The Network Innovation Allowance (NIA) and the Network Innovation Competition (NIC) are in line for an overhaul as Ofgem confirms an in-depth review of the funding mechanisms over the summer.

In an open letter to industry the regulator said the review will look at whether “substantive changes” are needed. It will publish its decision by the end of the year, so the changes can be effective for the 2017 innovation competition.

The letter follows recently published responses to Ofgem’s consultation, launched in December looking at the future of the NIC and NIA.

Several respondents said the NIC is stifling innovation by not making provision for experimental projects to fail. There were also calls for more flexible rules on intellectual property rights.

A further consultation will be held in the autumn to examine any proposals which arise from the review, as well as the amount of money which will be available through the electricity NIC.

The review will also examine the benefits derived from the Low Carbon Networks Fund (LCNF), which the NIA and NIC replaced.

Consultancy firm Pöyry has been appointed as an independent evaluator to carry out the review. Its findings will form the basis of any proposals to amend the governance arrangements.