Heat Pump Ready Programme Round 2: innovation funding competition

Heat Pump Ready was established in 2021, as part of the Net Zero Innovation Portfolio (NZIP), and aimed to accelerate domestic heat pump adoption in the UK. The programme provided funding to 44 projects, working to overcome a wide range of barriers. The programme was structured over three streams; Stream 1 focused on developing innovative methodologies to achieve high-density heat pump deployment in target areas, Stream 2 supported the development of innovative tools and technologies to overcome the barriers to heat pump deployment, and finally, Stream 3 focused on collaboration and learning across the programme.

The programme also focused on developing partnerships across the market, through supporting project consortia working in collaboration and enabling projects to participate in events, both programme specific and wider external events. There was a strong focus on networking and collaboration to create optimal teams to overcome barriers across the supply chain. A community was created amongst the HPR funded projects through in-person events, including external industry events such as Installer Show, FutureBuild, and an annual HPR conference. Projects from Heat Pump Ready Stream 2 participated in quarterly online learning workshops as a consortium.

The programme achieved several key successes, for example where projects developed tools and technologies to reach commercialisation, including the development of more efficient systems to reduce lifetime costs, smaller heat pump systems to minimise home disruption upon installation and tools to simplify information gathering during the customer journey.

The Warm Homes Plan sets out an ambitious package of policies and support to grow the heat pump market. Our aim is that by 2030 the heat pump market will have expanded to over 450,000 installations per year, as heat pumps increasingly become the desirable and natural choice for households replacing an existing heating system at the end of its life. This is supported by other announcements in the WHP including an expansion of the Boiler Upgrade Scheme (BUS), launching new low-cost consumer loans, and cutting electricity bills by £150 on average. The WHP also committed to removing other barriers to heat pump adoption, including simplifying planning rules, removing EPC requirements for the BUS and working with industry to streamline the consumer journey by targeting 3-day installations from the point of customer signature. Additionally, the WHP is also investing to develop the heat pump supply chain through funding for manufacturing, via expansion of the Heat Pump Investment Accelerator, and skills and training, with annual funding of £7m for the Heat Training Grant.

Projects must be delivered by individual private sector businesses (sole applicants) or by a consortium of project partners led by a private sector business (consortium applicants). Private sector businesses of any size are eligible for funding in this Competition.

Any sole applicant must be a private sector incorporated UK business or incorporated overseas but with a UK registered branch / establishment on Companies House with the necessary skills, experience and capacity to effectively deliver the proposed project.

Consortium projects must be led by a private sector business UK incorporated or incorporated overseas but with a UK registered branch / establishment on Companies House. This also applies to project partners. The other project team members in a consortium can be private sector businesses, or academic, research, public, third sector or community organisations.

An individual or lead organisation may not submit more than one application to a single barrier unless each application relates to a clearly distinct innovation and a significantly different project scope. However, where the Competition is oversubscribed, the Department reserves the right at the funding allocation stage to limit funding to a maximum of two applications per organisation. An organisation cannot lead or be a partner (Section 4) in any more than 3 submitted applications.

Whilst there may be the opportunity to start earlier, projects should aim, where at all possible, to plan for a project start date of 1st Feb 2027. All grant-funded activities must be completed by 30 January 2030.

Applicants can seek grant funding between £200,000 to £2 million: the maximum percentage of total costs covered by this will vary substantially depending on business size and project type, but can be up to 85% for some collaborative industrial research projects; for experimental development (closer to market) projects, the maximum percentage may be as low as 25%. Consult the competition funding guidance (page 42) to see the maximum grant levels for your project.

Please note any applications for funding through this Competition must be a brand-new project or at the very least extend the scope of previously or currently funded work to create substantively new products, applications or processes.

Eligible costs must be incurred in the UK and any subsidy recipients must intend to exploit the results of the project activity in the UK.

The eligible project costs incurred by all non-business partners, carrying out noneconomic work (e.g. Universities, Research and Technology Organisations (RTOs), public sector, third sector and community organisations) in a consortium must be less than 30% of the total eligible project costs.

In Scope:

• Electrically driven heating technology (i.e. a heat pump) or a constituent part or component of a heat pump system that provides heating and hot water to a domestic building. Air-to-air heat pumps are in scope as long as they are either installed a) as a standalone system to provide heat where the resident already has a separate hot water system in place (e.g., replacing storage heaters in flats), or b) to provide heat alongside a new hot water system (e.g., when a gas boiler is replaced)
• Heating technologies, or a component of a heating technology, which take ambient heat from either the air, ground or water.
• Hardware component(s) that make up a heat pump system
• For Barrier 4 only – innovative software products which relate to time taken for heat pump install from accepted quote

Out of scope:

• Heating technology which takes heat from a combustion source, e.g. gas, oil, or biomass
• For Barriers 1 to 3: standalone software solutions. Note: Software development may only be included where it is an integral part of, or directly supports, the design, operation, control or integration of innovative physical hardware being developed which is the focus of the project.
• Alternative and direct electric heating technologies, e.g. storage heaters, electric boilers, infrared heating, panel heaters, electric radiators, heat batteries (unless the heat battery operates as part of a heat pump system)
• Financial products, (e.g. loans, heat as a service products)

Further examples of what is in scope and out of scope are given in the funding competition guidance (p.15).

Where innovations materially influence the energy performance of heat pump systems, projects must demonstrate that the innovation, when integrated as part of a complete heat pump system, is capable of achieving a Seasonal Performance Factor of at least 3.5 in a real‑world home environment by the end of the funded project period. This means projects must record a minimum of 12 months’ worth of performance data on an in-situ innovative heat pump system trialled within a home.

Innovation funded must meet the following TRL/CRL (Technology/Commercial Readiness Level) criteria:

• Starting TRL: at least 5 and no higher than TRL 8
• Ending TRL: 9 (as part of a complete heat pump system by 30 January 2030)
• Ending CRL: 9 (as part of a complete heat pump system by 30 January 2030)

In addition to delivering the funded project, projects are required to engage, provide information and work collaboratively across the Heat Pump Ready Programme. This includes elements such as acceleration support activities, project reporting, regular engagement with allocated Monitoring Officer, adherence to Departmental financial accounting processes, participating in project stage gates, contribution to programme evaluation activities and complying with Departmental requirements on publicity. Travel and subsistence will usually be covered for in-person events.