EVALUATION

AN INDEPENDENT EVALUATION OF THE LCNF
Through the ‘Innovate UK Energy Game Changer’, Innovate UK is investing up to £1.5m
in technical feasibility studies to encourage new entrants into the energy sector in order to
help stimulate the adoption of disruptive technologies. In Spring 2016 businesses and
research organisations applied for funding in three areas associated with inspection, data
and energy engagement. The projects had to be led by Small and Medium sized
Enterprises (SMEs) whose core business is outside the energy sector. Again the funding
does not fully fund the projects, with the proportion of funding depending on the type of
project and size of company.
The Energy Systems Catapult is a leading technology and innovation centre set up to help
the UK navigate the transformation of the whole energy system and capture the new
commercial opportunities created (covering electricity, heat and combustible gases). In
addition to funding received from Innovate UK, direct contracts with UK business form a
significant part of the overall funding for the Catapults. The Energy Technologies Institute
(ETI) Smart Systems and Heat (SSH) Programme was the Catapult’s first major project.
The SSH programme will develop a suite of software models and heating technologies
that will enable the design of location-specific energy systems and improved heating
efficiency in buildings. On completion of this programme (end of 2017) the Catapult will
seek to undertake a large-scale demonstration of the designs and technologies developed
under the programme. SSH will therefore be bringing the TRL from 4 to around 6.
Prior to the introduction of LCNF the DNOs were allowed to spend up to 0.5% of their
revenue annually using the IFI. The IFI was intended for technical innovation projects
delivering value (e.g. financial, quality of supply, environmental, safety) to customers.
The LCNF has not funded projects at TRL 4 and below. These projects were considered
research and development (R&D), which would often have been eligible for funding under
the IFI. IFI was replaced in April 2013 with the Network Innovation Allowance (NIA) for
operators of the gas and electricity transmission networks and gas distribution networks.
The focus of innovation under the NIA has expanded to incorporate commercial, technical
and operational research and development projects to complement the previous IFI focus
on asset management. The NIA provides limited funding to network licensees to fund
smaller innovation projects directly related to the licensee’s network (that have the
potential to deliver financial benefits to the licensee and its customers) and/or fund the
preparation of submissions to the Network Innovation Competition (NIC – which replaces
LCNF).
6.1.2 Where does LCNF fit?
The LCNF is specifically targeted at projects that a DNO would not perform in its normal
course of business. A first tier LCNF project was required to have a TRL of between 5
and 8. Figure 33 shows how LNCF relates to other innovation funding mechanisms in
GB.
PÖYRY MANAGEMENT CONSULTING
October 2016
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