Notice

Heat Pump Ready Stream 2 – Wave 2: clarification questions and responses (updated 22 December 2023)

Updated 22 December 2023

Section 1: Updates to competition documentation

Update: 22 December 2023

We have published version 3 of the Project Finance Form, on the Heat Pump Ready Stream 2 – Wave 2 page, correcting formatting issues in earlier versions, including:

• Summary worksheet – cells D25-39 fixed so that they automatically populate the total costs from each of the categories
• Workpackage breakdown worksheet – additional rows added, now up to 25 rows
• Project Quarterly Breakdown – cells E10-17 are now automatically populated from the relevant cells D25-39 in the Summary worksheet

Please use version 3 of the Project Finance Form, unless you have already made significant progress in version 2, in which case you can submit version 2.

7 December 2023

We uploaded a new version (version 2) of the Project Finance Form, which corrects formatting issues in the original version on the Heat Pump Ready Stream 2 – Wave 2 page.

Applicants should note the following updates that are included in the new version:

• Summary tab – cell D46, which automatically populates the percentage of sub-contractor costs has been re-formatted from ‘general’ to ‘percentage’;
• Organisational funding breakdown tab – columns K, N & P have been reformatted from ‘percentage’ to ‘currency’ and formula has been added to columns K, N and O.

Documentation clarification questions

1. I require more rows than the finance spreadsheet currently allows – how can I add more rows to the locked worksheet?

Please email [email protected] with the details of the tab in which you need additional rows, and the number of rows you require. Any requests for this must be received by 14:00 Wednesday 13 December.

2. Are the slides from the competition webinar available? If so, where can I find them?

Slides from the competition webinar are on the Heat Pump Ready Stream 2 – Wave 2 page.

3. Is it possible to have an extension to the applications deadline due to the Christmas period prior to deadline?

No, the Heat Pump Ready team factored in the Christmas period when setting the application window.

Section 2: Stream 3 participation and other competitions

4. When we’re talking about Stream 3, is this referring to Stream 2 - Wave 2?

No, Stream 3 and Stream 2 are different elements of the Heat Pump Ready Programme.

Stream 3 supports learning and collaboration, evaluation activities and knowledge transfer across the Heat Pump Ready Programme. Stream 3 is delivered by the Carbon Trust who provide support to organisations delivering projects under Stream 1 and Stream 2. All projects funded under Heat Pump Ready Stream 2 – Wave 2 are required to participate in Stream 3 activities, as set out in Section 6 of the Stream 2 – Wave 2 competition guidance.

Stream 2 is a series of grant funded projects, with further details of Wave 1 projects currently under way, and details of the second round of funding, Wave 2.

5. How does this competition interact with other competitions - e.g. Innovation Lab NZ Heat?

Heat Pump Ready Stream 2 – Wave 2 is separate to other innovation competitions, including the Net Zero Heat Innovation Lab Competition which is run by Innovate UK.

Section 3: Competition eligibility

6. If a project doesn’t qualify for Stream 2 wave 2, is there likely to be another wave to Stream 1 at any point in the future?

The Department are currently not planning any more rounds of funding to be made available under the Heat Pump Ready Programme beyond Stream 2 - Wave 2.

7. I am keen to contribute to “Developing AI algorithms for optimisation, remote diagnostics & predictive maintenance of heat pumps”, how can I do it?

See full details of how to apply for the Heat Pump Ready Stream 2 – Wave 2 competition.

8. Is this competition open to non-heat pump, electrification of heat solutions, for example infra-red technology?

As set out in Section 1 of the competition guidance, each application must fall into 1 of the four Challenge Categories – applicants are required to justify how their project meets the requirement of the Challenge Category.

9. The window is March 24 to March 25 but can a project start later than March 24 as long as we are done by March 25?

Project duration and timescales are set out on page 18 of the Competition Guidance. In summary, projects must be at least 6 months in duration and activity funded by the Department must be completed by end March 2025

10. Is there a way I can talk to one of your team regarding scope? We have a highly disruptive tech which I would prefer not to disclose in open forum.

The Department do not offer calls with potential applicants; however applicants are welcome to email their query to the Heat Pump Ready team ([email protected]). Where the question does not involve commercially sensitive material, the question and answer will be included within future versions of this Question and Answer document. Where the question does include commercially sensitive material, the Heat Pump Ready team will seek to anonymise  the question and response, removing all commercially sensitive material removed prior to the inclusion within this document. The question will only be answered if it is possible to anonymise and / or remove commercial information from both the question and answer. The Heat Pump Ready team will work to agree with the applicant on the cleansed question before a question is answered in this document. Where it is not possible to anonymise and /or remove commercial information from both the question and answer, the question will not be addressed.

11. Are you expecting bids for both Tools and Technologies (Hardware & Software)?

Yes, relevant hardware and software projects – including projects with a combination of both – which are within the scope for Heat Pump Ready Stream 2 – Wave 2, are eligible for this competition.

12. How innovative can a project be? How much do we have to operate within existing regulations?

The innovation or technology readiness levels (TRLs) required at the start and end of projects are set out on Page 16 of the competition guidance. Applicants must set out as part of Criterion 2 how they meet the eligible TRLs. Within Criteria 2 applicants are also required to set-out any assumptions made and any legal restraints which arise from the innovation and how these will be overcome by the project. It is also recommended that you review the assessment Criterion 1 which asks applicants to set out how they will exploit commercially the innovation to be developed under the project, specifically “For highly innovative projects, where the market may be unexplored, you should explain what its size might be, (national/global), how the project will seek to explore the market potential and what sources you have used to reassure yourself that sufficient demand exists to justify the investment.”

13. If a project is not at TRL 5, but meets other criteria, is there a separate fund or stream for such projects? i.e. this stream seems to focus on existing projects from earlier streams.

To be eligible for this competition, all technology included within the project, must have reached TRL 5. There is no alternative funding Stream under the Heat Pump Ready Programme for technology at a lower TRL.

14. If we are in another grant programme (outside of NZIP/DESNZ) how would we be assessed for overlap with this one? Could an organisation drop out of another grant if the project is deemed too similar? Would the applicant get a straight ‘rejection’ if they have detailed they are delivering similar work under another grant programme?

Applicants should refer to the terms and conditions of their existing funding sources or talk to their current funders with regards to an organisation’s ability to withdraw from any existing grant programmes. As set out on Page 17 of the Competition Guidance, the Department is unable to fund retrospective work, so where a project has already achieved some or all project outcomes and outputs, the costs of those outcomes and outputs would not be eligible under this competition.

When submitting your application, you will be asked to disclose any other funding you are in receipt of or have applied for associated with your project. Applicants should be transparent and disclose any relevant projects or applications within this section, to prevent undisclosed activity being identified at the due diligence stage, should a project be conditionally awarded funding. Further details are set out on Page 19 of the Competition Guidance.

Projects must ensure the scope of their original application is distinctly different from any other projects as funding will be awarded for the project set out in their application. Projects do not have the opportunity to revise their scope post-application, should it be deemed to overlap with an existing project.

15. Can organisations who have already received funding as a Heat Pump Ready Stream 1 or 2 projects apply? Do those projects need to be complete before work starts on this project?

Organisations who have already received funding through Heat Pump Ready may apply for funding under Stream 2 – Wave 2, however projects must ensure they are applying for a project with a distinctly different scope and project outcome. Stream 2 – Wave 2 funding cannot be used to extend or top-up an existing project. In the case where a project wishes to build upon work carried out in a current project, they must ensure their current project is complete before work on a new Stream 2 - Wave 2 project starts. The Stream 2 – Wave 2 project must be a standalone project which is not dependent on achieving outcomes, yet to be realised, under an existing project.

16. Regarding the requirement for existing Stream 2 - Wave 1 projects to be completed, if the new application is for a scope extension – please can you advise if a new project could start using some existing tech/ functionality that is in wave 1, in a new consortium, with a new brief, prior to the completion of wave 1 (if it wasn’t a scope extension, but used as a part of a new idea)?

All projects applications for Stream 2 – Wave 2 which are intending on utilising innovation developed under Stream 2 – Wave 1 must have completed their original Stream 2 – Wave 1 project in order to be eligible. All Stream 2 – Wave 2 projects must be standalone and not dependent on achieving an outcome, yet to be realised, under an existing project.

17. Is there a more defined list of eligible costs?

A full list of eligible costs is available in Annex 2 of the Heat Pump Ready, Stream 2 – Wave 2 competition guidance.

18. Is the funding available for solutions which improve development / deployment / operation of communal heat pumps for domestic properties?

Heat Pump Ready Stream 2 – Wave 2 does not exclude any type of hydronic heat pump, i.e. individual or communal heat pumps, within the eligibility criteria. Applicants are required to justify how their project meets one of the 4 Challenge Categories set out within the Competition Guidance.

19. If you have a solution that covers multiple of the 4 aims of the funding, are we submitting one bid and saying we meet multiple criteria?

Applicants must choose only 1 Challenge Area which their project fits, noting the Department reserves the right to reallocated projects to a different Challenge Area should that be deemed more suited. Whilst responding to the assessment criteria, applicants may draw upon the full range of benefits and applicants which are relevant to their proposed innovation.

20. What is arm’s length condition to buy research and knowledge?

The arm’s length condition refers to the situation where a project team member will incur costs (for eligible items such as licensing knowledge or patents) that have been calculated using the arm’s length principle. Further details of the arm’s length principle are set out in the HMRC International Manual (INTM410000-INTM412000) and HMRC International Manual (INTM480000-INTM482000.

21. Will Seed Enterprise Investment Scheme (SEIS) or Enterprise Investment Scheme (EIS) funding apply for private investors if grant funding achieved? I.e. can a project combine the Heat Pump Ready funding with SEIS/EIS?

It is recommended that projects consult with their investors and/or accountants on whether schemes such as SEIS or EIS apply to their investment and whether the funding raised through either scheme could be used as match-funding against the total eligible costs for a Heat Pump Ready Stream 2 – Wave 2 project.

22. Can a project use a British Business Bank Startup Loan as part of our funding match?

It is recommended that applicants consult with the British Business Bank to establish the terms of the loan they are in receipt of, and whether it is eligible as match-funding against the total eligible costs of a Heat Pump Ready Stream 2 – Wave 2 project.

23. Please can you confirm RTOs and university partners are 100% funded for non-economic activities.

Please refer to page 33 of the Competition Guidance for details of eligible costs associated with non-economic activity.

24. Could you please explain ‘30% eligible project costs incurred by non-business partners’ statement in simpler terms?

Eligibility criterion 10 (page 18 of the Competition Guidance) requires that the project costs incurred collectively by all non-business partners in a project team (such as universities or public sector organisations) while carrying out non-economic activity for the project must be less than 30% of the total eligible project costs claimed for the project.

25. Can you submit a proposal which is only a software tool?

Yes, projects which involve the development of software only are eligible as long as they meet all the eligibility criteria for the competition.

26. How should organisations go about confirming use of overhead rates prior to submission?

Applicants are required to set out their overhead rate as part of their application and where an overhead >20% is set out, provide a breakdown and justification for this rate on the ‘overhead’ tab of the finance form. This rate will then be reviewed as part of the assessment of the application and due diligence process.

27. Can you confirm how you expect organisations to agree overhead rates with the Department?

Applicants are required to set-out and where required breakdown and justify their overhead rates as part of their application (‘overhead’ tab of finance form). Overhead rate will then be reviewed as part of the assessment of the application and due diligence process.

28. Your competition guidance indicates that research and knowledge-dissemination organisation applicants may be entitled to receive higher levels of funding for eligible project costs if, for the project, they are not undertaking economic activities. Can you confirm how much funding Catapults are eligible for, assuming no economic activities are being undertaken?

Please refer to page 33 of the Competition Guidance for details of eligible costs associated with non-economic activity.

29. Can you confirm the process for confirming specific organisations and levels of funding possible, based on the competition guidance and economic activities caveat.

Applicants must review the guidance provided on pages 33-34 of the Competition Guidance which sets out the specific funding levels which are associated with the type of innovation and activity being delivered as part of the project. Funding levels will be assessed as part of the assessment criteria and due diligence process. Where any ambiguity or confusion may arise regarding the funding level, a final decision on funding level will be made by the Department.

30. In your competition guidance, under subsidy levels, you refer to: economic activities entail offering the goods or services on a market. Can you elaborate more on this explanation please.

More detailed explanation of economic activities is set out in Limb B1 of the Statutory Guidance on Subsidy Control.

Paragraphs 15.13 to 15.19 of this Statutory Guidance provide general guidance on the definition of economic activities and paragraphs 15.33 to 15.35 of the Guidance provide examples of non-economic activities that are applicable to organisations carrying out Research, Development and Innovation.

31. Please can you confirm, only 2 in total per organisation irrespective of lead or partner status?

As set out on page 20 of the competition guidance, “Individual or lead organisations or consortia are permitted to submit no more than two applications to the Competition”. An organisation may choose to partner with other project leads and consortia on additional projects. Applicants must ensure they have resource available for all applicants they submit and declare any actual or perceived conflicts of interest.

32. Is it possible for you to confirm my project is in scope for the competition?

The Department cannot provide confirmation that a particular project idea is in scope for the competition in advance of an application submission as this will depend on how the innovation idea meets the eligibility and assessment criteria. Applicants should review their innovation idea alongside the competition eligibility set out in the guidance and the detailed guidance around the assessment criteria to judge if their project idea to be in scope for the competition.

Section 4: Assessment criteria

33. For Criterion 7, do applicants need to review all other Heat Pump Ready projects (i.e. Stream 1, Phase 1 & 2, in addition to Stream 2, Wave 1)? How do we find appropriate level of detail for these projects to support our response?

Yes, for Criterion 7 applicants are required to show additionality against all projects in receipt of Heat Pump Ready funding. Applicants will be assessed against only information which is publicly available on these projects. Summary information and links to the more detailed public information for all the relevant Heat Pump Ready projects are provided in Annex 1 of the Competition Guidance.

34. Is there any guidance on innovation ideas that might overlap with the DESNZ heat network zoning programme, eg. accelerating local decision making on networked vs individual HPs?

Applicants should review the overall scope and eligibility of the Heat Pump Ready Stream 2 – Wave 2 Competition and consider the test of additionality of public funding. The Department will not fund any work already done or to be done under another project, this is known as double funding.

35. How do day rates relate to the ‘public funding intensity’ factor mentioned earlier? Are lower day rates better for the ranking of cost intensity? There was a weighting on intensity applied to your score I thought?

The subsidy or grant funding intensity (pages 33-34 of the Competition Guidance) refers to the proportion of grant funding which a project team can request as a percentage of the total eligible costs for the proposed project. The subsidy levels set out in the guidance are the maximum levels of public sector grant funding which are available to projects within this competition, however projects can request a lower percentage of grant funding if they wish.

The level of subsidy which a project is requesting and the day rates which are being applied to the project are reviewed as part of Assessment Criteria 5, where applicants are asked to describe/explain the steps taken to minimise the project costs to ensure the proposal costs are proportionate and represent value for money (page 62 of the Competition Guidance).

Section 5: Funding award 

36. If an organisation submits more than one application and is successful with all, could they pick to deliver only one project?

Upon notification of outcome, applicants may notify the Department that they wish to withdraw their application.

37. Can an organisation bid in as a Lead on 2 (for example), but then as a Partner on another 2 ideas?

Full details are available on Page 20 of the Competition Guidance, however in summary an organisation can lead on 2 applications to the competitions and there is no limit on the number of applications an organisation may join as a partner within other applications. However, organisations must ensure they are able to deliver against all applications, that any conflicts of interest are declared and they must highlight any risks to delivery within their application.

38. For multiple applications - can you win both bids or is it that you’ll only win one of the applications you submit.

Full details are available on Page 68 of the Competition Guidance, however in summary, award of funding may be limited to one project submitted by a single organisation or consortium where the budget for the competition is oversubscribed. In this case, funding would be awarded to the highest scoring project submitted by the organisation or consortium.

39. Are you taking a portfolio approach on ranking the projects, or is it purely on the score?

The process for the allocation of funding is set out on Page 67 of the Competition Guidance. To help to secure a balanced portfolio of projects, the Department is aiming to fund projects which demonstrate additionality over existing projects being funded by the Heat Pump Ready Programme, and therefore, has included Assessment Criterion 7 to help to achieve this outcome.

Section 6: Existing Stream 2 – Wave 1 projects

40. Are you able to summarise the difference between what you were looking for in Wave 1 versus Wave 2?

An overview of all projects which have received funding to date through Heat Pump Ready is set out in Annex 1 of the Competition Guidance. The scope of Stream 2 – Wave 2 is set out in Section 1 of the competition guidance.

Section 7: Project finances

41. Can we enter a forecast budget for things like travel where we don’t yet know who we will need to visit as part of the project? Or does it need to state where we will be traveling to in the application?

Projects should include within their finance form the costs which they require to deliver their project. This should be provided in as much detail as reasonably possible. Projects are encouraged to be as specific as possible in the description of their costs as this will reduce the time associated with the due diligence process. Further details are provided on Page 62 of the Competition Guidance regarding what applicants should demonstrate and how the highest marks will be awarded regarding project finances.

42. Finance - I understand that heat pump ready fund the BUS grant for installs done under the project that do not meet existing BUS/MCS criteria - where and how are they included?

Cost eligibility vary between competitions and programmes, applicants should refer to Annex 2 which sets out the eligible costs associated with Heat Pump Ready Stream 2 – Wave 2.

43. Please can you confirm that days in a year are correct at 220? And that all partners must use that even if their working days may differ?

This, 220, is the correct number and all persons listed under labour must use this. When submitting an application, all parties listed as having greater than 220 days attributed per year to this project will be identified as an inconsistency for due diligence. Any such inconsistency will need to be fully justified.

Section 8: Supporting documentation

44. The request to have an agreed Collaboration Agreement at point of application is challenging, can an agreed ‘in principal’ collaboration be submitted, with elements still to be agreed highlighted within it?

Applicants are not required to submit a signed collaboration agreement. As set out in Section 10 of the Competition Guidance, this must be a draft collaboration agreement that all parties have reviewed and agreed to in principle. There should be no areas still to be agreed within this document, as applicants are required to confirm the uploaded agreement has been agreed by all parties.

45. Does the Department have a template for a collaboration/consortium agreement which a project team can use?

No, the Department does not have a template for a collaboration or consortium agreement.

Section 9: Other

46. If a project doesn’t qualify for Stream 2 wave 2, is there likely to be another wave to Stream 1 at any point in the future?

We are currently not planning for any further funding to be made available under the Heat Pump Ready Programme.

47. Is there a way of matchmaking or networking with people who have expressed interest or are on this call, to help us better form collaborative bids?

There is no formal match making or networking service as part of this programme.