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Capturing the value of innovation

Capturing the value of innovation. Introductory comments – 2012 LCN Fund Conference Hannah Nixon – Senior Partner, SG&G (Distribution). The Low Carbon Networks Fund . Key part of our regulatory tool kit Designed to kick start innovation by network companies and drive behaviour change

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Capturing the value of innovation

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  1. Capturing the value of innovation Introductory comments – 2012 LCN Fund Conference Hannah Nixon – Senior Partner, SG&G (Distribution)

  2. The Low Carbon Networks Fund • Key part of our regulatory tool kit • Designed to kick start innovation by network companies and drive behaviour change • £64m per year available for electricity distribution • Planned roll out to transmission and gas networks 2010 11 bids worth over £150m, 4 successful projects worth £63.6m 2011 6 bids worth nearly £60m, all 6 successful 2012 7 bids passed initial screening, worth over £80m Today is essential part of delivering LCNF’s key benefit - learning

  3. LCN Fund - success to date LCN Fund launched in 2010 to provide DNOs with the opportunity to respond to the challenges for the networks created by the low carbon transition

  4. Delivering value for money

  5. Value for money (2) • Approach to RIIO-ED1 • Innovation in business plans • ‘In period’ innovation • RIIO efficiency incentives • Measures to ensure value for money: • Two year review: implemented a number of refinements to improve value for money following public consultation • Monitoring Systems and Compliance Measures: we monitor the companies’ performance against significant obligations • Smart Grids Forum: seeking to incorporate all learning into the cost benefit model Further steps • Consultation on closedown reports • 2016 LCN Fund benefits review

  6. Innovation in RIIO • RIIO framework seeks to drive innovation : • Encourages longer-term view and efficient management of uncertainty • Consideration of innovation and alternative techniques in business plans • DNOs incentivised to respond to developments or face penalties • Strong incentives to innovate as companies keep a large proportion of savings made in delivering outputs • LCN Fund approach has also influenced the development of our proposals for RIIO-T1 and GD1: • Time limited innovation stimulus for high risk projects (NIC and NIA) • Innovation strategy alongside business plan

  7. The uptake of new technologies is uncertain …

  8. … as is what this means for distribution networks LCNF&NIC (DSR, Time of Use Tariffs, Energy Efficiency Smart Meters LCTs (PVs, HPs, EVs) Role of the DNO is changing (DSO?) Commercial/Market Arrangements Evolving Smart Grids development during ED1 (from Incremental to Top-Down?)

  9. Innovation in RIIO-ED1 • Timing • RIIO-ED1 Strategy Consultation – now open • February 2013 – Strategy Decision • July 2013 – Business plans due • Innovation and the business plans • Uncertainty around the characteristics, rate and location of take-up of low carbon technologies (LCTs) • Need to ensure these technologies (inc. generation) can connect in appropriate time at appropriate cost, without causing network problems • Consideration of use of smart grid technologies & DSR to maximise flexibility at minimum cost

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