Notice

Phase 1 Red Diesel Replacement competition launch event 27 September 2021: slides and video

Updated 31 May 2022

An online launch event was held for the Red Diesel Replacement competition on 27 September 2021 to provide more information about the competition.

Download the presentation slides from the launch event.

Video of the launch event

Red Diesel Replacement competition Phase 1 launch

Overview of video

Introduction

Tony Allen from BEIS welcomed attendees, notified them that the webinar would be recorded and that questions should be submitted in the chat. Additionally, to be GDPR compliant contact details of attendees cannot be shared but attendees have the option to enter their contact details into the chat if they would like their details to be shared, at the risk that anyone attending would be able to access this.

Tony then introduced the presenters from BEIS and E4tech, and Cenex’s role in supporting the marketing side of the Red Diesel Replacement competition.

Tony briefly mentioned that roughly 100 people registered, representing about 78 organisations ranging from academia through to the large-scale OEMs.

Tony ran through the agenda for the webinar, and some housekeeping such as that the recording and slides would be published on the competition website, explained when the Q&A from the webinar would be published and contact details for any follow-up comments or questions.

Tony then explained the objectives of the webinar, essentially covering 3 parts: BEIS and E4tech presenting; giving attendees an opportunity to ask questions; and networking. Tony then handed over to Adam Chase from E4tech.

Context

Adam Chase provided some background to the competition, starting with the red diesel rebate removal in certain sectors, and following discussions and consultations by Treasury for BEIS to help communities affected to innovate and to address the challenge. This led to work in Q4 2020 and Q1 2021 conducted by E4tech and Cenex. BEIS used this work to design a programme, including running stakeholder engagement events in early September. Adam reassured attendees that this is the definitive version of the competition which captures the changes from the engagement event that was consulted on.

Adam mentioned that the work has been carried out by a range of organisations, and that Ricardo Energy and Environment designed the competition guidance and prepared the supporting documentation and were present at the meeting. Adam highlighted that there is a report and that he would be providing a brief snapshot of it.

Adam explained that based on an analysis of the sectors most affected by the increase in fuel costs, that construction is the biggest UK sector and that mining and quarrying is in the adjacent sectors with similarities, resulting in those two sectors being the focus of the innovation programme. Innovation in these sectors could spill over to other sectors that are affected.

Adam described that E4tech looked at both fuel and powertrain options and about 60 permutations either in existence in a laboratory or conceived of that could be routes to lower emission propulsion or motion for construction, mining and quarrying.

Adam then mentioned that the first part looked at a spreadsheet analysis and that the top right-hand quadrant of the chart, that each bar represented permutations of fuel and powertrain options. The bars above the line are lower cost per kilogram of carbon saved, and the ones below it are more expensive. Looking into the future nth of a kind, notionally 2030 and beyond, the costs could come down and there are a few techno-economically appealing options.

Adam clarified that at the time of the analysis the Climate Change Committee published its analysis for the Sixth Carbon Budget and the key statement around biomass is that bioresources in the period of 2040 are going to be very precious and their versatility and value will be best applied to the sectors that have the highest need for them such as aviation and for biomass power with carbon capture and storage. Therefore, there would not be biofuels for transport.

Adam explained that this analysis fed into the work that E4tech conducted, and the light grey text shows pathways with biomass in it. Hence the solution set becomes much smaller and more expensive, for the most part which is a hint that there may be a need for intervention to support innovation.

Adam described that the techno-economic analysis is also represented in the potential pathways roadmap of short, medium and long term, corresponding to 2020s, 2030s and 2040s up to 2050. The chart suggests a suite of options that all have zero carbon at the end and a pathway that preferably leads from the 2020s to 2050 without a breakpoint. This is a simplistic summary of the techno-economic analysis work and consultation with industry.

Adam then mentioned that the consultation also considered various other important factors such as fuel storage on and off the vehicle, safety, and importantly air quality and that the traffic lights show that there is no obvious silver bullet but there are mixes of technologies that have different trade-offs.

Adam stated that the consultation resulted in very important feedback that aside from the technology, putting it into context through demonstrations was a strong theme of what was needed to diminish the barriers to adoption.

There was also no single answer from players in this sector on the best solution, that various solutions were being explored, and that intervention would lead to faster clarity on the optimal solutions. In the absence of intervention, the implication is that there would be deferral of investment, higher costs and greater uncertainty for the end users, and for innovators and technology developers a delayed opportunity to get products to the UK and global markets. This leads to a strong case for intervention which BEIS has taken responsibility for.

Adam summarised that the work was driven by BEIS and Ricardo, supported by E4tech, who have been supporting the design of the competition.

Red Diesel Replacement competition

Tony Allen then described the context of the Ten Point Plan for Green Industrial Revolution, which turned into the Net Zero Innovation Portfolio (NZIP) spanning advanced nuclear through to Industry & CCUS, offshore wind down to smart energy and storage; a diverse set of programmes. The Red Diesel Replacement competition fits under the Industry part of the NZIP programme.

Tony also described 4 other competitions within the Industry theme: the Industrial Fuel Switching; CCUS Innovation 2.0 Call 2 in May 2021; Industrial Energy Efficiency Accelerator partnered with the Carbon Trust; and Industry of Future engaging a delivery partner to conduct the study and for 40 sites to offer up their site to receive a decarbonisation roadmap. Another relevant competition is the Industrial Energy Transformation Fund Phase 2 concentrates on TRL 8-9, close to industrial implementation.

Jasmine Ng from BEIS introduced the £40m innovation programme that resulted in response to the red diesel rebate removal, and explained the aim to develop low carbon alternatives for the construction, mining and quarrying sectors, and to demonstrate the full system of vehicles, energy storage, distribution and energy delivery. Mining and quarrying sectors were selected due to synergies with construction sector in that such sites are often localised and without grid connectivity which would make them interesting case studies, in contrast to the on-road sector where there would be a need for a geographically spread refuelling infrastructure which makes testing concepts more difficult.

Jasmine then went through the 6 objectives of the programme.

Jasmine provided an overview of the programme, delivered in two phases. Jasmine described Phase 1 for developing component technologies across 3 lots covering the full supply chain funding approximately 20 projects, and Phase 2 supporting consortia demonstrating the fully integrated system on site; Phase 2 funding will support around 3 projects and is open to all applicants, not just those that participated in Phase 1.

Jasmine then explained Phase 1 Lots in more detail. Lot 1 focuses on developing components and systems related to fuel and/or energy distribution, storage and delivery, with a clear focus on the challenges in cost, performance and scalability for NRMM. Lot 2 focuses on development of components or subsystems in equipment or vehicles related to the use of fuels such as the engine or drive-chain, and also on the fleet management infrastructure required to maintain, host or service the equipment or vehicles. Finally Jasmine explained Lot 3 which focuses on development of fuels, so the production and testing of the fuel’s properties and performance.

Jasmine brought up the workshop that Adam mentioned earlier, stating that BEIS received feedback on several elements of the competition but specifically on the programme that the feedback was on the interlinking nature of the 3 Lots, so BEIS have tried to develop more guidance about expectations for the 3 different Lots. Jasmine also mentioned feedback that projects could span across all three Lots, but encouraged applicants to select one main Lot as the same assessment criteria will be used for all Lots.

Jasmine then described the programme timelines and that Phase 1 opened today (27th September) until 22nd November. Jasmine described the consortia match-making event in July 2022 and based on feedback received, BEIS are looking into whether there is an opportunity to move the event earlier in 2022 or if an additional match-making event can be included. Jasmine continued explaining that Phase 2 would launch in Q1 of 2023 with projects commencing in Q2 2023 but must be completed by 31 March 2025. Jasmine noted that all the dates shown, except the end date, are subject to change.

Jasmine explained the three-step process for Phase 1, starting with applications, followed by bid assessment and then grant award. Jasmine noted that applications will need to be submitted using the online form, and applicants must register to get a password to access the form. Jasmine also mentioned that any questions on the competition must be submitted on the RDR Questions Form found on the competition website by 15 October. Jasmine continued explaining that after the application window has closed, applications will be assessed by BEIS and third-party evaluators and completed by the end of December, depending on the number of applications received. By early January 2022 applicants will be notified if they are successful or unsuccessful, subject to completion of due diligence, with the grant awarded and project start by the end of January 2022.

Jasmine acknowledged the tight timelines overall and the mixed feedback received on Phase 1 timelines but noted that BEIS are unable to extend the end date of 31st March 2025 as this has to do with the period of government funding. Jasmine explained that the timings for Phase 1 and Phase 2 have been carefully considered to ensure sufficient time for both development and demonstration.

Jasmine then went through the 8 eligibility criteria used for the Phase 1 competition and details can be found on the competition guidance. Jasmine noted that for project location, it is preferred that demonstration of technologies must be at an UK site, but can be at a non-UK site if this can be shown to be reasonably justified. Jasmine also explained that for match funding, before the grant letter is issued, applicants will need to demonstrate a credible plan to raise the match-funding required for the whole lifetime of the project which needs to be evidenced - for example by relevant bank statements or letters showing intention to invest into the project. Jasmine also explained that BEIS will not provide more than £2.5 million to a single applicant in Phase 1, including if they are delivering multiple projects, with total funding per project at a maximum funding of £460,000.

Jasmine described that this competition operates under ‘Aid for Research and Development Projects’ and the maximum percentage of public funding that can be provided towards eligible project costs for different sized consortium partner(s) is shown on the table. Jasmine referred to the competition guidance which has details of eligible and ineligible costs that the grant claim can be used for. Jasmine explained the table shown further, describing that if a project is submitting a collaborative application containing different sized organisations, the amount of funding received is related to the organisation receiving the aid.

Jasmine acknowledged projects could span across lots and that BEIS are not able to remove restrictions of 1 lead in each Lot. However, BEIS have increased the maximum funding for a single organisation as lead or partner from £1.5m to £2.5m in total for Phase 1.

Jasmine then explained the technology scope for this competition. The technologies must show a clear progression pathway towards reducing greenhouse gas emissions, air pollution emissions, and overall reliance on biomass. This is based on the CCC’s recommendations, as Adam mentioned earlier, to prioritise biomass or waste based fuels post 2040 to other areas of the energy system where they abate the most GHG emissions. Jasmine described the long-term solutions being electricity, hydrogen, ammonia or e-fuels (e-diesel, e-methanol, e-methane). Fuels which are not hydrogen or electricity-based are limited to fuels to those that meet the definition of a ‘development fuel’ under the Renewable Transport Fuel Obligation (RTFO) or Recycled Carbon Fuels (RCFs) which have been proposed for inclusion in the RTFO. Jasmine explained RCFs are fuels produced from fossil wastes that cannot be avoided, reused or recycled. Fuels must be used in suitably modified equipment/vehicles at concentrations of 100% (excluding additives) without blending with any fossil fuel derived fuels.

Jasmine noted that this section received significant feedback asking for clarity around biomass and fuel development and BEIS have included a section in the competition guidance detailing more about the requirements. Jasmine noted that the fuel development section has tried to align with the RTFO, but fuels not eligible for the RTFO such as non-green hydrogen, should be produced in line with the UK Low Carbon Hydrogen Standard and to a similar standard for ammonia. Low carbon fuels developed using electricity must detail the additionality of that process compared to direct use of electricity. And finally fuels which are not hydrogen or electricity based must align with the ‘development fuel’ categorisation under the RTFO and convincingly demonstrate the journey post-2040 to the long-term pathways.

Jasmine described the Phase 1 activities which the funding would be used for, and the Phase 1 outputs, which include monthly updates, engaging in dissemination of project findings and a final publishable report. Jasmine reminded attendees that all activities must be completed by 30 December 2022.

Jasmine noted that the feedback considered the outputs were generally reasonable but would be challenging to achieve within the timeframe of Phase 1. Jasmine acknowledged some comments around health & safety aspects related to fuels and more definition around safety for fuel distribution, refuelling and storage has been included in the competition guidance. Jasmine also mentioned that stakeholders asked for a public resource which holds information to encourage uptake of the technologies, and that the planned dissemination activities throughout the life of the programme aims to achieve this in the targeted sectors and beyond.

Jasmine detailed the assessment criteria used for competition, divided into 5 main categories: project relevance (5%); technical concept (30%); environmental impacts (15%); commercial case (20%); and, project implementation (30%). On the commercial case, since BEIS is seeking to maximise the impact of government R&D funding, projects looking for public funding intensities that are lower than the applicable maximum are likely to score higher in the appraisal process.

Jasmine explained the environmental impact criteria in more detail, which requires projects to provide the GHG emission savings (gCO2e/MJ of work done), capturing the well-to-work system at commercial scale, against a red diesel comparator of 93 gCO2e/MJ, in a 2030 scenario. The competition guidance contains GHG emission values for various fuel pathways and some guidance on how to calculate the well-to-work GHG emissions however noting the numerous pathways to developing certain fuels, for fuel development projects, any emission values provided must have justification or evidence for using that value in the GHG estimation. Methane and ammonia slippage must also be accounted for, and those components with the highest potential GHG savings and evidence to support will score best, while those that only just meet a 50% reduction, or do not provide enough credible evidence, will score poorly. Jasmine noted that the RTFO threshold is 65% instead of 50% so eligible fuels under the RTFO would be expected to reach GHG emissions savings of at least 65%.

Jasmine acknowledged that feedback received asked for a standardised GHG methodology which has been provided in the guidance document. Additionally, for feedback on the 50% threshold not being ambitious enough, Jasmine noted that the assessment will be looking at savings that can either be made directly or are enabled by their technology within a commercial scale integrated system so for instance a control system on vehicle that leads to more efficient use of the fuel. Fuel producers who are eligible for the RTFO will be meeting the 65% threshold in any case.

Jasmine then offered a pause for a short 5 minute comfort break.

Jasmine detailed the next steps, to review the competition guidance and application form as early as possible to give sufficient time to start thinking about what is needed to apply. Jasmine noted an offline word version of the application form but reminded attendees that the online form that count towards the application. Jasmine declared that any previous expressions of interest or attendance to events does not result in an automatic registration.

Jasmine mentioned that post-webinar, BEIS will work through the questions submitted in the chat and aim to publish the anonymised Q&A within 10 working days by 11th October. Jasmine reminded attendees that further questions should be submitted on the Questions form found on the competition webpage until the deadline for questions on 15th October with final list of questions and answers published by 27th October.

Questions

Jasmine concluded the main part of the presentation and asked Adam and the E4tech-Cenex team to feed questions that came in the chat.

Adam asked a first question on red diesel for the agricultural sector and whether the agricultural sector is going to be included. Jasmine responded that the agricultural sector is not a target sector for this competition because the competition was focused only on sectors that will be affected by the red diesel rebate. However, Jasmine noted technologies developed in this competition will be applicable to non-road mobile machinery in the agricultural sector and other sectors not included in this competition as well.

Adam asked a cluster of questions around lead organisation types: whether a project could be led by an academic or research organisation or if it needs to be from industry; if there is a cap on the proportion of project costs taken by research organisations; and, are academic partners permissible if they are supporting technology development in industrial research. Tony responded that an academic project could lead a project in Phase 1 but noted that it may be more difficult to do so in Phase 2. Tony mentioned that they could either lead or be a consortium member but there were complex funding rules around this but that details could be found on the competition guidance. Tony mentioned that if it is still unclear after referring to the competition guidance to then submit the question on the RDR Questions Form which will be responded to by 27th October.

Adam asked about conventional diesel and if there is any scope to include technologies which reduce emissions from fossil diesel. Adam clarified the question asking whether diesel emissions are excluded from the competition and if not, why not. Tony responded that those technologies wouldn’t be excluded but the focus of the competition is to go a step beyond this to focus on longer-term technologies.

Adam asked about rail and rail freight aggregate transport and whether that qualifies as construction. Jasmine responded that it would not qualify as construction but noted that if the technology was proposed in a project with a construction consortia member as lead that it could be eligible for a demonstration for Phase 2. Adam clarified that on site transport would count as construction but not the rail aspect.

Adam asked a question about whether bio-LPG is permissible if it has advanced feedstocks and it is 100% concentration or renewable DME as a blend. Jasmine responded that it would be within the technology scope but to check against the RTFO development fuel criteria or to submit a question if still unclear. Adam also added that there needs to be a pathway beyond the use of bio-feedstocks and to evidence that it is consistent with the wider 2050 end-state.

Adam asked a question about whether both Phases are open to single company applicants and consortium or consortium only. Jasmine confirmed that both single, and collaborative applications were welcome.