EVALUATION

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AN INDEPENDENT <strong>EVALUATION</strong> OF THE LCNF • NPG has increased the number of external interactions that inform and guide its activities. They now routinely seek-out opportunities to collaborate with other DNOs on areas of strategic interest and are actively engaged with water and gas distribution projects through the Northern Joint Utilities Innovation Group. NPG has also established an agreement with Newcastle University to support its Future Energy Systems Hub. • SPEN operational business has changed due to the adoption and implementation of innovation, for example Rezap and the BIDOYNG device from Kelvatec which have changed LV fault location methods. The design teams are adapting to the rollout of flexible connection offers made possible through the LCNF funding mechanism. • ENWL has also undergone operational business changes for example the introduction of a managed connections process within the main business came about directly as a result of its Capacity to Customers project and has resulted in significant changes to the way in which generation customers are quoted and ultimately connected. ENWL has observed that this has led to a more mature relationship with generation customers requiring the connection customer liaison teams to work closely with customers to better understand their connection requirements. ENWL is now moving the principles into demand connections and are proactively engaging with a number of existing customers with a view to entering into demand side response contracts to assist with the network reinforcement challenge. An illustration of how innovation is currently viewed and has been taken to the core of the DNO business comes from the recent (Spring 2016) UKPN Head of Innovation Job advertisement: Reporting to the Director of Safety, Strategy & Business the Head of Innovation has overall accountability to ensure that UK Power Networks is identifying, prioritising and implementing best practice solutions. Championing innovation and building support across the organisation. Working with own team and colleagues across the business to encourage and facilitate innovative products, services and processes. Responsible for providing appropriate leadership, resources and expertise to ensure that innovation really happens and UK Power Networks is regarded as both the thought leader and the best at driving value from innovation. Our view is that this suggests that UKPN intends innovation to be considered across the whole business, not just within the Future Network Group. 3.3 Research and Development spend The total DNO spend on research and development (R&D) has inevitably increased following the introduction of the LCNF. Information on R&D expenditure has been provided by five DNOs and is illustrated in Figure 7. This shows that the spend funded by other mechanisms, mainly the Innovation Funding Initiative (IFI), has remained relatively constant over the LCNF period and from Figure 8 – which includes the years prior to the introduction of LCNF – the total expenditure can be seen to be relatively stable for the two DNOs who provide this history. PÖYRY MANAGEMENT CONSULTING October 2016 713_Poyry_Report_Evaluation_of_the_LCNF_FINAL_Oct_2016_v700.docx 26
AN INDEPENDENT <strong>EVALUATION</strong> OF THE LCNF Some DNOs obtain research funding from other sources such as the Technology Strategy Board 29 (Knowledge Transfer Partnership with university), Energy Technology Institute (ETI) and the European Union (EU) but the magnitude of this is a factor of ten, or even a hundred times, smaller than that obtained from IFI. Figure 7 – Nominal spend on R&D SPEN, UKPN, WPD, NPG 2010 – 2015 30 45 40 35 30 25 20 SPEN, UKPN, WPD and NPG total SPEN, UKPN, WPD and NPG without LCNF £m 15 10 5 0 2010/11 2011/12 2012/13 2013/14 2014/15 Figure 8 – Nominal spend on R&D (excluding LCNF) UKPN and NPG 2007 – 2016 31 45 40 35 30 25 20 UKPN without LCNF NPG without LCNF £m 15 10 5 0 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 29 30 31 Now Innovate UK. SSE Tier 2 project figures provided evenly spread across applicable years; ENWL figure not provided. Data for years prior to LCNF provided by two DNOs and used for illustration. PÖYRY MANAGEMENT CONSULTING October 2016 713_Poyry_Report_Evaluation_of_the_LCNF_FINAL_Oct_2016_v700.docx 27
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EVALUATION

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