Ofgem Strategic Innovation Fund invest £16m in round two projects

Ofgem will invest £16 million across 36 projects, as part of the £450 million Strategic Innovation Fund (SIF).

Thirty-six ground-breaking projects have successfully secured a total of £16.09 million next phase funding, as part of the SIF round two alpha competition process.

This follows the recent announcement of £95 million for 10 round one beta projects.

As part of the £450 million SIF programme, the round two alpha projects are led by energy network companies working in partnership with innovators and partner organisations.

Moving to the next level

The successful projects will now take their initial ‘discovery’ feasibility work to the next level, proceeding to ‘alpha’ where they have up to £500,000 each to develop their concept in depth.

Upon completion of the alpha phase, projects will compete for third phase ‘beta’ funding to produce demonstrator prototypes.

The projects are aiming to go onto commercial development and could be implemented operationally in energy networks as early as the mid-2020s.

They will play an important part in helping Great Britain achieve a safe, clean, low-cost energy future.

Biggest challenges faced

The challenges our energy systems face are fast evolving.

The SIF collaborates with network operators, industry, and academia to identify the most pressing challenges.

The challenges provide strategic direction and focus to identify and drive the highest-potential projects and bring them to reality.

The round two alpha projects are addressing some of the biggest challenges faced by the energy networks as they make the move to net zero:

  • how do we transition to net zero in a way that is just and fair for all parts of society?
  • how does Great Britain repurpose its energy systems to move safely and efficiently from fossil fuels to renewable energy?
  • as energy systems become more complex, how do we deal with increasing natural risks and other hazards?
  • how do we achieve government and industry targets for decarbonisation of major energy demands at the lowest cost to consumers, including the use of heat pumps in homes, and the move to electric vehicles?

Clean power by 2035

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

Innovative solutions that deliver resilience, reliability and affordability at pace are essential in achieving Great Britain’s target of clean power by 2035.

This latest funding round will help innovators develop their ideas further and deliver the transformative technologies needed to drive forward the energy transition at least cost to consumers.

Coordinated local energy support

One of the projects awarded funding is LEO-N (Local Energy Oxfordshire – Neighbourhoods).

LEO-N are tackling the challenge of reducing carbon emissions from major sources of energy consumption.

Scottish and Southern Electricity Networks have pulled together a team to create a coordinated process to make it easier for homes, businesses, and communities to transition to using clean energy quickly. And on a large scale.

Right now, there is no clear plan to help consumers make this shift, and a lack of the necessary infrastructure at the local level to support this transition.

An innovative approach

To address this, LEO-N are collaborating with stakeholders to use an innovative approach that focuses on creating tools, business arrangements, and local government structures that will speed up the move to net zero.

This involves identifying, installing, and funding a set of options, such as improved building fabric and smart technology, to reduce energy consumption.

Without this coordination process the individual changes needed may not be compatible with each other, leading to increased costs and reduced effectiveness.

A fair energy transition

Another of the funded projects is Hy-Fair.

Hy-Fair will tackle challenges encountered by consumers, especially those in vulnerable situations, and small businesses requiring extra assistance in their shift towards environmentally sustainable heating solutions and other low carbon technologies.

The project, led by gas distribution company SGN, will establish the Hy-Fair Fairer Warmth Hub as a central environment equipped with specialised tools and customised guidance to empower community champions, individuals, and small businesses.

The Fairer Warmth Hub’s innovative features will include:

  • a streamlined system for consumers to access financial support
  • guidance and simplified access to resources
  • data analytics for precise planning
  • community engagement tools

By fostering place-based approaches, Hy-Fair will encourage collaboration and help communities deliver a fair energy transition.

Transforming lives and communities

Stuart Sherlock, Innovation Governance and Performance Manager, SGN said:

Our project is more than just addressing challenges; it’s about transforming lives and communities.

We’re excited because, through the Fairer Warmth Hub, we’re not only providing vital support but also establishing an innovative framework that will be replicable nationwide.

With streamlined access to resources, financial support, and community engagement tools, we’re paving the way for a fair energy transition that empowers everyone, especially those in vulnerable situations, and small businesses, to embrace sustainable heating solutions and low carbon technologies.

Hope in challenging times

Matt Hastings, Deputy Director, Ofgem Strategic Innovation Fund, Innovate UK said:

The climate clock is ticking and the cost of living crisis is pushing people to their limits.

SIF is on an urgent mission to support people, the planet and business, these projects are a sign of hope in challenging times.

Within this round 2 alpha portfolio we have some trail blazing innovators whose ideas have significant potential to save consumers money and reduce CO2 emissions, whilst also helping to turn the UK into the Silicon Valley of energy.

About SIF

The SIF is a five-year programme with up to £450 million available to promote energy network innovation.

A new round of the SIF begins each year and runs in parallel with the previous rounds.

The competition for the third round of discovery opened in September 2023.

Further information

The purpose of the 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 government

Working in partnership

Ofgem is working with Innovate UK to deliver the 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 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
  • space

Regular challenge competitions

Ofgem has determined that the value of the SIF will be £450 million 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.

Innovative solutions

Under the SIF, gas and electricity network and system operators can 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 SIF is drawn from the bills that energy consumers pay, and so all projects funded will be required to bring a net benefit to consumers.

Three stages

Projects are funded progressively in three ‘agile’ stages (discovery, alpha and beta) to ensure focus on the right areas and minimise risk.

Discovery projects are short feasibility studies, alpha are longer proof-of-concept projects, and beta projects are largescale demonstrators.

This helps 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.

To maximise consumer benefit and minimise risk funding for each phase is provided incrementally and is dependent on key milestones being met.

Top image:  Credit: Khaosai Wongnatthakan, iStock, Getty Images Plus via Getty Images

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