IN Brief:
- A reward-only incentive would recognise innovative transmission delivery approaches.
- Independent panel assessment would determine eligibility and potential reward levels.
- The consultation remains open until 21 August 2026.
Ofgem has proposed guidance for a reward-only incentive intended to accelerate electricity transmission investment during the RIIO-ET3 price-control period.
The Innovative Delivery output incentive would allow licensed transmission owners to submit qualifying delivery approaches for assessment by an independent panel. Rewards would be available where evidence demonstrates innovation, faster delivery, and measurable value for consumers.
Proposed guidance covers project eligibility, the evidence required from applicants, appointment of the assessment panel, evaluation criteria, and the methodology used to calculate any reward.
RIIO-ET3 runs from 2026 to 2031 and governs investment and performance for Britain’s onshore electricity transmission companies. The period coincides with a large programme of substations, overhead lines, underground cables, offshore connections, and wider system upgrades.
Rather than operating as an automatic cost allowance, the incentive would depend on demonstrated output. Transmission owners would need to show that the approach went beyond established delivery practice and produced a quantifiable improvement.
Ofgem is seeking responses from transmission operators, consumer organisations, innovation bodies, suppliers, and other participants involved in planning and delivering strategic network infrastructure.
Acceleration must be supported by a credible baseline
Transmission projects are under pressure from increasing renewable generation, large industrial and data-centre connections, new interconnectors, and electrification across transport and heat. Long planning, consenting, procurement, manufacturing, and construction programmes can leave generation and demand waiting for network capacity.
Innovation can shorten parts of that sequence through standardised substation designs, modular equipment, alternative construction methods, digital surveys, improved outage planning, earlier supplier involvement, automated design processes, and coordinated procurement.
Faster delivery alone does not demonstrate innovation or consumer value. A scheme completed earlier at substantially higher cost may shift expenditure rather than improve efficiency, so the assessment panel will need a credible counterfactual showing how the project would otherwise have proceeded.
Evidence must also separate the effect of the innovation from external factors because planning approval, land access, weather, supply availability, and changes in project scope can all alter a programme. Applicants will need data linking the proposed approach directly to the claimed improvement.
The reward methodology will influence behaviour. An incentive set too low may not justify the engineering and commercial risk associated with changing established methods, while an excessive reward could pay network companies for practices they would have adopted without regulatory intervention.
Parallel RIIO-ET3 transmission reporting proposals will provide part of the cost, output, and performance record used to monitor investment. Consistent reporting will be required if delivery claims are to be assessed across different companies and project types.
Supply-chain constraints form a substantial part of the delivery challenge. Transformers, high-voltage switchgear, cables, conductors, converter equipment, and specialist construction services can carry long lead times, while earlier commitment can secure manufacturing capacity at the cost of greater exposure to cancellation or specification changes.
Standardisation offers another route to shorter programmes because proven equipment configurations and design modules can reduce engineering effort, approval time, and procurement complexity. Its limits become apparent where site conditions, fault levels, environmental requirements, or network configuration require bespoke solutions.
Digital methods can improve design coordination and reduce rework, provided the underlying asset data and technical standards are reliable. A digital model that does not match site conditions can accelerate an incorrect design, leaving verification necessary before construction and energisation.
Outage planning remains equally important because work on existing transmission systems often requires controlled outages, temporary arrangements, and coordination with generation and system operation. Faster construction cannot compromise network security, protection, or safe access to live assets.
An independent panel can bring engineering and commercial scrutiny to the assessment, provided its expertise covers the range of proposed innovations. Clear conflict-of-interest arrangements will be required where panel members have previously worked across the same transmission supply chain.
Learning that can be transferred to later projects will carry wider value than a one-off solution. An approach used successfully on one substation, circuit, or connection can improve subsequent programmes, whereas proprietary methods may offer fewer opportunities for sector-wide adoption.
Quality, safety, environmental compliance, and asset life remain fundamental because transmission infrastructure is expected to operate for decades. Defects introduced during compressed delivery may not become visible until long after the original incentive payment has been made.
Responses can be submitted through Ofgem’s RIIO-ET3 Innovative Delivery consultation until 5pm on 21 August 2026.
The final guidance will need demanding evidence, a realistic baseline, and a clear relationship between earlier completion and enduring network value. Without those elements, the mechanism risks rewarding normal programme management rather than genuine improvements in transmission delivery.
