Ofgem R3D: Unlocking system flexibility to electrify heat

Key Features

Organisations can apply for a share of up to £30 million exclusive of VAT, for collaborative Discovery Phase Projects that meet the Round 3 challenges. This funding is from the Ofgem Strategic Innovation Fund.

Programme:     Ofgem

Award:     Share of up to £30 million

Opens: 4th Sep 2023

Closes: 22nd Nov 2023

! This scheme is now closed


This competition is delivered in partnership with the Office of Gas and Electricity Markets (Ofgem). It is funded by the Ofgem Strategic Innovation Fund, which aims to deliver net zero at lowest cost to consumers and support innovative businesses to grow and scale.

Discovery is the first phase of a three phase competition:

  1. Discovery
  2. Alpha
  3. Beta

There are four challenge competitions in Alpha Phase:

  • Ofgem R3D: Whole system planning for faster asset rollout
  • Ofgem R3D: Novel approaches to deliver a secure power system
  • Ofgem R3D: Unlocking system flexibility to electrify heat (this competition)
  • Ofgem R3D: Enabling power-to-gas to provide system optimisation

The Round 3 challenges aim to achieve the Strategic Innovation Fund’s two main visions, to deliver:

  • net zero at the lowest cost to the consumer
  • to place the UK as the ‘Silicon Valley’ of energy system innovation

Your Project must address one of the challenges for the initial Round 3 Discovery Phase. You must plan for the development of your Project to meet a Round 3 Challenge through to live testing in the Alpha and large-scale demonstration in the Beta phase.

It is the responsibility of the lead applicant to ensure that they are entering the appropriate challenge competition and theme for their Project.

Successful applicants from the Discovery Phase will be invited to apply for the Alpha Phase.

In applying to this Discovery Phase competition, you are entering into a competitive process.

Any adoption and implementation of a solution from this competition would be subject to a separate, possibly competitive, procurement exercise.


The Strategic Innovation Fund (SIF) aims to deliver net zero at lowest cost to consumers and support innovative businesses to grow and scale.

Each Round 3 Innovation challenge as listed in the Strategic Innovation Fund – Round Three Innovation Challenge document has different aims.

The aims of Innovation Challenge 3: Unlocking energy system flexibility to accelerate electrification of heat are to:

  • increase participation of thermal flexibility in DSO and ESO markets
  • reduce time to integrate heat decarbonisation in network planning
  • reduce heat led peak demand through flexibility
  • increase use of renewable power for electrified heat through flexibility
  • deliver evidence to support policy and charging mechanisms to enable more equitable sharing of reinforcement costs

Your Project must meet the eligibility criteria of the Strategic Innovation Fund (SIF), as stipulated in the SIF Governance Document.

Applicants must demonstrate that the Projects deliver a net benefit to consumers through:

  • financial cost reductions (operating the network, energy bills, users of network services)
  • emission reduction
  • access to revenues for network users
  • introducing new products, process and services to the UK energy market

Your proposal must focus on network innovation that can benefit GB energy network infrastructure, consumers, operation, and utilisation.

You must address:

  • users and their context
  • constraints affecting the problem or wider context
  • opportunities for improvement
  • environmental impacts

At this stage a Project Direction will be issued for the Discovery Phase only. Successful applicants will be invited to apply for Alpha Phase.

The Discovery Phase of a Project will define the problem and the value in solving it. It will also facilitate a common understanding of consumers’ and network users’ needs from the innovation and identifying constraints.

The Alpha Phase will focus on preparing and testing solutions that are identified during the Discovery Phase, ahead of any large-scale demonstration of the Project.

Specific Themes

Innovation Challenge focus themes

You must select the primary Strategic Innovation Fund (SIF) Innovation Challenge focus theme that your project is targeting.

Innovation Challenge 3: Unlocking energy system flexibility to accelerate electrification of heat:

  • Theme 1: improving local heat supply and demand analysis and coordination to support energy network planning
  • Theme 2: improving the value and capture of system benefits from heat flexibility
  • Theme 3: effectively managing peak demand and stability through increased flexibility including over longer periods (multi-day and seasonal)
  • Theme 4: equitable approaches to reinforcements costs driven by heat electrification including via improving visibility of constraints


Your Project must:

  • have total eligible Strategic Innovation Fund (SIF) requested funding of no more than £150,000, exclusive of VAT
  • provide a minimum of 10% of total Project costs as a compulsory contribution from alternative funds
  • start by 1 March 2024
  • end by 31 May 2024
  • last up to 3 months

Due to current Government trade restrictions, any commercial, business development or supply chain activity with any Russian or Belarusian entity as partner or subcontractor must be scrutinised in detail by Ofgem ahead of their funding decisions. This includes any goods or services originating from a Russian or Belarusian source.

To lead a Discovery Phase Project for this challenge, you must be an Ofgem licensed electricity or gas distribution network, transmission operator, or Electricity System Operator (ESO).

Project partners

Each Discovery Phase Round 3 Challenge has specific project partner requirements in addition to the lead network licensee. The eligibility requirements for the Discovery Phase of this challenge competition are different for each theme:

Theme 1: You must partner with all organisation types in this list:

  • a relevant local government entity
  • an organisation with their primary expertise focused on data modelling, machine learning, or advanced statistical approaches
  • a large business consumer of energy or community energy groups, that can provide local energy generation or storage facilities

Theme 2: There are no specific partner requirements but all partners must be relevant to the project

Theme 3: You must partner with:

  • an organisation with a capability in developing and operating thermal storage


  • community energy groups, that can provide local energy generation or storage facilities

Theme 4: You must partner with a consumer representative group

You are encouraged to have other Project Partners in addition to the mandatory requirements listed above. Your Project Partners can include a variety of third-party innovators such as:

  • start-ups
  • micro, small or medium-sized enterprise (SMEs)
  • suppliers
  • academics
  • independent researchers
  • disruptors
  • other licenced energy network companies

This list is not intended to be exhaustive.

If successful, the Project Direction will be awarded only to the lead network (Funding Party). Project Partners must be responsible for at least one deliverable in the Discovery Phase.

Ofgem are looking for proposals that involve all the necessary stakeholders relevant to the proposed innovation. We particularly encourage Projects working with suitable SME technology developers and growth companies.

Ofgem will not award funding if you have failed to comply with the eligibility criteria set out in Chapter 2 of the SIF Governance document.

In line with paragraph 5.8 in the SIF Governance Document, Projects submitted under Round 1 & 2 of the SIF are eligible to request permission to reapply into SIF Round 3 Innovation Challenges.

This is on the condition that your Project:

  • meets the Round 3 Innovation Challenge scope, eligibility, and partner requirements
  • acknowledges the focus of the Innovation Challenges’ changes with each round of the SIF
  • meets with the requirement set out in the Innovation Challenge it is applying to, rather than a previous round’s Innovation Challenge


Ofgem will not fund Projects that do not meet the requirements of the SIF Governance Document.

Funding Costs

A total SIF funding of up to £30 million exclusive of VAT is allocated to the Discovery Phase across the 4 challenges.

Matched contributions that exceed the 10% mandatory minimum contribution will be assessed as delivering greater value for money. Projects must also consider the suitability of sourcing additional private or public funding where it may be unsuitable for consumer bill payers to finance assets or other equipment and resources.

If you are unsure whether your Project or parts of your Project are eligible for funding in this competition, you must contact us by email to SIF_Ofgem@iuk.ukri.org at least 5 working days before the competition closes. We will decide whether to approve your request.

The total funding available for the competition can change. The funders have the right to:

  • adjust the provisional funding allocations between the phases
  • apply a ‘portfolio’ approach based on technology, geography, innovation, markets, and participants

Ofgem reserve the right to make the final decision as to which Projects are funded.

At the end of Discovery Phase all milestones detailed in the Project Direction must be fulfilled. The successful organisation will be invited to submit an application into the Alpha phase and a further assessment will take place.

Interested in applying for this competition?

Book an appointment to speak to one of our advisors to discuss your eligibility to apply for this Grant Funding opportunity.