Following the publication of the five RIIO-3 Innovation Challenges, we are welcoming early engagement from innovators with ideas or solutions that could help address them.
The innovation delivery groups will shape and prioritise activity and opportunities under each challenge over the coming months. However, innovators can begin engaging now where they have ideas or solutions that align with the published challenges (and the innovation priorities identified).
The Energy Innovation Centre (EIC) team has over 200 years of collective industry experience and can provide initial feedback on ideas, support proposition development, help assess alignment with the challenges, signpost to relevant funding routes and facilitate engagement with energy networks where appropriate. Where appropriate, the EIC will liaise with Ofgem, UKRI and relevant stakeholders to ensure effective industry coordination.
Please complete the SIF Challenge Triage form at the bottom of this page. If you need help, please contact us.
Deliver products and services to prove the viability of autonomous local balancing and optimisation of networks at every level by 2034.
Overview
This challenge aspires to deliver a future where energy flows across homes, streets, businesses, and local communities are balanced and managed autonomously, using local control systems to meet local needs from local clean assets while coordinating with the wider system.
Instead of a national centralised control room micromanaging millions of devices (storage sites, heat networks,
biomethane injection points, electric vehicles, solar PV installations, heat pumps and more), the energy networks of 2034 will use distributed approaches to optimise operation of all assets in real time and help to unlock potential economy-wide savings of £36 bn annually by 2050.
By resolving most energy imbalances and constraints locally, networks will unlock unused capacity, reduce the need for infrastructure build, enhance intelligent system visibility, and respond to real or potential faults in ways which are mathematically impossible through a centralised control system. Automation and digitalisation are key enablers, delivering simplicity of outputs from the background complexity. The system will optimise across vectors, fully exploiting assets that allow constraints on one vector to be sidestepped using
another.
Work must consider not only how decentralised control functions in normal operation but also under stressed system conditions. This will allow network customers to more actively participate and be rewarded for ensuring reliable, affordable and abundant low-carbon energy for every UK business and household.
Evidence indicates that a bottom-up balancing hierarchy is likely to be the most cost-effective route to a decarbonised energy system. Analysis by PwC and Innovate UK found that place-based delivery has the potential to achieve net zero goals at roughly a quarter of the cost of traditional top-down alternatives.
This transition follows proven benchmarks in the telecommunications sector, where edge computing architectures have reduced operational expenditure by at least 20% while enabling an uplift to near-instant service responses. Building on these insights, innovation should be framed as exploring the relative potential
contributions from decentralised and centralised approaches, and the roles of and interactions between decentralised and centralised coordination layers.
Potential Prize
- Rewards to customers for taking a greater role in operating the energy system
- Competing investment between infrastructure, self-generation and energy efficiency
- Tools for local area energy management
- Systemic ability to coordinate decentralised assets
- Trailblazing organisational roles and obligations in delivering local optimisation.
Challenge Ambition
- Proving the Opportunity Available from Decentralised Local Balancing: This is a fundamental change to current grid operation. There is a need to determine the most technologically-suitable and cost-effective approaches, and to develop new technologies, standards, business models and partnerships across the energy system to deploy them. In parallel, regulatory mechanisms should be developed to ensure that customers benefit from the cost avoidance they enable, allocating rewards to the actors creating the value
- Delivery Year: 2034 targets initial deployment and validation during the RIIO-4 period, paving the way for full national scale-up through RIIO-5. This horizon aligns with economy-wide projections for electrification, sector-coupling interactions and the ubiquity of connected devices, edge computing, and AI.
Necessary Partnerships
- Networks: Distribution Network Operators (DNOs) transitioning into active System Operators (DSOs), with Gas Distribution Networks (GDNs) for cross-vector balancing operations, and electricity and gas TOs and NESO for larger-scale coordination
- Energy Asset & Smart Appliance Manufacturers: Working with them to understand their ability to perform energy services and to define mechanisms and protocols to communicate to local controllers
- Industrial and Commercial Organisations: They will play a crucial part in the ability to drive new forms of balancing and system management
- Technology Companies: Building on solutions delivered for complex logistical and system-wide sectors.
- Others: Local authorities, Fintech market operators, and coordinators of energy communities.
Innovation Opportunities
- Management systems for orchestrating energy actions within and between system layers and across actors
- Integration of edge computing controllers to network assets, and connected devices
- New rewards for customers and actors that participate in reducing whole energy system costs
- AI and machine learning models to better predict demand, supply, faults etc. at granular levels
- User Experience paradigms and AI energy companions that help to automate consumer participation
- Coordination models between local, regional and national system actors
- Power hardware devices and configurations to enable smart and reconfigurable operations
- Smart, bidirectional and scalable gas compression solutions
- Automated low power and latency data and control system architectures.
Case Study: Residential Batteries for Zero Upfront Cost
Biogas in Denmark supplied over 40% of the country’s gas consumption in 2025, compared to just 1% in Great Britain, with Denmark aiming for 100% by 2030.
Biogas production in the country increased when 20-year-long subsidies were introduced in 2012, which were open for new applications until 2018. Over this time the market matured, and new production is now being encouraged through tenders.
At the time the subsidies were introduced, the vast majority of biogas was being used to produce electricity. Over time this has shifted, with ~80% now being upgraded to biomethane and injected into the grid – allowing it to contribute to the decarbonisation of sites and processes not currently suitable for electrification using existing gas infrastructure, and providing distributed sources of molecular energy to supply local demand.