SP Energy Networks denied £37m of innovation funding by Ofgem

Regulator says key technologies are already being used by other network operators or funded through RIIO

Ofgem has turned down two applications by SP Energy Networks for a total of £36.8 million of funding through the Innovation Roll-out Mechanism (IRM).

The regulator rejected the requests on the basis that the key technologies for the projects are already being used by other network operators or being funded through the existing RIIO price control.

The purpose of the IRM is to help network operators deploy proven innovative technologies as part of their everyday operations.

Distribution network operators (DNO) can submit applications for funding during one of two windows over the course of the RIIO-ED1 price control. The first window opened in May this year, with the next set to open in May 2019.

Ofgem received four bids during the first window – one from UK Power Networks and three from SP Energy Networks (SPEN) – worth a total of £79 million (2012/13 prices).

SPEN applied for £20.4 million to roll out a new strategy for inspecting and managing its overhead power lines. The scheme would involve the digital mapping of its entire network using Light Detection and Ranging (LiDAR) as well as risk-based data analytics and non-destructive pole testing.

Ofgem denied the request after the being told by several other DNOs that they have already adopted LiDAR and data analytics to varying degrees as part of their maintenance routines. 

“In light of steps taken by other DNOs to deploy LiDAR and data analytics under their RIIO-ED1 allowances, we think that SPEN’s HOSS [Holistic Overhead Lines Survey Strategy] application is not distinctive from an ordinary business arrangement,” the regulator said in a decision document.

SPEN requested a further £16.45 million to deploy enhanced monitoring devices into 52 per cent of its large secondary substations.  

Ofgem said SPEN already has funding within in its RIIO ED-1 business plan to install the devices in 12 per cent of the substations.

It continued: “Given the similarity, we think SPEN’s ESSM [Enhanced Secondary Substation Monitoring] application is not distinctive, and therefore is outside the scope of the definition of a proven innovation in the IRM licence condition.”

The DNO also applied for £9.1 million to deploy an active network management scheme in part of its Scottish Power Distribution (SPD) license area, where constraints have been limiting exports from 90MW of distributed generation in Dumfries and Galloway and delaying the connection of a further 200MW of distribution generation.

During the assessment process SPEN reduced the funding request to £8.01 million. The application was approved by Ofgem.

SPEN head of distribution network Jim McOmish said: “We recognised that with high volumes of local energy projects in Dumfries and Galloway, and the potential for more to come, there was an opportunity to do something different that will deliver both local and wider benefits to our customers.

“This scheme will be ground-breaking in the UK due to its scale, complexity and the level of interaction with our customers across both our distribution and transmission networks.”

UK Power Networks sought around £33 million to deploy monitoring and control devices on its low voltage networks, but subsequently decided to withdraw the bid and deliver the project within its existing RIIO allowances.

Ofgem partner for RIIO networks Kersti Berge said: “The IRM allows electricity distribution networks to claim extra funding to roll out proven innovation so that it becomes ‘business as usual’.

“However, they can only have extra money for using technology or approaches that are genuinely new, and not already funded through their price control.”

She continued: “All network companies must look at how they can innovate and roll out new solutions cost effectively for customers. We therefore welcome UKPN’s decision to withdraw its request for £33m of IRM funding for equipment which seeks to avoid unnecessary grid reinforcement.”