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Innovation Funding Incentive

Under the Gas Distribution Price Control Review the energy regulator, Ofgem, introduced the Innovation Funding Incentive for Sustainable Development scheme (IFI/SD). The basis of the scheme is outlined below and full details can be found under the Gas Transporter Special Licence Condition E11, as well as at Ofgem’s website.

• A gas distribution network (GDN) is allowed to spend up to 0.5 per cent annually of its distribution network transportation activity revenue on eligible IFI/SD projects.

• The gas distribution network is allowed to recover 80 per cent of its eligible project expenditure under the licence condition, with a cap on its internal cost at 15 per cent.

• Eligible projects have to meet the criteria set out in the Gas Distribution IFI/SD Good Practice Guide (see below) and, as a minimum, align with at least one of Ofgem’s five sustainable development themes:

• Managing the transition to a low carbon economy.
• Eradicating fuel poverty and protecting vulnerable customers.
• Promoting energy saving.
• Ensuring a secure and reliable gas and electricity supply.
• Supporting improvement in all aspects of the environment.

The aim of the scheme is to allow the gas distribution networks to invest in research and development, even when project costs and benefits span beyond the price control’s five-year horizon. In addition the gas distribution networks are encouraged to work in collaboration with and receive ideas from other interested parties, including, but not limited to, consultancies, academia, technical development companies and other gas distribution companies.

This good practice guide has been produced for gas distribution networks who will be managing IFI/SD programmes. It has been endorsed by the gas distribution networks and approved by Ofgem as required by the regulatory instructions and guidance. It will also be useful in providing guidance to organisations that are likely to be involved in the specification and delivery of IFI/SD projects including manufacturers, academics and consultancies.

The purpose of this guide is to ensure that all projects that are funded by the IFI/SD are:

• Selected in accordance with the eligibility criteria approved by Ofgem, which includes alignment with at least one of Ofgem’s sustainable development themes.

• Managed effectively, taking account of the particular characteristics of research, development and demonstration projects.

• Reported on in a consistent way as required by Ofgem.

The guide recommends the steps that need to be taken to formulate and deliver projects that are eligible for the IFI/SD scheme. It is not the purpose of this guide to cut across existing management structures within gas distribution networks and other organisations, but rather to give a framework for coherence between companies and to provide a checklist to ensure all the requirements of Ofgem are met. This guide aims to give a high-level view of good practice processes and procedures.

It is expected that companies will also employ existing internal processes that complement those recommended by the good practice guide. This will save additional process resources and minimise the cost of compliance with the guide.

IFI Submissions

The GDNs are keen to receive ideas and proposals from interested parties. If you have an idea that you would like to be considered, please submit this by completing the idea form found below. The Good Practice Guide will aid in understanding how this should be completed.

The GDNs are also in the process of developing their IFI strategy out to 2013 and beyond which can be found linked below. This provides an outline of key topic areas of interest to the GDNs for which they would be interested in receiving project proposals.

In the first instance, please submit your IFI ideas to Clare Cantle-Jones, clare.cantle-jones@energynetworks.org, using the form below.

Download the IFI Idea Capture Form.

Download the IFI Strategy (once finalised and approved).