Research and analysis

Evaluation of the Regulators’ Pioneer Fund (round 1) - interim case studies, November 2019 to January 2020 (web)

Published 15 March 2021

The high-level objectives of the Regulators’ Pioneer Fund

The Regulators’ Pioneer Fund (RPF) is an initiative set up by the Better Regulation Executive (BRE), part of the Department for Business, Energy and Industrial Strategy (BEIS), to help create a regulatory environment that gives innovative businesses the confidence to invest, innovate and deploy emerging technologies for the benefit of consumers and the wider economy. 

Key aims of the funding (which will invest up to £10 million over 2 years in 15 regulator-led projects across 12 sectors) are:

• enabling economic growth
• boosting value for consumers
• projecting a pro-innovation image internationally
• fostering a pro-innovation business culture

Aims of the RPF programme evaluation

• assess the extent to which RPF grants have enabled regulators to become more innovation-enabling
• identify the effects on business innovation in the sectors impacted by the projects
• enable BEIS to improve the RPF design and competition process for any future funding rounds
• contribute to BEIS work to create best practice guidance on innovation-friendly regulation and inform future policy decisions

The policy logic model for the RPF

The policy logic model is in four stages:

1. Outputs
2. Outcomes
3. Impacts
4. Goals

Outputs

RPF regulator(s):

• permits new business innovation (e.g. products, services, processes, business models), for example through new licensing or sandbox regime
• stimulates new business innovation (e.g. products, services, processes, business models), for example by setting challenging outcomes or releasing new information
• reduces time or cost of introducing business innovation (e.g. products, services, processes, business models), for example by providing better advice or simplifying processes
• improves business or investor confidence in how business innovation (e.g. products, services, processes, business models) will be regulated, for example through comms
• improves consumer confidence in business innovation (e.g. products, services, processes, business models), for example through improving protections or enhancing comms
• influences other UK regulators to take a pro-innovation regulatory approach, for example through forming partnerships or disseminating findings
• influences other administrations to align with its regulatory approach.

Outcomes

• Increased generation of ideas (e.g. products, services, processes, business models) by businesses operating in the UK.
• Increased investment in innovation in the UK.
• Increased competition (i.e. increased entry and exit to UK markets).
• Increased consumption of innovation (e.g. through greater consumer confidence) – i.e. increased UK market size.
• Lower regulatory barriers to trade (e.g. through global regulatory influence), with increased overseas market size.

Impacts

Increased quality/quantity of business innovation (e.g. products, services, processes, business models) that benefits the economy, society and the environment.

Goals (outside of scope of the evaluation)

• Faster, more sustained growth in productivity and wages.
• Increased resilience to economic shocks.
• Faster delivery of wider benefits of economic development (e.g. wider consumer choice, advances in medicine, transport, etc.).
• Better outcomes for consumers, workers, citizens and the environment.

Case studies: selection and methodology

Two additional case studies were selected to show early lessons from the programme.

Qualitative interviews were conducted with regulators and their external stakeholders to explore their perspectives on progress, impact and lessons learnt. These were:

• Oil & Gas Authority
  • the project team involved in the bid and delivery
  • a strategic lead on the project
  • two external stakeholders involved in the project in different capacities
• Financial Conduct Authority (FCA)
  • the project team involved in the bid and delivery
  • a strategic lead on the project
  • two external stakeholders involved in the project in different capacities

The case studies with Oil & Gas Authority (OGA) and Financial Conduct Authority (FCA) followed the three interim ones conducted with the Solicitors Regulation Authority (SRA), Medicines and Healthcare products Regulatory Agency (MHRA) and Civil Aviation Authority (CAA) in the same format between July and October 2019.

For each case study, early lessons have been captured from the following phases and themes:

• project set up
• internal engagement
• external engagement
• enabling innovation through regulation
• value of the RPF

Interim case studies methodology

Participants’ selection and data collection

Regulators interviewed for the case studies were selected by BEIS and Kantar based on their initial progress to reflect emerging lessons from their projects.

For each project, the research team conducted:

1x 60 mins semi structured qualitative interview with key members of the project team (e.g. project and programme manager or bid manager, depending on team composition);

1x 60 mins semi structured qualitative interview with a strategic lead overseeing the project;

2x 30 mins interviews stakeholders (e.g. delivery partners, businesses or other organisations operating in the sectors, other regulators) identified by the regulators and selected by BEIS.

Fieldwork was conducted between November and December 2019 (12 months into regulators’ projects). These interim case studies follow two rounds of a quarterly information management questionnaire delivered by Kantar. This questionnaire was used to understand how far projects were achieving the outputs and outcomes in the RPF logic model (see slide 3). Topics explored are included below.

Project team / strategic lead (the same topic guide was used flexibly to explore different perspectives)

Topics explored:

• regulators’ understanding of the RPF and motivations to apply for funding
• vision for the project and connection with organisational mission
• experiences of main stages of work (e.g. set up, internal and external engagement, delivery of project specific activities)
• expected and unexpected challenges encountered
• lessons they learnt about enabling innovation in their sector, engaging with businesses, regulators and other stakeholders
• any emerging outcomes of their project on innovation in their sector
• perceptions of RPF support, any impact the Fund had on their ability to enable innovation in their sector, and ways the RPF could be improved for the future

Stakeholders

Topics explored:

• stakeholders’ exposure to and perspective on regulators’ work
• nature of their involvement and views on their engagement with regulators
• ways in which regulators can more effectively engage with stakeholders to enable innovation in their sectors
• any perceived initial outcomes and benefits deriving from regulators’ projects
• views on future outcomes and how regulatory activity could be improved to encourage innovation

Analysis of the information collected through the case studies interviews

• material collected in interviews (e.g. audio files, notes) were organised through a thematic framework developed in Excel, informed by evaluation objectives
• individual and joint brainstorming sessions were carried out by researchers in the Kantar team to review and consolidate insight, and draw key overarching themes

Cross cutting lessons

Interim lessons from the case studies (January 2020)

Both regulators interviewed described their experience of the RPF programme as having been very positive and valuable. They felt that the RPF had provided them with critical resources and headspace to better understand the market they operate in, explore the application of new technologies to existing challenges, and conduct innovative work.

Furthermore, the Fund played a key role in enabling / advancing collaboration with and exposure to their sector and other regulators to tackle shared issues, which both OGA and FCA found highly beneficial. 

Overall, both regulators felt their projects had allowed them to achieve positive results, laying the ground for them to continue their innovative work in the future - with the potential of enabling economic growth and better consumer protection in their sector.

OGA believed a clear project plan, defined roles and strong project management have supported this. Through their work they built new linkages across industry and other regulators to lay the basis for delivering against future energy integration challenges.

Similarly, FCA felt that direct involvement and ongoing communication with sector stakeholders and innovators, along with the flexibility to adopt different working styles enabled them to get closer to the implementation of digital regulatory reporting.

Regulators’ activities appeared to be aligned with RPF’s key aims of positioning the UK at the forefront of innovation and fostering a pro-innovation culture, as collaboration with industry stakeholders and other regulators (both in the UK and internationally) were key components of their project. Regulators were also active in promoting their work externally, showcasing their commitment to innovation and sharing lessons from their projects.

OGA found that an effective communication / engagement plan has been vital to the success of their project. They explained that engaging with industry (particularly innovators) has raised their profile as a “pro-innovation” body and supported them in being able to have better interactions with industry on innovation.

FCA engaged with the industry throughout their project and started discussions with some other UK regulators on how their knowledge could be applied to cross-sector challenges. Furthermore they regularly shared lessons from their work with the Global Financial Innovation Network, stimulating significant interest abroad and positioning the regulator as leading in this space.

Regulators also mentioned applying learnings from their innovation efforts internally, engaging and securing buy-in from their organisation and informing a better organisational understanding of, or changes in, internal practices / work streams.

Case study 2, OGA, realising cross-sector integration transition

Project at a glance

Role as the regulator

The Oil and Gas Authority (OGA) regulates, influences and promotes the UK oil and gas sector in order to deliver on the UK’s statutory requirement to maximise economic recovery from the UK Continental Shelf (UKCS).

They control the issuance of licences to organisations that wish to explore for and extract hydrocarbons, and approve operational and development plans. 

They are also required to support sector efforts to achieve UK environmental targets, particularly through the transition to a zero carbon energy system.

Project vision

The Energy Integration project brings together four regulators – OGA, Ofgem, The Crown Estate and the Department for Business, Energy and Industrial Strategy (BEIS) – to explore future opportunities to integrate low or zero carbon energy technologies into existing offshore oil and gas infrastructure.

The project explores the technical and economic feasibility of five offshore technology scenarios that include integrating electricity, wind power, carbon capture and storage (CCS) and hydrogen. The project explores the regulatory gaps, overlaps and barriers to determine how best to support adoption of energy integration projects in future and identifies several practical ‘quick wins.’

Motivations for RPF bid

The project addresses the problem that, until recently, energy production activities operated in geographic and regulatory isolation from each other. However, with the UK becoming a world leader in offshore wind and the pressing need to decarbonise the UK energy system, there is a growing need for the industries and their respective regulators to move from their silos to a more collaborative way of working, particularly concerning projects that involve cross-sector innovation and integration.

The RPF presented an opportunity to explore this problem through a funded collaboration with other regulators that would not have been possible using core funding and resource.

Main activities involved

The main activities involved were:

• desk-based research
• technical and economic consultancy
• collaborative input and assessment of concepts
• regular steering meetings
• industry engagement activities:
  • workshops
  • presentations
  • industry feedback on ideas
  • review of existing industry projects

Focus RPF programme outputs

1. New business innovation through new licencing or sandbox regimes

2. Innovation by changing outcomes/releasing new information

3. Reduced time or cost of introducing business innovation

4. Improved business/investor confidence in business innovation regulation

5. Other UK regulators influenced to take up pro-innovation regulatory approach

Project set up

Understanding of the problem and RPF purpose

The OGA understood their problem to be a growing need for collaboration between previously siloed industries and regulators to respond to new opportunities to maximise the economic and low- carbon potential for offshore energy in the UKCS.

The OGA were also keen to stress that they viewed the problem as an opportunity for their sector – that removing barriers to energy integration projects would yield benefits for businesses, regulators and the general public as part of the future energy transition.

The OGA understood the RPF as follows:

“To anticipate future business need and to provide a government response, both in terms of providing a robust and efficient regulatory approach, but also in terms of understanding […] what type of policy support [industry needs] to facilitate change and transitions.” (OGA)

“It also gave funding for regulators to think out of the box and do work that requires time and effort and resources and everything else that otherwise would not be possible to deliver.” (OGA)

Challenges in setting up the project

The key challenge for the OGA in setting up the project was a reduced time to start the project compared to the other RPF projects, as they were not initially awarded the funding. The OGA were selected for funding after another funded project was cancelled. They were notified that their project was to be funded in December 2018 and required to start working immediately.

The OGA reported having to work at an accelerated pace to start up the project, particularly as they were required to spend a significant proportion of the project budget before the end of the financial year (beginning of April 2019). They were able to negotiate with the funder to reallocate the funding from a half-half split to a one-third, two-thirds split. This was still a challenge for them to spend, particularly given the requirement to award external contracts for work through government tender rules that take time.

The OGA said they were able to overcome these challenges to their satisfaction and were pleased with the flexibility offered by the Better Regulation Executive (BRE): “”With a little bit of creativity and flexibility on BRE’s part and our part, I think we managed.” (OGA)

Lessons learnt on project set up and planning

The OGA felt that a large part of their perceived success in overcoming their project set- up challenges was due to a very good relationship with Innovate UK and the BRE. They felt that any question they had during this time was promptly addressed.

Another contributing factor was having a clear project plan and project team structure in place since the beginning, with clear roles and individual responsibilities for workstreams.

The OGA felt that the nature of their project (i.e. exploring low- carbon innovation and collaboration opportunities across the energy sectors) meant that there was a clear value to internal stakeholders, regulator partners and industry – “it was not a hard sell.” (OGA) – which meant that key individuals were easy to engage and happy to help set up the project. 

The project team also feel that the phasing of the project (starting with a technical feasibility study before moving onto economic and regulatory assessment) supported effective and rapid project set up.

The OGA felt happy with the time they had to prepare the bid and overall found project set up easy, despite the time pressure. They wouldn’t want to have done anything differently and wouldn’t have wanted Innovate UK or BRE to have done anything differently. 

Internal engagement

Internally, OGA engaged:

• Management board
• Wider teams

Nature of internal engagement and response from the organisation

The OGA explained they found internal engagement an easy task on this project, with wide support and interest in the outputs and outcomes being generated. They noted that the project has touched on an important topic at a critical stage for the industry as both the OGA and the oil and gas sector are trying to understand their role in the energy transition from fossil fuels to zero carbon. This is a major strategic question and this has meant that there is broad internal support for and interest in the project, particularly on the project’s ‘quick wins’.

Senior OGA staff sit on the project steering board as a formal engagement activity, with information flows to other parts of the organisation spreading out from this. Relevant colleagues from across the OGA have been invited to project events such as industry and regulatory workshops to support the project and keep the wider OGA involved. Seminars and presentations have been delivered by the project team to other colleagues across the OGA.

The OGA believed that the project may have supported greater engagement with industry, both in building new links and in providing better information for the wider OGA to have better conversations with industry around innovation.

The OGA felt that initially the aims and objectives of the RPF were difficult to communicate internally. This could have been improved with some clearer communication/messaging from the funders.

External engagement

Externally, OGA engaged:

• Project partners: The Crown Estate, BEIS, Ofgem
• 12 other regulators (at UK and Scotland levels)
• Local authorities (where projects are being planned)
• 10-15 oil and gas companies
• 3-4 renewable energy companies
• Supply chain and infrastructure companies
• Academia

External stakeholder engagement

External engagement was a major part of this project – from the project team involving a cross-sector group of regulators to a wide programme of industry and regulatory engagement activities to gain input and feedback on the project’s proposed energy integration concepts.

At a project team level, the OGA feel that engagement between the project partners has been very effective, with frank, open interactions centred around monthly meetings. This feeling was echoed by both BEIS and the Crown Estate who both feel that the project has exceeded their expectations in terms of the experience of project delivery and the emerging outcomes. The Crown Estate are keen to explore future working opportunities with the OGA.

Beyond the project team, the project has been involved in workshops and seminars with external stakeholders to gain their input on the technical and regulatory details of the energy integration scenarios proposed by the project. The OGA have also carried out a mapping exercise to identify existing energy integration projects (or projects that have the potential to involve energy integration) that has supported their engagement in identifying new stakeholders.

Lessons learnt on stakeholder engagement

The only challenge noted by the OGA was around difficulty in making links with multiple individuals in larger organisations (e.g. BEIS) where they have a need to engage beyond their existing contacts. There was a particular challenge gathering cross-sector stakeholder contact details at the beginning of the project. However they feel that they successfully overcame this challenge without delay to the project.

The OGA found that involving industry at the beginning of the project in a proactive way supported a ‘snowball’ effect, attracting more industry attention to the project ahead of its later stages, which has been beneficial to their feedback and dissemination activities.

An effective project communication plan was seen as a positive lesson, with clear, up-to-date messaging provided to wider OGA staff to use in their wider interactions with industry. This has meant that project information is spread more widely and has attracted more interest in the project and enhanced impact.

BEIS noted that while they were happy with their own involvement on the project, that they may prefer more interaction with the OGA: “Maybe a little bit more opportunity to talk through, a bit more dialogue, rather than a sort of show-and-tell might be helpful.” (BEIS)

Enabling innovation

Initial positive outcomes and achievements

The main outcome of the project so far is an enhanced understanding of the opportunities for energy integration across offshore energy sectors, including potential impacts, barriers and practical steps to facilitate progress in this area. This has been evidenced by the creation of new knowledge, sharing of practical guidance and building cross-sector relationships that will be necessary for the future of energy integration (connected with focus outputs 2 and 6).

The project has led to a richer organisational understanding of the scale and scope of technical, economic and regulatory issues and opportunities facing energy integration projects among the project team members and their wider organisations. This has supported them to be able to have better interactions with industry stakeholders.

A particularly important output of the project has been their ‘quick wins’ document that identifies twelve practical changes that can be made over the short term (e.g. regulatory amendments, small-scale projects, etc.) to begin the process of facilitating energy integration plans in the UK energy sector connected with focus outputs 1, 2, 3 and 4). “It is a great piece of work and it is the right direction to look at: [To look] at quick wins, look at realistic measures that can be taken fairly quickly to allow industry to lead.” (The Crown Estate). This document also identifies a number of opportunities for future collaboration between project partners and industry stakeholders.

The OGA also feel that their work on this project has fed into their work on CCS and other areas. They have been surprised how much the project is already supporting their interactions in other areas that are looking at innovation in the energy transition future. The OGA also feel that the project has promoted a new level of thinking around the OGA’s role in meeting the UK’s net zero target. It has helped them understand the future direction of the oil and gas sector offshore and supported them to become leaders in climate change in the sector.

“The depth of understanding gained is in a different universe from where it was.” 

(OGA)

“I’ve been very impressed with the outcomes and so I’ve invited the OGA in to talk about it in the department.”

(BEIS)

“By talking about these innovative concepts, you get people interested, you get people talking to you as the regulator and you get people understanding what you as the regulator might be able to do for them beyond just the traditional role of the regulator in terms of giving licences.” 

(OGA)

Beneficiaries of the project

The OGA is benefitting through improved understanding of energy integration issues, supporting their wider activities.

Project partners are benefiting from a greater understanding that is supporting their work on innovation and industry engagement.

The general public could benefit through potentially cheaper, cleaner energy supplies delivered through energy integration.

Industry may benefit from better interactions with regulators and a smoother path to energy integration projects. This includes a clearer future role for the oil and gas sector.

Lessons learnt from effort to enable innovation in the energy sector

The project has highlighted that all of the energy integration innovations could be delivered today but that the process could be more efficient. There would be pressure on industry to develop concepts that have clear business and environmental value but that may not be able, with current regulation structures, to be delivered efficiently. This has highlighted the importance of working with multiple regulators to address potential barriers in advance.

The OGA have also found that carrying out a project in the innovation space has supported them to increase awareness of innovation in their sector and bridge the gap with innovators: “because of our quite extensive communications, we are pushing the message out that we are a regulator that are interested and supportive of these kinds of projects, which means we hear about more of these types of projects.” (OGA)

The OGA have also learned that understanding gaps in regulation, engaging with industry and investigating industry projects, helps them to better adapt to support future innovation and have positive, constructive interactions with their stakeholders: “By listening to the industry and these potential projects, finding out what the problems are and the potential problems [i.e. existing problems and potential future problems], then we can be a much more intelligent interlocutor with other projects.” (OGA)

All project partners have recognised the need for increased regulatory collaboration to support innovation in their sector: “If we don’t talk to each other we might create accidental barriers.” (OGA) “Infrastructure doesn’t exist in silos, it’s all connected; but the people who regulate it, they’re not always as connected as they should be.” (BEIS)

BEIS also note that learning from different sectors can be vital in driving innovation (e.g. heart surgeons learning from racing pit-stop teams) and that the energy sector will similarly benefit from engaging with a wider range of stakeholders.

Plans to disseminate learnings

The OGA explained they have already conducted a number of dissemination activities including:

• three industry workshops
• presentations at a number of different industry conferences and events
• convening a cross-industry conference bringing together over 100 companies with offshore energy interests.

They intended to carry out a number of dissemination (and implementation) activities at the end of the project and beyond including publications and industry engagement. They note that they will ideally need to find additional funding for this.

The Crown Estate are organising a meeting for the OGA to present the results of the project to other Crown Estate colleagues. They are also exploring other ways to disseminate learning internally and externally

Value of the RPF

The RPF supported the OGA effort to enable innovation in their sector providing value in a range of ways:

• supporting development of new knowledge around cross-sector innovation in energy integration
• supporting new links between regulators to address cross-sector challenges and remove barriers
• enhancing links between industry and regulators by providing a platform to discuss innovation
• identifying a number of practical quick wins that can begin the process of supporting innovation

“To be totally honest, these four groups have seldom sat in the same room, and now we’ve been sitting in the same room once a month […] It’s more than all the previous meetings of these groups together for the past twenty years.” (OGA)

Thoughts on how the RPF could be improved and better support regulators if the programme was repeated

Overall, the OGA and its partners have been very pleased with the funding provided and how it has been administered. They have found the administrative and reporting requirements to be useful (“we need to have financial discipline” (OGA)) and have found that the quarterly meetings with Innovate UK have helped keep them on track. They felt that the relationship was “light touch but effective” (OGA).

One area that they felt could have been improved is the flexibility between accounting periods, as this may have forced projects in circumstances such as theirs to make unwanted or unrealistic changes. They also found that the split of funding between 2018-19 and 2019-20 didn’t match the respective time allocations noting that “if you have a certain period and if you say ‘spend this in year one and this in year two’, this should also [match] the actual physical time that you have.” (OGA)  

Another area identified for potential improvement was to provide RPF applicants with clearer communication materials to allow them to brief internal stakeholders on the fund’s scope. This would make it easier to pitch potential projects to senior staff to authorise bids. 

Another area that they said that could have been improved was that BRE had suggested that they could support OGA by handling liaison with the BEIS press office. This didn’t happen, which required the OGA to go directly to the press office. For OGA this felt like an acceptable result as they already had good working links with the BEIS press office, but they noted that other projects may not have links like this.