Notice

Heat Pump Investment Accelerator: clarification questions and responses (updated 11 October 2023)

Updated 4 December 2023

We have listed here all the enquiries received by the HPIAC team since the commencement of the Competition, along with corresponding responses. We received enquiries via the HPIAC inbox and from the Question and Answer sessions held on 26 and 27 July 2023.

We have removed any confidential information concerning companies.

The deadline for enquiries was 22 September 2023.

Bid structure

Do the word limits mentioned in the scheme guidance serve as a realistic guideline or a strict cap?
_{(Added 4 August 2023)}

The word limit specified in the guidelines is a strict cap, any content that exceeds this limit will not be taken into consideration. Annexes can be utilised to offer supplementary information supporting answers in each section, such as board minutes, reports or for diagrams, charts and tables. However, it is important to note that they should not be exploited to bypass the word limit.

Do you have a standard letter template for the board letter that you would like us to use? Our approach will be to seek a letter that simply states that it is prepared to support the project if the grant can be obtained to help it meet decision criteria. Please let me know what additional detail you might require.
_{(Added 22 September 2023)}

We do not have a standard letter template, but the approach proposed could be one form of evidence to support the proposal.

Can diagrams/images/charts be inserted directly into the question text boxes in the application form or within the body of the business case text, or should they be submitted as separate attachments?
_{(Added 22 September 2023)}

Diagrams, images and charts can be included in the question text boxes and similarly they can also be put in the business case if that is your preference. If they are likely to need different formatting, such as being landscape rather than portrait, then an annex can be used to include them. It is also important to note that there is no size/page limit on diagrams/images/charts within the application.

What is the best way to ask the team questions if an applicant has further queries?
_{(Added 22 September 2023)}

The best way to ask questions is to email the competition’s shared inbox heatpumpaccelerator@energysecurity.gov.uk, as this is monitored and can be accessed by the relevant team. Please note that we will only address enquiries received by 5pm on Friday, 22 September.

Bid assessment

Could you please offer further clarification regarding the scoring limitation on hot water only heat pumps in the strategic alignment, qualitative section?
_{(Added 4 August 2023)}

In cases where an application involves the production of both an air source heat pump (ASHP) (which caters to domestic hot water and heating) and a domestic hot water only heat pump, the scoring limit of 3 in the strategic alignment - qualitative section will not apply. However, this would be subject to review by the assessment panel to ensure that the manufacture of the ASHP is not merely a nominal component intended to alleviate the scoring limit.

How does commercially sensitive information submitted by manufacturers within competition bids get handled?
_{(Added 4 August 2023)}

All information contained within a manufacturer’s bid will be treated with utmost confidentiality.

As per standard practice, we strictly refrain from sharing information contained within a manufacturer’s bid with third parties or other suppliers. Throughout the procurement process, we treat all provided information as classified, and only the name of the winning supplier and the contract value will be disclosed publicly. If an organisation feels the need to sign a Non-Disclosure Agreement as part of their bid process, we urge them to contact the shared inbox heatpumpaccelerator@energysecurity.gov.uk and advise the team as soon as possible, so we can initiate the process.

Does the head count specified within the application solely apply to the business unit responsible for producing heat pump components, if we are part of a larger group?
_{(Added 4 August 2023)}

The head count of the entire larger group is considered within the assessment totals.

Will due diligence be conducted in-house, or will applicants be required to procure a provider?
_{(Added 4 August 2023)}

The department will conduct due diligence on short listed applications internally. Applicants are not required to involve external providers to carry out due diligence.

Is there a minimum project size for the competition?
_{(Added 4 August 2023)}

There is no minimum project size for the competition. However, the department encourages applicants to be as bold and ambitious as possible within their applications.

Can heat pumps or components manufactured via the competition be exported, if the UK demand is not as expected or falls short of projections? Is there any % limit stipulated for domestic / export content?
_{(Added 4 August 2023)}

If exporting is necessary to make the project economically viable, it is acceptable. While our preference is for a significant portion of the output to be used for UK consumption, we understand that a certain percentage of manufacturing may need to be allocated for export purposes to make the proposal viable.

Is there a specified percentage limit for the manufacturing and assembly of heat pump components?
_{(Added 4 August 2023)}

There is no explicitly defined limit. However, we require applications to include some degree of manufacturing of heat pumps / components rather than solely concentrating on assembly without any manufacturing component.

To what extent should the breakdown of costs (such as machinery, building, fittings) be detailed within a manufacturer’s application?
_{(Added 4 August 2023)}

A general outline of costs should suffice. The application should demonstrate a level of detail that clearly indicates well-thought-out costs, such as costs pertaining to the manufacturing plant and fit-out. More comprehensive details at the invoice level may be required if the application advances further in the competition process.

What are the stipulations of componentry to be used within manufacture?
_{(Added 4 August 2023)}

The department does not require that all components must be sourced or produced from any particular country, including no requirement for domestic content. However, a key objective of the competition is to provide secure supply chains of heat pumps and components for the UK.

Should a company apply if they are within the design stage of manufacturing?
_{(Added 22 September 2023)}

We encourage applicants to be bold and ambitious with their bids, and so we do not discourage anyone from applying to the scheme if they think their project can meet the requirements of the competition. However, it is worth noting that one of the eligibility criteria is that proposals should be able to realistically commence production on or before March 2026. We encourage you to consider this and the rest of the scheme guidance carefully and decide whether it is worth applying to the scheme, depending on whether you are referring to the product being at the design stage or the factory/production process being at the design stage.

Enquiry regarding question C2, whether the wording encompasses the possibility of leasing a new building: “The project must be for the construction of a new manufacturing factory, or the expansion, retooling, refurbishing, or reworking of an existing building.”
_{(Added 22 September 2023)}

Leasing a new structure could satisfy the C2 requirements for the competition, but we will also need to assess how the lease aligns with the overall eligibility criteria, taking into account factors such as its duration and terms.

Clarification requested on question ‘D1.5’: “Please explain what scope there is for further expansion, improvements and diversification for your project in the UK” on whether the department expects details on product expansion, improvements, and diversification and/or in relation to buildings/ capital investment in factory and factory upgrades? Additionally, clarification on whether the expansion, improvements, and diversification details needs to align with the project timeframe (by Mar-26) or if they can extend beyond 2026.
_{(Added 22 September 2023)}

The information provided, including details regarding diversification of the products being manufactured, is not limited by the project’s timeframe and can encompass periods beyond March 2026. This could pertain to scenarios where a project consists of multiple phases, and the investment being discussed is part of an earlier phase.

What will happen if a company is successful in their bid?
_{(Added 22 September 2023)}

Should a bid proceed past the bid assessment the applicant progresses to the ‘due diligence’ stage, and our team will facilitate contact between the applicant and our grants and loans team. The grants and loans team will guide the applicant through the additional information needed and outline the subsequent steps involved in the due diligence and if the applicant has been awarded funding, team will also guide the team through the post-scheme monitoring and what further information may be needed.

Would electronic Surface Mount Technology type production count as full manufacturing?
_{(Added 22 September 2023)}

We require some form of manufacturing of the product / component(s) to take place at the UK factory and not just assembly. An applicant will need to clearly demonstrate in their application the manufacturing part of the whole process, in which Surface Mount Technology may well qualify if suitably explained and evidenced.

Eligible costs and funding

When can applicant’s expenditure be deemed eligible?
_{(Added 4 August 2023)}

Once an applicant receives notification of that they are proceeding to due diligence, a discussion with the department may be possible on incurring expenditure related to the proposal, at the applicant’s own risk. Expenditure on eligible costs prior to due diligence will not be eligible for claims against a grant in any circumstances. Further information on ‘eligible costs’ can be found within section 8 of the scheme guidance document.

Is the aid intensity rate the same as the grant funding rate?
_{(Added 4 August 2023)}

The aid intensity rate is the same as the grant funding rate, which is the amount of grant requested, from all public bodies, compared to the eligible costs of the proposal. Further information on the aid intensity rates can be found within section 19 of the scheme guidance.

Question regarding front end payments for equipment already purchased. Is it possible to include costs around equipment upgrade that would fall before the project commences?
_{(Added 22 September 2023)}

It is highly unlikely that costs that are incurred prior to a proposal entering due diligence, and being incurred at the applicant’s own risk, would be allowable. They may also impact on the Case for Assistance as this may point to the project being undertaken regardless of grant funding.

Question regarding the strategic Alignment Spreadsheet: will you use the figures to calculate the added value by multiplying the difference between material input £ and finished production £, then multiplying by volumes each year?
_{(Added 22 September 2023)}

Correct, this is how the added value would be calculated.

Question regarding what finished production cost includes, whether this pertains to the variable costs for each unit or the total fixed/overhead costs into account.
_{(Added 22 September 2023)}

The ‘final production cost’ figure in the template should encompass all expenses related to the production of a component or subcomponent. We do want to emphasise that there should be no double counting of overhead costs in the final production cost, for example if a sub-component is manufactured and then included in another process within the application.

Is it acceptable to pursue a strategy of supplying products across Europe and gradually increasing supply volumes to the UK market in response to growing demand?
_{(Added 22 September 2023)}

The department recognises that, for a factory to remain economically viable, it may need to export a portion of its production capacity until the UK market can fully absorb the output. We would expect to see as part of the proposal how an applicant plans to increase the proportion of the capacity direct to UK markets, accepting that part of this plan will depend on market conditions.

Query regarding the grant limits for applications and whether lower bids would be considered.
_{(Added 22 September 2023)}

The highest grant amount that a single proposal can seek in the Competition is £15 million, with the exception of Northern Ireland where the maximum per project is €15 million. The department will review all applications to ensure that the eligible costs are appropriate and meet subsidy control requirements/grant intervention rates. There is no minimum limit for applications, however the department encourages companies to be as bold and ambitious as possible within their applications.

Question regarding financial information requested regarding statutory accounts and whether it would be acceptable to use a multiplier for future forecasts (for example, 5/10% growth).
_{(Added 22 September 2023)}

This approach would be acceptable, if the applicant can justify the percentage/figure used within the application.

Could you clarify how the grant funding is administered following approval? Will the applicant receive the grant instalments after having spent all of their own funds first?
_{(Added 11 October 2023)}

Grants will be provided in instalments linked to milestones. It is expected that the grant instalments will cover the milestone costs by at least the overall subsidy intensity of the project until the grant awarded is fully drawn down. This will be confirmed in the award letter for successful applicants.

Grant instalments will be paid 30 calendar days after it has been agreed that the relevant milestones have been met.

Are land costs eligible costs when building a new factory or building an already built-up factory?
_{(Added 11 October 2023)}

No, the cost of acquiring land can not be included in the eligible costs for a grant. If land is required to be purchased in order for the project to proceed, it is possible for applicants to include the cost of land purchases within the overall project costs as part of their overall business case and used to calculate their project subsidy intensity rate. However, the cost of land cannot constitute a milestone against which grant instalment can be drawn down.

Similarly, the value of land already owned by an applicant cannot be included in the business case and cannot be used as part of the total project costs to calculate the subsidy intensity rate.

Are stamp duty, legal fees related to the purchase of land and/or buildings eligible costs?
_{(Added 11 October 2023)}

Stamp duty and legal costs that can be capitalised as part of the cost of purchasing buildings form part of the eligible costs.

If some of these fees can be attributed to the purchase of land a third-party valuation, provided by the applicant at the due diligence stage, would be needed to value the land and buildings separately to determine the proportion of stamp duty, legal fees, etc. attributable to the land purchased.

If there is an existing factory which has already been used by another company and is not being built from the ground up, would the purchase of that factory also qualify for the grant?
_{(Added 11 October 2023)}

Yes, the cost of purchasing an existing factory could be included in the eligible costs however as land costs are not eligible, the cost of the factory building would need to be able to be valued separately to the land and this must be able to be evidenced satisfactorily at the due diligence stage.

Confidentiality

Is it possible for commercially sensitive information within a bid to be disclosed to third parties through a Freedom of Information request or other information requests?
_{(Added 22 September 2023)}

Even if a a Non-Disclosure Agreement (NDA) is in place, the department has a duty to comply with information legislation, including the Freedom of Information Act 2000 and the Environmental Information Regulations 2004. However, it is important to note that this legislation includes exemptions that can be used when dealing with commercially sensitive information. This is why, in our application guidelines, we encourage applicants to identify, either within the application or separately, any parts of their submission that contain commercially sensitive information. In the event of an information request, we would consult with relevant parties before determining what information can be disclosed. In such cases, a blanket NDA covering the entire application would not be sufficient, as there may be non-commercially sensitive portions that must be disclosed.

The department is happy to draft a Letter of Comfort for different organisations regarding how we handle, treat and secure commercial data in applications received. In respect of this Competition, access to the applications and any other documents submitted alongside, will be strictly controlled and will only be viewed by those involved in the assessment and administration of the Competition and will not be accessible by anyone else. Unless required by law, the department would not disclose any information without the named company’s written consent, regardless of whether a Letter of Comfort or NDA was in place.

Query regarding the disclosure of information, specifically concerning page 1, where applicants are required to reference legislation. Does the department have a standard paragraph that provides reassurance regarding the ownership structure and protection of sensitive information?
_{(Added 22 September 2023)}

Typically, the relevant legislation would revolve around the exemptions outlined in the Freedom of Information Act, although these exemptions may still be subject to a public interest evaluation. There could potentially be other relevant legislation, but this would largely depend on the specific company and circumstances. We would anticipate that the company would already be aware of any such applicability.

Question regarding confidentiality and whether it’s permissible to utilise a company-specific, personalized non-disclosure agreement (NDA).
_{(Added 22 September 2023)}

In our scheme guidance/application form, we have requested that applicants should indicate the portions of their application that contain commercially sensitive information, understanding that this may encompass a significant portion, if not the entirety. If an applicant insists on signing a Non-Disclosure Agreement (NDA), it must be a standardised NDA that has been prepared and approved by the department. This approach ensures that the department does not have to create individualised agreements with each applicant.

The department is happy to draft a Letter of Comfort, which details how the department handles commercial confidentiality. It is important to note that access to applications and any other documents submitted alongside, will be strictly controlled and will only be viewed by those involved in the assessment and administration of the Competition and will not be accessible by anyone else. Unless required by law, the department would not disclose any information without any applicant’s written consent, regardless of whether a Letter of Comfort was in place.

Format of documents

Can all application documents be submitted in pdf format?
_{(Added 22 September 2023)}

Yes, so long as they are searchable. We also require any of the HPIAC spreadsheets sent as pdf to be also sent in Excel format.