EVALUATION

AN INDEPENDENT EVALUATION OF THE LCNF
sans LCNF; but also not to the same level of quality or scope. They believe this is
especially true regarding long term, ambitious projects such as the CLNR – this would not
have been taken forward.
Another respondent believed that the LCNF platform allows for dispensations and
incentives to produce credible business cases for innovation projects.
Reduced Risk
Two of the DNOs mentioned that the reduced risk provided by the LCNF allowed projects
that were previously hard to fund due to being risky i.e. beyond simple incremental
innovation, the opportunity to be taken forward. ANM and CMZs were examples provided
of riskier innovations that resulted in a change in approach. One of the respondents
continued on to say the combination of the inventive of discretionary award (removing the
risk of the initial decision) and rewarding the progression of business as usual, has made
the LCNF successful.
Without the LCNF
Two respondents thought that only some of the technology in the projects that was at a
high TRL would possibly have been invested in by DNOs without the LCNF, or delivered
based on measures in the regulatory frameworks.
One of these respondents felt in addition to being high TRL to have any chance of being
invested in without the LCNF, the solutions would have to be low risk in comparison to
traditional solutions and result in direct cost reductions within the price review.
A.2.2
Effect of LCNF on Private Sector Innovation (Q2.2)
Questions:
Do you believe the LCNF has prevented, or otherwise discouraged, private sector
innovation? Are you able to provide examples to support your view?
A.2.2.1 Summary of Responses
None of the respondents felt that the LCNF has in anyway discouraged or prevented
private sector innovation. Two thirds of the DNOs felt that private section innovation has
been increased as a result of the fund.
One of these respondents feels that this has led to innovation occurring in the areas which
can deliver value to the consumer. Another of these respondents stated that figures
indicated 94% of the fund spending has gone to the private sector. They also mention
Innovate and Energy Systems Catapult as good innovative presences, giving innovation in
the industry a sense of maturity.
The final respondent of this group believes the industry is becoming more welcoming to
the private sector, as evidenced by two bids being submitted this year with a private
sector company leading, championed by a DNO. DNOs also sponsor the Energy
Innovation Centre – which helps SMEs promote innovative technical solutions that match
the current issues of network operator’s.
However one respondent made the point that from companies’ regulatory returns it can be
seen that the LCNF has not just replaced DNO’s existing price-control or shareholderfunded
activities, it has extended them.
PÖYRY MANAGEMENT CONSULTING
October 2016
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