Department for Energy Security and Net Zero, Heat Pump Investment Accelerator Competition – Round 2

This Department for Energy Security and Net Zero, Heat Pump Investment Accelerator Competition Scheme aims to diversify the UK heat pump supply chain, increase domestic manufacturing capacity and help the UK’s Warm Homes Plan and Energy Security objectives. It was created to support extending, repurposing or retooling of old factories, and proposals for new factories.

Our key takeaways from the Subsidy Advice Unit (SAU) report are:

• Assessments should clearly explain why underinvestment in the manufacture of heat pumps in the UK, arising from the identified issues, constitute market failures within the meaning of the Statutory Guidance.
• Detailed explanations of all non-subsidy options that were considered to achieve the policy objectives of the Scheme should be provided by discussing which specific options DESNZ discounted, in addition to legislation.
• An analysis of how different types of market participants (for example, large incumbents, small players, and importers) may be affected differently by the Scheme should be discussed, in order to strengthen the competitive assessment at an enterprise level within clearly defined geographic and product markets.
• Benefits that relate to all policy objectives (rather than focussing mainly on job creation) and the specific policy objectives identified should be considered.
• Assessments should explain how the Scheme will be aimed at beneficiaries, and incentivise them in delivering a secure, affordable and sustainable energy system.
• Assessments should distinguish between the Scheme’s policy objectives and ancillary benefits that implementing it will achieve, and also address each step systematically in relation to all policy objectives (if there are multiple).
• Assessments should provide evidence to demonstrate why the increased grant is expected to be sufficient in order to change the beneficiaries’ economic behaviour to invest in the UK. Additionally, they should use the Scheme documents to demonstrate the basis for the explanations provided.

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