Richard Halsey, Innovation Director at Energy Systems Catapult, on why RIIO-3, the third iteration of Ofgem’s performance-based framework regulating UK gas and electricity networks (running 2026–2031), is a pivotal moment for energy networks and innovators

As our energy system’s clean transition enters the second half of this decade, the scale of the challenges facing energy networks is unmistakable – but so is the potential for innovation and economic growth.

Our energy system is being reshaped by powerful forces: the rapid electrification of transport, heat and industry; the growth of distributed clean energy and digitalisation; and rising affordability pressures in volatile global energy markets. Together, these are fundamentally changing what customers need from networks – and how networks must respond.

Against this backdrop, RIIO-3 and the Strategic Innovation Fund (SIF) – which is making £500 million available over the coming price control period – marks a pivotal change in how energy network innovation is conceived, delivered and, crucially, adopted across electricity and gas networks.

This isn’t simply about doing more, but about taking a genuinely different approach, moving faster – with greater ambition, stronger coordination and a relentless focus on customer and whole energy system outcomes.

From projects to purpose: a new framing for network innovation

Historically, network innovation has often been organised around individual projects with pilots testing new technologies or approaches and generating valuable lessons. While this has delivered solid progress from many important network innovation projects, it has also arguably limited transformational change at the pace required. Too many good ideas have struggled to cross the gap from initial pilot to wider network adoption, and too often innovation has been incremental in the face of system-level challenges that demand something far more transformative.

RIIO-3 – and the five innovation challenges announced earlier this week by Ofgem and Innovate UK – signals a deliberate move away from this model. The emphasis has shifted towards mission-led, outcome-focussed innovation that is explicitly designed to reduce costs, unlock economic growth, bolster resilience, and deliver a cleaner energy system that meets the real needs of its users.

That means starting with the problems that most constrain delivery of customer outcomes – and then mobilising innovation to solve them.

It also means recognising that many of the hardest challenges sit at the boundaries: between electricity and gas, planning and operations, data and decision making, networks and customers. Solving these issues has demanded a different level of ambition and a different way of working.

ENIT: laying the foundations for RIIO-3 network innovation

The Energy Networks Innovation Taskforce (ENIT) and its recommendations have sounded the starting gun for this new era of network innovation in RIIO-3.

It hasn’t defined individual projects, but identified a select number of innovation challenges that really matter – and created focus around them across networks and the wider innovation ecosystem.

Energy Systems Catapult has supported the Taskforce, drawing on our experience at the interface of energy networks, policy, innovators and customers.

Through our delivery of energy research and innovation over the last decade, we’ve seen repeatedly that technology alone isn’t the limiting factor. Progress depends on how our energy system is planned, coordinated and operated – and on whether innovation is focused on solving real network problems with scale in mind from the outset.

The Taskforce’s approach has reflected these lessons. It’s focusing innovation on five shared challenges and outcomes:

• Accelerating energy network connection of our industry and businesses: major new growth sites can be energised and operational within six months
• Faster build and maintenance of our energy networks: 50% faster, 20% cheaper network build and maintenance
• Instant connection of low-carbon and smart energy appliances in our homes and buildings: enable instant, plug-and-play connections of domestic energy devices and appliances
• Eliminating energy outages: near-zero interruptions to energy via autonomous reconfiguring and islanding of any section of the network
• Decentralised energy system balancing: prove and enable autonomous local balancing and optimisation of networks at every level

These new SIF challenges send much clearer signals about where innovation is most needed, and where collaboration is essential rather than optional.

Embedding whole system innovation in future energy networks

One of the strongest insights from the innovations and innovators we’ve supported is the importance of whole energy system thinking.

Electrification of heat or transport, for example, isn’t simply a question of installing more low-carbon technologies. It reshapes energy demand patterns, customer behaviour, network constraints and long-term investment needs in ways that cut across traditional planning and operational boundaries.

Similarly, digitalisation initiatives have demonstrated that data and digital tools only deliver real value when they actively inform decisions – whether in network planning, operational control or customer interaction.

Innovation in RIIO-3 must therefore go beyond new assets and technologies to include how we plan where there’s uncertainty and operate in an increasingly dynamic and interdependent system.

RIIO-3 and SIF creates space to embed this thinking into business as usual. Over the coming weeks, this blog series will explore what that means in practice – from priority innovation challenges to the collaborative approaches that can accelerate learning into lasting change.

From start-ups to scale-ups

For innovators, start-ups and scale-ups, RIIO-3 should be seen as a market-making moment. The move towards mission-led, outcome-focused innovation provides clearer signals about where energy networks will need solutions at scale – over both near and longer-term time horizons – and across electricity and gas networks.

We’ve seen firsthand how Great British innovators have to the potential to help tackle the challenges facing future energy systems, bringing forward the technologies and integration needed for network transformation.

Digital innovators such as Grid Edge, EA Technology, Geo and UrbanChain who are unlocking new value across the system, are using data to understand, optimise and enable demand-side flexibility.

Disruptors like Voltempo, Keep Energy Systems, LiNa Energy, Anzen and Nusku who are developing the physical solutions to transform energy – from ultra-high-power charging to disruptive energy storage and heat pump technologies.

And then there’s those working at the interfaces to scale integrated solutions, such as myenergi, Sero and Wondrwall, who are developing smart, integrated home energy technologies and consumer-centred solutions and services.

The UK’s future energy system – ambitious on decarbonisation, demanding on affordability and operating within a mature regulatory framework – provides an exceptional proving ground for promising innovators to develop, test and rapidly deploy the solutions we need.

The innovation challenges identified by the Taskforce are arguably the same ones facing many if not all energy systems globally. Solutions that are proven here will be inherently exportable.

Breakthrough ideas to network transformation

RIIO-3 and SIF is redefining network innovation. For networks, that means being bold in responding to shared challenges and open to new ways of working.

For innovators, it means bringing forward solutions that are ambitious, system-aware and designed for adoption at scale.

If we get this right, the next five years can become the period in which energy network innovation is truly catapulted – delivering much better outcomes for businesses and consumers in the UK, accelerating the growth of the UK’s high-potential businesses, and capturing the opportunities to shape energy systems around the world.

In our coming blogs, we’ll dig deeper into the innovation opportunities coming out of RIIO-3 and SIF – if you’d like to explore how we can help you explore them now, click on the ‘get in touch’ button below.