EVALUATION

AN INDEPENDENT EVALUATION OF THE LCNF
B.2.1.5 Regulatory Measures
Two respondents said how the LCNF led to there being a greater chance of relaxation of
regulatory measures; in order for innovation projects to take place e.g. Smarter Network
Storage by UKPN.
Another respondent commented on the regulatory regime. Although it is significantly
different now under RIIO, the timescales over which the price controls operate are still too
short for most but the simplest ‘easy wins’ to be able to be implemented and make a
return in eight years to justify the investment necessary for many of the LCNF projects
that have advanced.
B.2.1.6 Previous to the LCNF
Several respondents commented on how innovation was sparse within DNOs prior to the
LCNF. One respondent mentioned Ofgem’s innovation incentives, IFI and RPZ, and how
they brought forward significant products. This respondent also commented on the great
job Ofgem did to upscale these incentives with the LCNF scheme. Another respondent
commented on how it has given DNOs an opportunity to use resources on activities out
with business as usual, which has been liberating for both DNOs and project partners,
who enjoy being able to ask more from DNOs support wise.
Another respondent commented that many departments relating to power engineering
have closed down in the past twenty years due to a lack of interest or funding from DNO’s
to undertake innovative projects and fund research centres.
Another respondent mentioned that prior to the LCNF DNO innovation was rare and it was
more likely that a DNO would block innovation than encourage it – but obviously since the
LCNF this has totally changed.
B.2.1.7 Other Observations
One respondent made the point that LCNF has not only funded innovation it has provided
a mechanism to reward adoption and roll-out in subsequent price controls. The innovation
roll-out mechanism under RIIO-ED1 now provides the opportunity to fund roll-out for new
solutions within the same price control period.
B.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?
B.2.2.1 Summary of Responses
None of the respondents thought that the LCNF had actively prevented or discouraged
private sector innovation, or had any examples of this.
B.2.2.2 Encouraged Innovation
Six of the respondents believed that the LCNF has in fact encouraged private sector
innovation.
PÖYRY MANAGEMENT CONSULTING
October 2016
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