Notice

Heat pump investment accelerator competition: round 2 - clarification questions (added 28 May 2026)

Updated 28 May 2026

Clarification questions (added 28 May 2026)

Q001. Does [the definition of ‘manufacturing’] cover assembly of components into a finished article? How would you define assembly and value add? Is there a minimum percentage volume of locally produced components or materials?

The definition of manufacturing does include ‘assembly only’ projects: a project that involves purchasing all components from UK or overseas suppliers and assembling them is permissible under the Competition.

For the Strategic Alignment assessment template, this would be completed by listing the purchase costs of the components in column I as separate line items (top 10 components by value, then group all remaining components as one line), whilst the finished production cost of the whole unit would be entered as a separate line and have column K completed.

Q002. Under a consortium, how are different company sizes treated? If the consortium is made up of different size companies, does each company get its own rate?

If a small business is in a consortium, then the maximum intervention rate for costs involved in the part of the project delivered by the partner would be that of a small business, even if the lead partner is a medium or large business. Both partners would still need to evidence why this was the minimum necessary and there would need to be evidence that they are true partners. See example table below:

Lead or Project Partner	Name	Total eligible project spend to be invested by you	Maximum total grant payable to you	Maximum intervention rate allowable by this grant
Lead (large company)	Lead	£1,000,000	£450,000	45%
Partner 1 (small company)	Partner	£1,000,000	£650,000	65%
Total		£2,000,000	£1,100,000

Q003. How does funding work for consortia? Does each company receive its own funding, or does it go through the lead applicant to distribute?

Funding is provided to the lead applicant, after they have provided evidence of expenditure is incurred so would expect evidence from each party that has incurred funding. It would then be up to the lead applicant to distribute grant funding to the consortium members.

Q004. What evidence do you need for Case for Assistance?

This is dependent upon the company, for example a company may have financial modelling that shows that without funding the investment does not pass the company’s investment metrics, but with the funding it does. This will be tested through the due diligence process and if the amount needed to clear the financial hurdle is determined as lower, DESNZ may offer a lower level of grant than applied for. Board minutes that support this modelling will reinforce this.

Alternatively, it may be that a company has been unable to raise private financing to cover the full investment and the grant provides the balance. We would need to see evidence to support however you have determined the funding amount.

Q005. Is the scheme only for domestic heat pumps or would it be applicable to larger industrial ones?

The manufacture of all heat pumps and associated components is eligible for funding under the Competition, including larger industrial heat pumps.

Q006. How does the Competition treat lease costs [in relation to the leasing of buildings]?

As this is a capital grant, if there was a request for a grant against building lease costs, then the costs would need to be able to be capitalised to be eligible for grant funding. Applicants’ finance teams will be able to advise if this is possible based on how a building is intended to be used.

Q007. How are consortiums treated under the due diligence process?

Due diligence is carried out on the lead applicant, as the organisation liable for repaying the grant in any situation where the Department claw back any part of the funding. As a result, it is recommended that the consortium nominates as its lead party the financially strongest partner.

Q008. Given Ministerial approval is required following shortlisting of projects, what assurance is that any change within Government would not affect the availability of grant funding?

The notification and completion of due diligence do not (of themselves) release Grant Funding or entitle the applicant to funding, and any funding will remain subject to Ministerial Decision and agreement to the Department’s proposed form of Grant Offer Letter. Until the Grant Offer Letter is signed with a successful applicant, the Department absolutely reserves the right to cancel the competition and not to make any funding available.