Innovation Funding Mechanisms
As part of the RIIO-2 price control, there are two funding mechanisms that facilitate innovation across the gas industry; the Network Innovation Allowance (NIA) and the Strategic Innovation Fund (SIF).
Network Innovation Allowance (NIA) – provides an allowance to fund smaller scale projects. NIA funding provides an opportunity to develop innovation programmes across the gas industry that focus on the energy transition and vulnerable customers. Drivers for the NIA are:
- Research and development – encouraging operational and technological innovation
- Collaboration and dissemination – working with external partners to solve problems and share new learning
- Customers and strategy – focusing on solutions that deliver direct financial value to our customers
Strategic Innovation Fund (SIF) - The SIF is the replacement for the Network Innovation Competition (NIC) and is intended to support innovation activities that contribute to the achievement of net zero and deliver real benefits to both network companies and consumers.
Where SIF funding is concerned, Ofgem will set the strategic direction using innovation challenges. Following this, network companies will be invited to apply for funding, by submitting suggestions that address these challenges.
SIF projects are split into three phases:
- The Discovery phase focuses on enhancing the understanding of the problem that needs to be solved and will typically take between 6 and 8 weeks to complete
- The Alpha phase looks at trying out different solutions to the problem identified and will typically take between 10 and 20 weeks to complete
- The Beta phase focuses on deploying the solution in a real-life environment, while continuing to make improvements. The duration of the Beta phase depends on the scale and complexity of the solution being deployed and will likely be the longest duration and largest scale phase of the SIF process