New challenge areas for projects to decarbonise energy networks

L2 electricity pylons at sunset in Somerset, England, UK.

Ofgem and Innovate UK have announced the challenge areas for round three of the Strategic Innovation Fund (SIF), which opens for applications in September 2023.

The Office of Gas and Electricity Markets (Ofgem) and Innovate UK have announced the challenge areas for the third round of SIF, which will open for applications in early September 2023.

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.

Four innovation challenge areas have been set as the priorities for this year’s project proposals to address. They have been identified in consultation with the energy industry, consumer groups and other stakeholders.

The challenges reflect SIF’s broad emphasis on delivering innovation, which is aligned to Ofgem’s strategic change priorities.

Energy network innovation priorities

There are four specific challenges for this round.

Whole system planning and utilisation of networks, to facilitate faster and cheaper network transformation and asset rollout

This is the challenge to:

  • improve and evolve the process of network planning and connecting new low-carbon energy supply and demand to the grid
  • help meet net zero in a timely and cost-effective manner

Novel technical, process and market approaches to deliver an equitable and secure net zero power system

This challenge is about developing and scaling up technologies, processes and markets that will deliver an equitable and fair net zero electrical system at all levels.

Unlocking energy system flexibility to accelerate electrification of heat

The challenge to address here is the visibility and coordination of electric heat demand, to enable effective network planning and flexibility for a greener and more affordable future energy system.

Enabling power-to-gas (P2G) to provide system flexibility and energy network optimisation

Using renewable energy to generate gas such as hydrogen can potentially allow long-term energy storage and bring energy system benefits; the challenge is to unlock this potential.

Opening in early September

The first funding phase of this round will open in early September. Energy network companies working with other innovators can apply for up to £150,000 for a feasibility study to develop their ideas in response to the challenges.

After this discovery phase, those projects judged to have the greatest potential will go forward to the alpha phase in 2024. They will receive additional funding of up to £500,000 to further develop their ideas over six months.

Then after a further selection process, successful projects will go through to a final phase, beta. They will become multimillion-pound, large-scale demonstrators, working to prove their potential for rollout across energy networks as business-as-usual.

Towards a low-carbon future

The aim is to speed up the development of new technologies and services that will help meet the urgent challenges facing energy networks and society, as we move towards a low-carbon future.

Marzia Zafar, Deputy Director of Strategy and Innovation at Ofgem, said:

This is a great opportunity for innovators to focus their talents on solving some of the major challenges the energy sector is facing on the road to decarbonisation.

SIF has already proved to be a launchpad for some fantastic innovative thinking and we’re looking forward to seeing what exciting proposals we get in response to this year’s set of specific challenges.

Exciting new proposals

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

This year’s SIF challenges express some of the most important areas that must be urgently tackled to decarbonise energy networks by 2035 – whether the backlog in new grid connections or the transition to electric heating.

We encourage innovators everywhere to look at these challenges and opportunities and bring forward their ideas. The previous two rounds of the SIF have already funded more than 100 ground-breaking innovation projects and we look forward to exciting proposals taking shape over the coming months for this year’s programme.

More detail on the challenges is on the Ofgem website. Innovate UK is holding an online launch event on 25 May, open to all, to discuss the challenges and call for ideas.

Further information

Innovation challenges round three decision document

Ofgem’s Strategic Innovation Fund (SIF): a brief guide

Ofgem: about SIF

About Ofgem

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 the 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

About Innovate UK

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.

About the SIF

The purpose of SIF is to:

  • support network innovation that contributes to the achievement of net zero, while delivering real net benefits to network companies and consumers
  • work with other public funders of innovation so that activities appropriately funded by network consumers are coordinated with activities funded by the government

Ofgem is working with Innovate UK to deliver SIF.

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 SIF using its expertise in engaging with innovators on funding programmes across multiple sectors.

SIF funding

The value of SIF is expected to be £450 million over the current network price control period.

The level of funding available can be increased upwards if there is a need for greater funding.

It issues regular challenge competitions focused on areas of strategic importance to the future of the gas and electricity networks.


Under SIF, 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.

SIF funding is drawn from the bills that energy consumers pay, and so all projects funded will be required to bring a net benefit to consumers.

The ‘Giant Leap Together’ model

As part of SIF programme, Innovate UK has created ‘Giant Leap Together’, a carefully designed activity plan recurring and being refined each year.

It 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 or products and services that will target these challenges
  • incubation: helping energy networks and innovators form effective partnerships that can develop the ideas into powerful innovation projects or products and services
  • acceleration: selecting and funding the most promising ideas, solving problems, helping businesses secure investment and developing the best ideas into ‘business as usual’

Three ‘agile’ phases of funding

In the acceleration stage, projects are funded progressively in three phases:

  • discovery
  • alpha
  • beta

This is to ensure focus on the right areas and minimise risk.

It will help the projects to:

  • develop rapidly
  • react to change
  • maximise their potential to transform the gas and electricity networks

This will also help grow large-scale successful businesses and contribute to UK economic growth.

The next SIF competition

The round three discovery phase competition opens in early September 2023.

Projects under this competition must be led by:

  • gas transmission, gas distribution electricity transmission or electricity distribution network operators, or the electricity system operator
  • working in collaboration with other networks, businesses and academics

Top image:  Credit: Adam Gasson

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