RIIO-2 Consultation Response
September 2020
currENT’s members have found that the RIIO (Revenue = Incentives + Innovation + Outputs) model in Great Britain has incentivised network companies to embrace and implement new technology, and we often use it as an example of how output-based regulation can drive innovation in networks.
We propose that Ofgem can further improve RIIO-2 to deliver Net Zero at lowest cost to GB consumer by considering the following:
- RIIO-2 must be strongly aligned with the overall objective of decarbonising GB’s energy sector
- Network companies should have the flexibility to adapt or change their proposed projects if better solutions are identified
- Innovation projects should involve strong industry participation and collaboration between network companies
- Innovation funding must support early stage innovation (e.g. pilots) and later stage innovation (e.g. new applications)
- Driving innovation can require significant resources in the shorter-term but delivers large benefits in the longer-term; reducing OPEX budgets may lead to less resourcing for innovation projects and ultimately less savings for consumers
- Transparency is critical to minimise the risk of information asymmetry between regulators and network companies, maintain technology neutrality, and ultimately ensure that the best solutions for society are transparently selected and implemented
- An output-based approach should remain strong in RIIO-2 to maintain focus on the target outcomes of network investments rather than the type of solution chosen
Read our full response to the RIIO-2 Draft Determination consultation here.