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Ofgem unveils updated innovation sandbox, including six 'evolutions'

Image: Ofgem.

Image: Ofgem.

Ofgem has refreshed its innovation sandbox, taking on industry feedback to evolve the service.

The sandbox – which was established in 2017 – allows for innovation projects that would otherwise be prohibited by current regulation. Ofgem uses it to experiment with ways of mitigating barriers to innovation.

Its Decarbonisation Action Plan, released earlier this year, outlines its commitment to supporting innovation and experimentation “particularly in the retail market, to create low carbon products and services that will directly benefit consumers”.

The sandbox has now been refreshed, with six "evolutions" outlined. One of the biggest change to the sandbox is the removal of application windows. Innovators will now be able to access the service “when they need it”, Ofgem said, although it isn’t ruling out the use of such windows in the future, for instance for themed sandbox activities.

Ofgem is also looking at expanding the number of rules in the supply licence it can provide relief from, with the sandbox now also including the Balancing and Settlement Codes (BSC) and the Distribution Connection and Use of System Agreement (DCUSA).

Two learnings – that innovators want to launch businesses not run trials and start-ups want to signal low regulatory risk to investors – have resulted in the evolution of the sandbox confirming “whether non-traditional types of activity are permissible”. There will also be derogations available to support market entry.

The guidance of the sandbox scope will also be explicit, as well as there being clear entry criteria for different sandbox services after Ofgem found innovators want clarity around support available.

Lastly, innovators can now access feedback if not sandbox-ready, as well as Ofgem publishing general guidance on common-use cases and issues arising from the feedback service.

The sandbox prospectus setting out the detail of what’s on offer and what’s out of scope, as well as who can access it, how to apply, entry criteria and other key information will go live shortly, Ofgem said.

Projects to have operated in Ofgem’s sandbox include Centrica’s Local Energy Market in Cornwall and projects from BP and Verv.

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