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  • Funding Mechanisms

  • Ofgem runs a number of incentives and competitions to help Britain’s electricity networks achieve energy efficiencies and become smarter. These include:
    • Low Carbon Networks Fund
    • Network Innovation Competition
    • Innovation Funding Incentive (now closed)
    • Network Innovation Allowance
    • Registered Power Zones
    We actively share the learning from these projects within our business and with other networks operators, helping to promote best practise and bring new techniques and technologies into ‘business as usual’ operation.
    OFGEM - Links to Ofgem homepage
  • Low Carbon Networks Fund (LCNF)

    The LCNF runs until March 2015 and allows up to £500m to support DNOs undertaking projects to better understand how we can develop a secure, value for money modern network as we move to a low carbon economy.

    The fund has two tiers of funding:

    • Tier 1 allows recovery of some expenditure incurred on small scale projects
    • Tier 2 allocates up to £64m for flagship projects via an annual competition

    The LCN Fund will be replaced by the Network Innovation Allowance and the Network Innovation Competition.

  • Innovation Funding Incentive (IFI)

    The IFI is intended to provide funding for research and development (R&D) projects focused on the technical development of distribution networks to deliver value (i.e. financial, supply quality, environmental, safety) to end consumers. IFI projects can embrace any aspect of distribution system asset management from design through to construction, commissioning, operation, maintenance and decommissioning. A network operator is allowed to spend up to 0.5% of its Combined Distribution Network Revenue or up to 0.5% of its Base Transmission Revenue on eligible IFI projects.

    Open reporting (i.e. available in the public domain) of IFI projects is required by Ofgem; this is intended to stimulate good management and promote sharing of innovation good practice.

  • Registered Power Zones (RPZ)

    Registered Power Zones are intended to encourage DNOs to develop and demonstrate new, more cost effective ways of connecting and operating generation that will deliver specific benefits to new distributed generators (DG) and broader benefits to consumers generally.

    The RPZ incentive applies for five years to generation projects with a connection start date between 1st April 2005 and 31st March 2012. 

  • Network Innovation Competition (NIC)

    The Network Innovation Competition was introduced by Ofgem as part of the RIIO: T1 price controls.  Under this incentive, gas and electricity network companies compete for funding for research, development, and trial of new technologies, operating systems, or commercial arrangements.

    Up to £27m is available annually through the Electricity NIC.

  • Network Innovation Allowance (NIA)

    The Network Innovation Allowance was introduced by Ofgem as part of the RIIO: T1 price control for Electricity Transmission, which started in April 2013. The NIA is a set allowance that the Transmission network receives to fund smaller technical, commercial, or operational projects directly related to the licensees network that have the potential to deliver financial benefits to the licensee and its customers.