatic Approach

This follows the helpful feedback we received from DNOs at our webinar with them on 18 March 2026. 

Who should respond

• Distribution Network Operators (DNOs)