‘Moderate’ innovation will still deliver customer value

Any attempt at starting the sixth Low Carbon Networks and Innovation (LCNI) conference with self-congratulatory hubris about the inventive dynamism of the UK’s regulated energy networks was cut short by the characteristically candid approach of Ofgem’s chief executive, Dermot Nolan.

Delivering an opening keynote at the popular industry event, Nolan shared insights into the energy regulator’s ongoing review of network innovation funding. It was the conclusion of independent consultant Poyry, he said, that innovation culture in energy networks has progressed from “low” to “moderate” status in response to incentives.

This is hardly language for the networks to preen about and Nolan was clear that he expects the industry to keep on pushing further to consolidate the achievements made via innovation funding to date. He also hinted at forthcoming ideas from the regulator about ways in which third-party technology providers and entrepreneurial start-ups might be allowed to access regulated funds in order to spice up customer-focused innovation ambition.

Despite Nolan’s message that networks have a long way to go before they can lay claim to having sustainable innovation cultures, however, delegates at LCNI were relieved to hear that Ofgem’s innovation funding review has broadly determined that the projects are providing value for money. Early analysis by Poyry suggests customer benefits could be calculated at anywhere between £800 million and £7.8 billion, depending on the extent to which innovation outputs are rolled out in the real world.

As Nolan acknowledged, these are not trifling sums. It now remains for them to be realised through widespread deployment of new technologies and ways of operating the energy system.

• In addition to communicating the broad findings of Ofgem’s innovation funding review, Nolan assured that the smart systems consultation, which has been waiting to begin since May, will

“very soon” see the light of day. David Capper of the Department for Business, Energy and Industrial Strategy added that part of the ­hold-up is down to the fact that the department’s secretary of state, Greg Clark, is keen to launch the consultation himself, reflecting a deep personal interest in the issues involved.