Ofgem Strategic Innovation Fund announces challenge areas for second round of funding, to help accelerate the transition to net zero

Press release

Publication date

Industry sector

  • Distribution Network
  • Transmission Network

Ofgem and Innovate UK have announced the challenge areas for the second round of innovation funding under the Strategic Innovation Fund (SIF), which opens for applications in early September 2022.

The SIF aims to find and fund ambitious, innovative projects with the potential to accelerate the energy transition to net zero at the lowest cost to consumers. Now four innovation challenge areas have been identified as the priorities that this year’s project proposals should address. 

Chosen in consultation with the energy industry and consumers, the four challenge areas, which incorporate a focus on transport, heat, data and integration across the whole gas and electricity system, are:

  • Supporting a just energy transition - including new ways to identify and support vulnerable customers, and help those who are disadvantaged, fuel poor or off the gas grid to reduce heat and mobility carbon emissions
  • Preparing for a net zero power system - including new ways to support low-stability systems, and to use new sources of energy supply and demand to help manage grids 
  • Improving energy system resilience and robustness – including ways to develop multi-energy systems and make them more resilient, and strengthening energy system robustness so that new infrastructure can be rolled out efficiently
  • Accelerating decarbonisation of major energy demands – such as ways to manage and integrate large-scale demands from heat and transport, integrating heat networks for wider energy network management, and improving energy efficiency at all levels in the system.

Now the challenge areas have been identified, the programme will open an initial ‘discovery’ phase, whereby innovators working with energy companies can apply for £150,000 to further develop their ideas. 

After the discovery phase, those projects judged to have the greatest potential will be awarded up to £500,000 to further develop their ideas. Another selection process will follow, with successful projects receiving more funding and able to carry out large-scale demonstrations of their technologies. The aim is to develop innovations which can be rolled out across all UK energy networks, making them fit for the future and delivering benefits for both consumers and the planet. 

Neil Kenward, Ofgem Director for Strategy and Decarbonisation, said: 

“Ofgem set up the Strategic Innovation Fund to harness the power of innovation to help accelerate a fair, affordable and inclusive transition to low carbon energy. 

“The challenge areas announced today address some of the most pressing issues on this journey, and we encourage energy networks and innovators to consider how they can develop the best ideas with the greatest potential for this year’s competition.”

Matt Hastings, Deputy Director of the Ofgem SIF programme at Innovate UK, said: 

“We believe we can make the UK the best place in the world to be an energy entrepreneur. The first round of the SIF produced 40 innovation projects across a wide range of themes, showing that the sector is ready to join in this ‘giant leap together’ to decarbonise the energy networks. 

“With the next challenge areas now clear we expect that many dynamic new collaborations will form this year, as energy networks get together with other innovators - inside or outside the energy sector - to take part in the SIF.”

The Strategic Innovation Fund is a five-year programme with up to £450m available to promote energy network innovation. 

A public briefing webinar on 25 May 2022 will explain more about the innovation challenges and how the next SIF competition works. 

Innovators wanting to partner with network companies on projects should attend the competition launch webinar to find out more.

Sign up link:  https://eur.cvent.me/9WN04

More information:


About the SIF

Notes to Editors

  • Ofgem – the Office of Gas and Electricity Markets - is Britain’s independent energy regulator. Its role is to protect consumers now and in the future by working to deliver a greener, fairer energy system. It does this by: 

    • Working with Government, industry, and consumer groups to deliver a net zero economy at the lowest cost to consumers.
    • Stamping out sharp and bad practice, ensuring fair treatment for all consumers, especially the vulnerable.
    • Enabling competition and innovation, which drives down prices and results in new products and services for consumers. 
  • Innovate UK is the UK’s innovation agency and is part of UK Research and Innovation. It drives productivity and economic growth by supporting businesses to develop and realise the potential of new ideas, including those from the UK’s world-class research base.
  • The purpose of the Strategic Innovation Fund is to support network innovation that contributes to the achievement of Net Zero, while delivering real net benefits to network companies and consumers; and to work with other public funders of innovation so that activities appropriately funded by network consumers are coordinated with activities funded by Government.
  • Ofgem is working with Innovate UK to deliver the Strategic Innovation Fund. The partnership brings together the complementary roles of both organisations. Ofgem regulates network and system operators to enable Net Zero at lowest cost to consumers. Innovate UK focuses on business growth and is delivering the SIF using its expertise in engaging with innovators on funding programmes across multiple sectors such as offshore wind, energy storage, defence, transport, aerospace, healthcare, and space. 
  • Ofgem has determined that the value of the Strategic Innovation Fund will be £450m over the next network price control period (RIIO-2). The level of funding available can be increased upwards if there is a need for greater funding. It will issue regular challenge competitions focused on areas of strategic importance to the future of the gas and electricity networks.
  • Under the Strategic Innovation Fund, gas and electricity network and system operators are able to form consortia with businesses and academics to propose innovative solutions to the challenges facing the networks. They can then apply for funding through the competitive process. 
  • The Strategic Innovation Fund is drawn from the bills that energy consumers pay, and so all projects funded will be required to bring a net benefit to consumers. 
  • As part of the SIF programme, Innovate UK has created ‘Giant Leap Together’, a carefully-designed activity plan recurring and being refined each year.  This process has four stages: 
    • Challenges: Identifying the most important energy network innovation challenges, based on problems that users and consumers are facing;
    • Ideation: generating new ideas for projects/products and services that will target these challenges;
    • Incubation: helping energy networks and innovators form effective partnerships which can develop the ideas into powerful innovation projects/products and services;
    • Acceleration: selecting and funding the most promising ideas, sharing insights, solving problems, helping businesses secure investment and developing the very best ideas into ‘business as usual.’ 
  • In the acceleration stage, projects are funded progressively in three ‘agile’ phases – discovery, alpha and beta – to ensure focus on the right areas and minimise risk. This will help the projects to develop rapidly, react to change and maximise their potential to transform the gas and electricity networks while growing large-scale successful businesses and contributing to UK economic growth. 
  • The first competition under the SIF, the Round 1 discovery phase, opened in August 2021 and closed in November 2021. The Round 2 discovery phase opens in August 2022.
  • Projects under this competition have to be led by Gas Transmission, Gas Distribution, or Electricity Transmission, Electricity Distribution Network Operators, or the Electricity System Operator, working in collaboration with other networks, businesses and academics. 
  • For more information about the SIF see www.ofgem.gov.uk/sif

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