The Innovation Funding Incentive (IFI) scheme is a mechanism introduced by OFGEM to encourage distribution network operators (DNO) to invest in appropriate research and development (R&D) activities that focus on the technical aspects of network design, operation and maintenance.

The principal objective is to deliver benefits to consumers, taking a longer term view, by enhancing efficiency in network operating costs and capital expenditure.

2008/09 has been a very successful year for IFI within National Grid. We spent approximately half of our IFI funding allowance in 2007/8 and for 2008/9 we invested approaching 75% (£1.9m) of the gas allowance and 120% (£7.7m) of the electricity transmission annual allowance on R&D.

We aim to lever our spending, with the total costs for the programme for electricity amounting to greater than £51m and the gas programme to greater than £14m.

The IFI has again been utilised for our existing assets and there continues to be a number of vital areas which we are exploring to further enhance safety, capability and reliability whilst ensuring efficient use of expenditure.

The potential role of Carbon Capture and Storage (CCS) in the transition to a low carbon economy is another important focus.

For electricity, our challenges include the connection of new low carbon generation, overcoming capacity constraints on the network and enabling Smart technology to optimise network and customer choices.

For more detailed information on our IFI activities please view our annual reports (see below).