Referral of the proposed Heat Pump Investment Accelerator Competition subsidy scheme – Round 2 by the Department for Energy Security and Net Zero (DESNZ)
Source: gov.uk (2025-11-19)

The Subsidy Advice Unit (SAU) has published a report providing advice to the Department for Energy Security and Net Zero (DESNZ) concerning its proposed Heat Pump Investment Accelerator Competition subsidy scheme – Round 2.

Administrative timetable

Final report

19 November 2025: The SAU has published its report providing advice to DESNZ concerning its proposed subsidy scheme the Heat Pump Investment Accelerator Competition – Round 2. The report sets out the SAU’s evaluation of DESNZ’s Assessment of Compliance of its proposed subsidy with the requirements set out in the Subsidy Control Act 2022.
- Final report (https://www.gov.uk/government/publications/report-on-the-proposed-heat-pump-investment-accelerator-competition-subsidy-scheme-round-2) (19.11.25)
Request from DESNZ

9 October 2025: The SAU has accepted a request for a report from DESNZ concerning its proposed subsidy scheme the Heat Pump Investment Accelerator Competition – Round 2. 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 subsidy complies with the subsidy control requirements (Assessment of Compliance). The SAU will complete its report within 30 working days.

Information about the scheme provided by DESNZ

The Heat Pump Investment Accelerator Competition (HPIAC) aims to help diversify the UK supply chain and increase the UK’s domestic manufacturing capacity to support the Warm Homes Plan’s deployment ambitions and to improve the UK’s energy security. It will provide up to £90 million 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 £30 million per project.

The competition is open to all types of heat pump (air, water or ground sourced). Proposals relating to hybrid heat pumps (those that combine a heat pump with a fossil fuel boiler) will also be acceptable, but the grant can only be used in relation to the heat pump elements of the factory. Heat pump components can include any component used in a heat pump, but application must demonstrate how those components will be used in heat pumps and not other products. Hot water storage, that is to be paired with a heat pump, is also eligible for funding.

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). DESNZ expects that applicant’s factories should be operational by March 2030 and that all grant payments will also be made by March 2030, 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 DESNZ’s proposed subsidy scheme please send your comments 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 (https://www.gov.uk/government/publications/guidance-on-the-operation-of-the-subsidy-control-functions-of-the-subsidy-advice-unit/operation-of-the-subsidy-control-functions-of-the-subsidy-advice-unit).

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 make or modify the subsidy 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 (https://www.gov.uk/government/publications/guidance-on-the-operation-of-the-subsidy-control-functions-of-the-subsidy-advice-unit/operation-of-the-subsidy-control-functions-of-the-subsidy-advice-unit).

Contacts
- CMA press team: xx-xxxx-xxxx or xxx@xxx.xx (mailto:xxx@xxx.xx)