EVALUATION

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AN INDEPENDENT <strong>EVALUATION</strong> OF THE LCNF Another respondent feels in the coming years it would be good to find other ways to enable suppliers more access to the competition. Finally, one respondent believes that the regulator has to be more honest with DNOs at the project evaluation stage – they need to highlight concerns and ensure it reaches the appropriate level of seniority in the DNO. Also this respondent stressed the importance of providing a safe environment for failure of innovation. C.2 Innovation in GB C.2.1 Would The Innovation Projects Have Occurred Without The LCNF (Q2.1) Questions: To what extent do you believe that these innovation projects would have occurred without the LCNF? Are you able to provide examples to support your views? C.2.1.1 Summary of Responses Eleven of the respondents felt that the innovation projects would either not have occurred without the LCNF or not have gone ahead at such a scale/such a quick timeframe, or otherwise that the LCNF has definitely been a factor in the projects going ahead. With two respondents commenting on how the LCNF sped up the introduction of innovation projects, and two respondents remarking that the projects could not have been carried out to the same scale in the absence of the LCNF. One of the respondents felt it was hard to say, but conceded that he did not think C2C or CLASS could have occurred without the safe environment provided by the LCNF. One respondent believed the innovation developed could not have occurred with support and encouragement from the regulator; they feel this point was proven by the fact not the whole fund was spent. Another respondent said it is hard to quantify, but there are indications that GB is at the leading edge of ‘smart grid’ innovation, which can be attested to the LCNF. One respondent stated the fact that in 2009 (pre-LCNF) the UK spend per customer on investment in UK network innovations barely reached the EU average; and by 2012 it was some three times the average. Three respondents felt that the level of innovation would have been small. C.2.1.2 Changes in DNOS Around one third of respondents made the point that the LCNF has driven the positive change in the DNOs making them open to innovation. One of these respondents made the point that previous to the LCNF the senior management would have discouraged staff from trialling innovative solutions, and this change has provided an opportunity for third parties to demonstrate the solutions and expertise they can bring. Another respondent made a similar point in that the scale of the LCNF resulted in board level interest in the projects. Another of these respondents felt the LCNF was key to the DNOs developing strong future networks teams, which they hope will continue to work on innovation in their DNO. PÖYRY MANAGEMENT CONSULTING October 2016 713_Poyry_Report_Evaluation_of_the_LCNF_FINAL_Oct_2016_v700.docx 176
AN INDEPENDENT <strong>EVALUATION</strong> OF THE LCNF Finally, one of these respondents believes the incentives under the DNO were crucial to push this change, allowing new suppliers and technical solutions to be introduced. C.2.1.3 Other Observations A point was made by two respondents that the LCNF was essential to test innovative solutions at scale. Another respondent feels that network operators would not have been inclined to fund the projects as the pay-back is too uncertain and long even if it does happen. Another response made the point that it is not clear where else funding would have come from if not the LCNF since they benefits normally go to regulated entities, saying the only alternative route could be a R&D allowance embedded in pricing reviews. One respondent states that the LCNF can deploy technology so quickly since it usually builds on that with a reasonable TRL, as opposed to developing brand new discoveries. Another respondent believes the LCND has brought about other benefits such as; resource development (young engineers as an example), investment in SME’s, and growth in the number and variety of supply chain businesses engaging with the GDNs. Finally, one respondent feels that certain technical advances would have occurred due to necessity or good business practice eventually, asset health for example and smart arena advances due to disruptive technologies. C.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? C.2.2.1 Summary of Responses Two thirds of the respondents that responded to this question felt that the LCNF had in no way prevented or discouraged private sector innovation, only three felt it may have. C.2.2.2 Encouraged Innovation Three respondents mentioned that they thought the LCNF had done the opposite and actually encouraged it – one of them felt the LCNF aligns private sector innovation with the needs of DNOs by providing them a platform to engage. Another respondent felt this is especially true with regard to Active Network Management and Demand Side Management, saying the fund has driven suppliers to support DNOs in projects and going forwards to BAU. Another respondent felt the LCNF providing the opportunity for companies to prove their technology only encouraged innovation. They continued on to say a trial they had been involved in prior to the LCNF would probably have made it to BAU if the LCNF had existed as it was just lacking evidence that DNOs would benefit from the technology. C.2.2.3 Reservations Two respondents felt that it may have discouraged it to a limited extent as a result of IP ownership. One of these respondents went on to say that since the LCNF encourages technology at a relatively high TRL, it can be a challenge for start-ups to develop ideas at PÖYRY MANAGEMENT CONSULTING October 2016 713_Poyry_Report_Evaluation_of_the_LCNF_FINAL_Oct_2016_v700.docx 177
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EVALUATION

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