EVs, hydrogen and nature-based innovations funded by Ofgem

Ofgem funding signals a practical shift in how energy networks plan for decarbonisation

In early February 2026, the UK energy regulator Ofgem confirmed a new round of funding that matters to far more than network operators. Working with Innovate UK, Ofgem awarded just over £36.7 million to 25 projects under its Strategic Innovation Fund. The aim is to test and prove ways to decarbonise Great Britain’s energy networks while keeping costs under control.

For small and medium sized businesses, this signals how the energy system around you is being redesigned. Decisions made inside these projects will shape future grid connections, gas alternatives, charging infrastructure, and planning rules. They also influence what larger customers and public sector buyers expect to see in supply chains.

The funded work focuses on electric vehicles, hydrogen and other low carbon gases, and nature based solutions. These are not abstract concepts. They affect how quickly you can add capacity to a site, whether heat and transport options widen, and how resilience is built into local infrastructure.

While SMEs will not receive this funding directly, the outcomes feed into regulation, network investment plans, and procurement criteria. In practice, this means the rules you operate under during the next decade are being tested now. Understanding the direction of travel helps businesses plan investment, manage risk, and respond to customer expectations.

Importantly, this funding round shows a move away from isolated pilots. Ofgem wants evidence that new approaches work across whole systems, not just single assets. That matters if you rely on stable energy supply, predictable connection costs, and clear compliance requirements.

How the Strategic Innovation Fund works and what this cycle covers

The Strategic Innovation Fund was created in 2021 as part of Ofgem’s price control process. Price controls set how much network companies can charge customers. In return, companies must meet service standards and invest wisely. The fund allows part of this spending to support innovation that would be hard to deliver through normal budgets.

Ofgem runs the fund with Innovate UK, the government’s innovation agency. Network companies such as electricity distribution operators and gas networks must work with external partners. These include technology firms, universities, and consultancies. The requirement aims to stop insular development and encourage open problem solving.

The fund supports projects at several stages. Discovery explores ideas and evidence. Alpha tests feasibility through small trials. Beta focuses on proving solutions at scale and preparing them for wider rollout. This staged approach reflects the commercial reality that not every idea works.

The announcements made on 5 February 2026 relate to Cycle Four of the fund. This cycle places strong emphasis on faster network build out, whole system planning, and decarbonising gas. Ofgem has been clear that electricity demand is rising and networks must keep pace without pushing costs onto consumers.

Alongside this, Cycle Five opened in late January 2026. That round concentrates on greener gases and on how electricity, gas, heat, and transport interact. According to Ofgem, future cycles will continue to focus on evidence that can be embedded into regulation, not just technical success.

You can read the regulator’s overview of the fund on the Ofgem Strategic Innovation Fund pages. Innovate UK also publishes delivery details and calls through its programme updates.

What was announced in February 2026 and who is involved

The February announcement confirmed £36.7 million of funding spread across 25 projects. These awards cover electricity transmission and distribution, gas networks, and cross cutting topics that sit between vectors. Ofgem clarified that the funding reflects multiple strands within the same cycle, rather than a single small competition.

Each project is led by a regulated network company. However, delivery depends on a consortium approach. Partners include energy suppliers, engineering firms, data specialists, and research bodies. This structure is intended to shorten the gap between trial and deployment.

Several projects focus on electric vehicle readiness. These look at how local networks can handle clustered charging demand without constant reinforcement. Others address flexibility. Flexibility allows consumers or assets to shift demand in response to network needs, reducing peak costs.

Hydrogen and greener gases also feature strongly. These projects explore how existing gas infrastructure can handle alternatives to natural gas. Work includes connection planning tools, blending studies, and operational changes. The aim is to understand limits early, before policy mandates force rapid change.

Nature based solutions form a smaller but notable group. These projects test how natural features can support network resilience. Examples include flood management near substations or biodiversity enhancements around assets. The focus is on practical guidance rather than abstract benefit claims.

Public statements from Ofgem and Innovate UK framed the awards as part of delivering a cleaner and more affordable energy system. While such language is expected, the regulatory intent is clear. Evidence from these projects will feed into future network allowances and obligations.

Nature based solutions move from policy intent to operational testing

Nature based solutions describe the use of natural processes to address infrastructure challenges. In the energy context, this can include wetlands to manage flood risk or planting schemes that stabilise land around assets. These approaches contrast with traditional concrete driven engineering.

UK policy has increasingly supported these solutions. The National Infrastructure Strategy states that nature based options should be considered unless they are not viable. However, for network operators, evidence has been limited. Regulators and engineers need data on performance, cost, and maintenance.

Projects funded under this round aim to close that gap. They look at how to assess sites, compare natural and conventional options, and record outcomes in a consistent way. This matters for planning consent and for public acceptance.

For businesses, the relevance is indirect but real. Infrastructure that integrates natural features can face fewer delays, especially in sensitive areas. It can also reduce long term maintenance costs. From a procurement perspective, buyers increasingly ask how environmental impacts are managed on site.

It is also worth noting that nature based projects align with biodiversity net gain rules. Developers now need to show ecological improvements. While energy networks are regulated utilities, their approach influences expectations across construction and maintenance contracts.

Defra has published guidance on natural flood management that underpins some of this thinking. The government’s natural flood management materials provide context for how evidence is being built and shared.

Why these trials matter to SMEs beyond the energy sector

At first glance, network innovation funding can seem remote from day to day business concerns. However, the outcomes shape the environment in which SMEs operate. Electricity capacity constraints already affect site expansion, fleet electrification, and data centre growth.

If projects succeed in reducing reinforcement needs, connection times could fall. That directly affects capital planning. Delays in upgrading local networks can stall investments for months or longer. Clearer rules and better tools reduce uncertainty.

Similarly, work on green gas and hydrogen informs future heating options. While policy on heating remains contested, networks need to plan. Businesses making long term property decisions will watch closely for signals on where gas alternatives are likely to be supported.

Tender requirements also reflect these developments. Public sector clients increasingly reference network readiness, flexibility participation, and environmental protection. SMEs in construction, logistics, and facilities management are often asked to demonstrate awareness of these issues.

There is also a cost angle. Network costs sit inside energy bills. Ofgem’s role is to protect consumers. By funding innovation now, the regulator aims to avoid higher costs later. That objective aligns with business needs, even if the pathway is technical.

Finally, supply chain standards tend to follow regulated sectors. If network operators adopt new planning tools or environmental approaches, contractors and suppliers adapt in response. Being caught off guard can mean lost bids or rushed compliance.

Key facts from the latest Strategic Innovation Fund awards

• Ofgem awarded £36.7 million to 25 projects under Cycle Four of the Strategic Innovation Fund.
• The funding decisions were announced on 5 February 2026.
• Projects cover electricity networks, gas alternatives, electric vehicles, and nature based solutions.
• All projects are led by regulated network companies working with external partners.
• Funding supports discovery, alpha, and beta stages to prove concepts before wider rollout.
• Evidence from the projects is expected to inform future regulation and investment allowances.
• Cycle Five of the fund opened in January 2026 with a focus on greener gases and whole system planning.

What we advise businesses to take from these developments

From our work with UK SMEs, we see two common reactions to energy system change. Some ignore it until a problem arises. Others overreact to headlines without understanding timelines. Neither helps commercial decision making.

This funding round does not mean immediate rule changes. However, it shows what regulators are paying for. When Ofgem invests in a topic, it usually appears in future consultations and guidance. Keeping an eye on those themes helps you prepare.

We suggest reviewing how your business depends on energy infrastructure. This includes connection capacity, fleet plans, and site resilience. If you plan growth, delays or constraints can be costly. Early discussion with network operators or advisers reduces surprises.

Businesses bidding into public or regulated supply chains should also pay attention. Tender questions increasingly refer to decarbonisation, flexibility, and environmental management. Being able to explain how you engage with these issues, even at a basic level, builds credibility.

For many SMEs, reporting requirements are expanding. Understanding how energy data might be requested, including sources and resilience, helps avoid rushed data collection later. Our SBS support for carbon reporting compliance often starts with improving energy information quality.

Finally, avoid assuming one solution fits all. Electric vehicles, hydrogen, or demand flexibility all have contexts where they work. The funded projects reflect that complexity. A clear view of your operational needs should guide decisions, not headlines.

Authoritative sources tracking the programme and wider context

Ofgem remains the primary source for official updates on funded projects and regulatory intent. Its announcements and consultations are published on the regulator’s website and provide insight into future obligations.

Innovate UK offers detailed summaries of individual projects, partners, and learning objectives. These are useful for understanding where trials sit on the path to deployment.

For broader context on energy policy and networks, the Department for Energy Security and Net Zero outlines national strategy, while analysis from outlets such as BBC News business coverage helps track public debate.

The Carbon Trust also publishes practical guidance on low carbon technologies and infrastructure that businesses can apply without regulatory jargon.

We also maintain practical explainers for SMEs, including our guide to energy procurement, which covers how network costs and constraints affect contracts.