Referral of Heat Pump Investment Accelerator Competition by the Department for Energy Security and Net Zero

The Subsidy Advice Unit (SAU) has accepted a request from the Department for Energy Security and Net Zero (DESNZ) for a report concerning the proposed Heat Pump Investment Accelerator Competition (HPIAC) scheme.

From:
Competition and Markets Authority
Published
31 July 2023
Case type:
SAU referral
Case state:
Closed
Market sector:
Electronics
Opened:
3 May 2023
Closed:
15 June 2023
SAU Referral type Mandatory Referral
SAU Referral State Closed
Sector Manufacturing
SAU Referral opened 3 May 2023

Administrative timetable

Date Action
15 June 2023 SAU’s report to be published
17 May 2023 Deadline for receipt of any third party submissions (submissions after 5pm on this date cannot be taken into account)
3 May 2023 Beginning of reporting period

Final report

15 June 2023: The SAU has published its report providing advice to DESNZ concerning the HPIAC scheme. The report sets out our evaluation of DESNZ’s Assessment of Compliance of its proposed scheme with the requirements set out in the Subsidy Control Act 2022.

Request from DESNZ

3 May 2023: The SAU has accepted a request for a report from DESNZ concerning the HPIAC scheme. This request relates to a Subsidy Scheme of Particular Interest.

The SAU will prepare a report, which will provide an evaluation of DESNZ’s assessment of whether the scheme complies with the subsidy control requirements (Assessment of Compliance). The SAU will complete its report within 30 working days.

Information about HPIAC provided by DESNZ

The Heat Pump Investment Accelerator Competition (HPIAC) will help to diversify the UK supply chain and increase the UK’s domestic manufacturing capacity to enable the target of deploying 600k heat pumps a year by 2028 to be achieved and to improve the UK’s energy security. It will provide up to £30m of grant funding support to proposals for new factories or proposals to extend, repurpose or retool existing factories for heat pump unit and heat pump component manufacturing. Applicants will be able to request funding for up to £15m per project, with a maximum subsidy ratio of up to 45% of the total investment value, which can be increased by 10 and 20 percentage points for medium and small enterprises respectively.

The competition is open to all types of heat pump (air, water or ground sourced), however those considering an application relating to air to air, domestic hot water only or larger heat pumps (those with a design thermal output exceeding 45kW) should note that these will attract a lower score under the assessment criteria compared with hydronic heat pumps and their components.

Proposals relating to hybrid heat pumps ie those that combine a heat pump with a fossil fuel boiler, will also be acceptable, however the grant can only be used in relation to the heat pump elements of the factory. The HPIAC will be open to applications seeking to locate a factory in all parts of the UK, and is open to applicants with a presence in the UK as well as those that currently do not have a presence (although they will be required to establish a UK company to receive grant funding). We expect that applicant’s factories should be operational by March 2026 and we expect that all grant payments will also be made by March 2026, although where exceptional circumstances exist, this may be extended. Eligible costs are defined as being capital expenditure (as defined in FRS 102) that is relevant to and facilitates the project.

Eligible Costs will comprise plant and machinery costs, such as conveyor belts, casing, robotic arms, transportation modules, cutting equipment, brazing equipment, and testing chambers. Similarly, expenditure on fixtures and fittings will likely be eligible, such as for storage racks, lighting, alarm systems, work benches, computers, and other IT equipment.

Eligible Costs also include building costs that facilitate the project, such as foundations, walls, access roads, framing, flooring, windows, and roofing. This could also include non- ‘bricks and mortar’ costs that can be capitalised under FRS 102, such as statutory fees, consultancy fees and insurance.

Similarly, the costs for the general design, development and management of a project will fall within the scope of Eligible Costs, so long as they meet the definition of capital expenditure under FRS 102. This means that more speculative design costs might be excluded, or the internal cost of senior personnel who might be advising on the project (such as directors).

In the case of a hybrid boiler/heat pump factory, eligible costs will be pro-rata of the expected value of the heat pump units and/or heat pump components production against the expected value of the total production of the factory from the third to the seventh year of operation. Heat pump installer training, as well as research and development costs, are not within the scope of eligible costs, as these are already supported under other Government schemes. However, any installer training and research and development activity included within the project (and any potential benefits they generate) will be considered as part of the scoring process for assessing applications.

Information for third parties

If you wish to comment on matters relevant to the SAU’s evaluation of the Assessment of Compliance concerning HPIAC, please send your comments before 5pm on the date stipulated in the timetable above. For guidance on representations relevant to the Assessment of Compliance, see the section on reporting period and transparency in the Operation of the subsidy control functions of the Subsidy Advice Unit.

Please send your submissions to us at [email protected], copying the public authority: [email protected].

Please also provide a contact address and explain in what capacity you are making the submission (for example, as an individual or a representative of a business or organisation).

Notes to third parties wishing to make a submission

  • The SAU will only take your submission into account if it can be shared with DESNZ. The SAU will send a copy of your submission to DESNZ together with its report. This is to allow the public authority to take account of the submission in its decision as to whether to grant or modify the HPIAC or its assessment. We therefore ask that you provide express consent for your full and unredacted submission to be shared. We also encourage you to share your submission directly with DESNZ using the email address provided above.

  • The SAU may use the information you provide in its published report. Therefore, you should indicate in your submission whether any specified parts of it are commercially confidential. If the SAU wishes to refer in its published report to material identified as confidential, it will contact you in advance.

  • For further details on confidentiality of third party submissions, see identifying confidential information in the Operation of the subsidy control functions of the Subsidy Advice Unit.

Contacts

Updates to this page

Published 31 July 2023
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