What’s so innovative about the Strategic Innovation Fund?

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A new Innovate UK and Ofgem partnership seeks ideas to transform energy networks in the race to net zero. Its radical approach aims to achieve maximum impact.

Innovation isn’t exactly a new idea. We humans have been at it for ages, from fire to the wheel to the internet to the spork. I’m still waiting on my hoverboard though.

But we can’t say that the processes of enabling innovation, and its funding, have always been approached in an innovative way.

This is why we’re so excited about the partnership between Ofgem and Innovate UK to deliver the new Strategic Innovation Fund (SIF) for the energy networks. It’s a new approach which recognises the central strategic role that Ofgem and Innovate UK can play together in driving forward energy innovation. It aims to set a new standard for innovation competitions in this sector.

A major opportunity

The SIF is a major opportunity for innovative businesses and academics to work with energy networks on innovative projects that will deliver benefits to consumers. Paid for by consumers through their energy bills, it is there to help energy networks and the electricity system operator:

  • save consumers money
  • reduce CO2
  • improve access to energy markets
  • develop new products, processes or services.

It’s not just about projects though, it’s also about turning Great Britain into the Silicon Valley of energy and a global hub for energy innovation.

Below are the things that I think make the new SIF innovative (but I’m always interested in hearing from you how to make it better):

1. collaborative foundation

The foundation of the fund is two organisations that work very well together, with a shared public commitment to deliver impact. The blend of Ofgem’s objective for a net zero energy system at lowest costs to consumers, with Innovate UK’s objective for business growth, is a powerful and timely combination.

It incentivises fairness, decarbonisation and economic growth; exactly what is needed at the heart of the green recovery. And all in the interest of ensuring that energy consumers gain benefit from their investment.

Wider collaboration also underpins the SIF. Ofgem and Innovate UK are embracing and encouraging more collaborative ways of working with all involved, from other innovation funders, to the gas and electricity networks taking forward innovation projects.

The aim: a highly effective model for innovation in the energy networks sector, built on collaboration.

2. responsive, flexible challenges

On 31 August we launch the funding opportunity for our first four ‘challenges’ or themes, namely:

  1. whole system integration
  2. data and digitalisation
  3. heat
  4. zero emission transport.

We plan to launch more challenges regularly, when there are opportunities to address additional innovation needs.

Having the flexibility to develop new challenges, in response to the changing needs of consumers, is essential.

The energy sector or market needs the ability to pivot quickly and mobilise ideas at pace. It also means we can collaborate with other government innovation programmes rapidly where needed, such as working with:

  • BEIS’ net zero innovation portfolio on heat
  • Innovate UK’s prospering from the energy revolution programme on data and digitalisation.

3. lean delivery, sprinters not super tankers

In the past, Ofgem and Innovate UK have each funded some very large, long-duration projects. Our approach in the SIF is different. Here we’re using a process with three stages, discovery, alpha, and beta, in a “fail-fast” approach.

We start with a high volume of small or short projects, identify the best ideas quickly, and soon refine this to a smaller volume of larger or longer projects.

Discovery projects are capped at two months long and £150,000 of funding. Alpha projects can be up to £500,000 and run for six months. There is no funding cap on beta projects, so this is where real demonstration comes to life.

By the time projects apply into the beta stage, they should be closer to a tangible product, process or service that can:

  • save consumers money
  • reduce CO2 emissions
  • improve access to existing (or new) markets.

4. simplified application process with reduced barriers to entry

We have massively reduced the burden of time, effort and cost in applying for funding, without compromising scrutiny. In the predecessor to SIF, the Network Innovation Competition (NIC), it could take 12 months to develop a project proposal requesting funding of between £100,000 and £500,000. It consumed huge amounts of resource from networks and their partners with no guarantee of success.

In the new discovery stage process, bidders fill in a scaled-back 10-question application with 400 words per answer. Plus a 60-second video and some simple additional tools to help us communicate the projects externally. As part of the application we ask for early thoughts around investment readiness and perceived regulatory barriers so we can better understand the risks to commercialisation.

There will be a similar application process for alpha and beta applications, with more opportunity to elaborate on the detail.

5. focus on commercialisation

The UK does not have a good track record of companies really ‘scaling up’ commercially following innovative ideas. This is something we are determined to improve. Often, grant-funded projects end up on the shelf in the shape of a lengthy report that is rarely read.

Our intention is that beta projects should be aiming for ‘business as usual (BAU)’ adoption of their product or service as fast as possible. If we can get there in a one-year beta, fantastic. If it needs to take longer and cost more that’s OK, but the ambition should be to get to BAU and to commercialisation as quickly as possible.

To support this ambition, we will set up a new function to monitor and support projects rolling from innovation stage into BAU. We will help the businesses working with the energy networks on these projects to scale up if they need.

This will include a network of investors and utilities who can coach businesses towards commercialisation and develop routes to market nationally and internationally.

6. integrated innovation and regulatory change

We know from Innovate UK’s prospering from the energy revolution challenge that innovation and regulation need to work better together. So, we are partnering with the Innovation Link team in Ofgem throughout the delivery of the SIF to gather the intelligence needed to inform change.

Innovation Link offers support on energy regulation to innovators looking to trial or launch new products, services or business models, helping them to understand what the rules mean for them.

This will ensure that regulatory barriers are considered throughout the innovation process, from application to project delivery to commercialisation. Our ambition is for innovation to feed a more agile regulatory change mechanism. It will help the regulations to evolve quickly as needed for the UK to stay on track in the run-up to net zero.

Innovation with urgency

2050 is less than 30 years away. To put that in perspective, Bryan Adams’ ‘Everything I Do’ was number one 30 years ago, yet it only seems like yesterday.

We need a culture change that innovates with extreme urgency if we are to reach net zero. We need an urgency to:

  • reduce emissions
  • deliver value to consumers
  • make a difference.

We just need to get on with it and this is why we’ve helped to create Ofgem’s most agile funding mechanism to date. It’s great to see the networks starting to seize the challenge.

We would not be here without some courageous visionaries from Ofgem and Innovate UK:

  • Emily Seto
  • Graeme Barton
  • David Richardson
  • Steve McMahon.

People who were brave enough to try something new, when they could have easily just played it safe.

All our efforts are geared to creating a high-impact programme with commercially successful innovations that transform the energy networks whilst more than meeting the needs of energy consumers.

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