Whether it’s commitment from the Department for Business, Energy and Industrial Strategy to drive innovation by increasing spend until 2020 or Ofgem asserting in its ‘network innovation review’ that it is critical for transitioning to a low carbon economy, innovation’s impact on the energy sector is being clearly stated.
The big trilemma
Driving this is the need for energy system transformation that addresses the challenges facing the UK as we transition to a low carbon economy. It is only through innovation that energy network operators will discover new technologies and processes that will help address the energy trilemma of energy affordability, security and sustainability.
Since 2008, the Energy Innovation Centre has worked as an innovation scout for the UK’s gas and electricity distribution networks. We do this by scanning for new technologies from around the world that have the potential to be game-changing for the industry. These ideas come from our innovator community of almost 2,000 SMEs – SMEs with specialist skills and agility that larger organisations lack.
The complexities of these big businesses mean it can be difficult to engage with SME innovators to trial technologies and implement them into day-to-day activities. For their part, SME bosses often lack insight into the operational, regulatory and procurement challenges that typically characterise energy network businesses and this can block access to potential customers in this market.
Collaboration, not competition
This misalignment isn’t unique to the energy industry – it’s typical for any market where major players constitute big business. Some of the world’s largest companies – Unilever, Google, Lego and Coca Cola to name a few – have sought to bridge this gap by investing in initiatives to connect with SMEs.
While there’s evidence of the success of such programmes, we believe the real opportunity in the UK energy sector is in the consistency of challenges faced across all network businesses – whether gas or electricity – as this has enabled us to pursue a collaborative approach to innovation. By collaborating on the need to drive innovation rather than competing against each other, the benefits are greater and the risk of duplication in terms of effort and resources is minimised.
Funding the future
Another vital factor in helping SME innovation is access to funding that can help support the testing and development of new ideas and technologies. In the energy sector, distribution network operators can draw down funding from regulator Ofgem to support projects. This has had a positive effect in embedding innovation within the culture of energy networks, but as this funding comes under increasing scrutiny, the energy sector may need to look to other sectors and business models to support drive innovation projects, such as private equity investment.
Picking up the pace
We need to pick up the pace so we can see innovations go from trial stages, right through to it becoming a part of day-to-day, ‘business as usual’ on much shorter time scales. After all, if we had something that wasn’t working as effectively as it could do in our own homes, we generally wouldn’t wait ten years to fix it. We’d be looking for solutions to make it cheaper, safer or easier to use – why should it be any different in business?
Even to increase pace, it all comes back to collaboration. If we expect to see innovation projects delivered at a faster rate, then we need to create opportunities for big business and SMEs to come together and share ideas. By working in collaboration, we open ourselves up to a whole world of new thinking and technical possibilities that could result in the next big thing and a whole new outlook to our energy future.
Denise Massey is MD of the Energy Innovation Centre