Unleashing the power of ideas: introducing our new innovation fund

Steven McMahon

Steven McMahon

Publication date

Industry sector

Generation and Wholesale Market
Solar panels with wind turbines

This summer, Ofgem and UKRI are launching a new fund that, starting at £450 million, will help unlock cutting edge ideas and technology to help power green energy across the UK.

Britain’s transition to producing net zero greenhouse gas emissions requires a major transformation of the energy sector, particularly over the next 10-15 years.

This will lead the biggest overhaul of the design and operation of our energy networks, the web of cables and pipes that transport our gas and electricity round the country, in over half a century.

Energy networks were designed long ago for predictable, stable gradual demand.

In the electricity sector, however, demand, generation, and consumer’s behaviour, will all change as we become greener in the way we travel, and power and heat our homes.

In the gas sector, it’s also a time of exceptional change. There are a number of possibilities for how we make our heating greener, including the big question of whether we turn to hydrogen, heat pumps, electricity, or all three in the future.

These challenges are significant, but so too are the opportunities.

Innovation is key

Innovation is a crucial lever that we have to test new things and help bring down costs.

Cutting edge ideas and technology helps us to preserve and create options, bring forward information to reduce future uncertainty, and develop new markets that enable technologies to deliver benefits to the system and consumers.

More broadly, innovation also creates economic value, speeding up the commercialisation of new technologies that can significantly cut the cost of meeting net zero, while generating new jobs and investment for the UK.

It will help power a consumer-led revolution in operating and using the system, where users will determine the pace of change for example how quickly electric vehicle use ramps up and how successful flexible measures such as cheaper off-peak charging is.

Innovation has been an important and successful part of Ofgem’s approach to regulating the networks (“RIIO” model).

Through our Network Innovation Competition we’ve funded innovative programmes that are having a real-world impact. The Optimise Prime trial, for example, aims to speed up rollout of commercial electric vehicles, saving an estimated 2.7m tonnes of CO2, equivalent to London’s entire bus fleet running for four years or a full Boeing 747-400 travelling around the world 1,484 times. The project will also help free up enough capacity on the electricity network to supply a million homes.

In future, however, the approach we take needs to go beyond engineering and technology and become much broader.

Funding the innovation revolution

Policy and technology around green energy is fast-paced and ever changing. On the ground, innovation involves planning and cooperation across many different sectors, from networks and tech companies to local authorities.

Our new Strategic Innovation Fund (SIF), part of our RIIO-2 price controls, will be able to address both these issues. Starting at £450 million, we will be able to dial funding up or down for investment as policy continues to evolve, for any of the networks at any time.

We’ll be looking at the big strategic green energy challenges, and use the fund to address the key research and development issues and problems that we identify quickly, directly and with an organised industry response.

Ofgem will make sure we coordinate with innovation happening elsewhere, particularly across Government and other regulators, which inevitably has a strong energy focus.

We’ve forged an exciting new strategic partnership with UKRI (UK Research and Innovation), who’ll harness their expertise to deliver the programme and transform the landscape, from the generation of an idea to market rollout.

We also know that the green journey will impact every part of society and we need to find a way of casting our engagement net as far as possible – including those developing and affected by innovation. To get the best ideas, then these need to be coming in from the widest range of innovation players possible.

Innovation will be at the heart of our approach to delivering net zero. There’s so much opportunity, and Ofgem is taking all the steps we need to find good answers -  getting the right alignment in place across the whole system, embracing the widest set of people and perspectives as we can along the way.