Notice

Industrial Fuel Switching Competition: Phase 1 questions and answers

Updated 28 June 2023

This page was updated on 16 November

We have added answers to the following questions:

• question 56: does the lead partner manage the funds, paying other partners retrospectively then making a claim to BEIS, or can individual partners invoice BEIS directly? Are payments made on a quarterly basis?
• question 57: can the lead partner change between Phase 1 and Phase 2 of the competition?
• question 58: can a university use the TRAC methodology to apply the overhead rate for this competition when completing the finance forms and justification?

This page contains questions and answers covering answers to questions asked during the Net Zero Innovation Portfolio: Industrial Fuel Switching competition launch event, held online on 12 October 2021, as well as questions received from stakeholders about the competition by the question submission deadline of 22 October 2021.

Questions have been anonymised and grouped with other similar questions for ease of reference.

Previous and other BEIS Funding

1. Are the outcomes of all the Industrial Fuel Switching 1 (run between 2015 – 2021) projects now published?

The outcomes from Phase 1, feasibility studies, have been published.

The outcomes of Phase 2, demonstration projects, will be published once the four demonstration projects have closed, anticipated to be around spring 2022.

2. Can you provide details of other Net Zero Innovation Portfolio programmes presented during the launch event?

Details can be found on the Net Zero Innovation Portfolio page.

3. How does this competition relate to the Industrial Energy Transformation Fund (IETF)?

This is an innovation competition, for development of pre-commercial technologies at a TRL between 4 and 7 at the start of the project. The IETF supports deployment of commercial technologies, at higher TRLs at the start of the project.

Read more information about the IETF.

4. Is there a website that lists all the funding /competitions available in the UK?

A list of all current Net Zero Innovation Portfolio funding competitions/programmes can be found on the Net Zero Innovation Portfolio webpage.

The Energy section of the Knowledge Transfer Network’s (KTN) website is also useful for identifying related funding opportunities in and outside of BEIS.

General eligibility

5. Our technology can produce either hydrogen or electricity from residual waste/ sustainable biomass, so which category would we fall under?

You should select the Lot where the majority of the work and costs apply.

6. Can an academic university lead or join as a partner in a consortium?

Yes, universities can lead or join industrial fuel switching projects as a consortium partner, as long as the project meets the eligibility criteria set out in the competition guidance notes.

7. Must a company be involved in a project? If yes, must the company lead the project?

A private company does not have to be involved in an application. Any organisation, be that an academic institution etc., can apply as the lead organisation, as long as the project meets the eligibility criteria. The lead organisation must be UK-based.

8. Is there any requirement/ limitation for the international partners? Would the international company claim the costs from the project?

Projects can work with international partners, who can also be a member of a consortium formed for any application/ project. Therefore, international partners can claim for costs from the project. However, over 50% of the total project funded must be conducted within the UK, so costs claimed for outside of the UK must not exceed 50% of the project budget.

9. Is the consortium able to assess more than one site during phase 1 “feasibility study”?

Yes, the applicant may assess multiple sites during the feasibility phase.

10. For Phase 1 funding is there any obligation to carry on to Phase 2 or is this considered entirely separately?

There is no obligation to participate in Phase 2 if you participate in Phase 1. Both phases are open to any eligible applications, whether you have applied to Phase 1 or not.

11. Can applicants make more than one application? Both across the three Lots (hydrogen, electrification or biomass/waste/other) and multiple bids within one lot?

Following stakeholder feedback, we have updated the competition guidance to allow lead organisations to enter a maximum of three applications as the project lead, across all Lots. As the lead organisation, you may therefore enter a maximum of three bids, either under the same Lot or spread across the different Lots.

Technology providers/OEMs are limited to one application for a particular technology/solution requiring development per Lot. You may be a consortium member of multiple applications, but if you are part of multiple successful applications, you must be able to deliver on them.

12. We are working with several industry sites and intend to submit a bid which includes multiple sites as part of one bid into a single Lot. Could you please confirm whether this is acceptable?

Multiple sites may be part of a single application/ project, as long as the total maximum budget for the application is £300,000 or under. A lead applicant may enter a maximum of three applications as the project lead, across all Lots. For example, this could be three applications under a single Lot or three applications spread across the different Lots.

13. Can a feasibility study be principally carried out by RTO (Research and Training/ Technology Organisation)/ academic partners with industrial/ commercialisation members of a likely Phase 2 consortium mainly acting as a steering group?

Yes, this arrangement is eligible for Phase 1 of the competition.

Application process

14. Can you review all sections of the form or are you required to submit section by section on the online form?

You can download a word version of the full online application form to help you prepare your application. You can also use the ‘save and continue’ function online, to enable you to navigate through the online form. All applications need to be submitted via the online application form; word document versions of the form will not be accepted.

15. The scope of our bid includes multiple sites. Can the word count limit for each box in the application form can be multiplied by the number of sites included in a bid?

The word limit cannot be increased, and remains the same per application, regardless of the number of feasibility studies proposed in the application.

Finance, eligible costs, and payment processes

16. The Guidance states that “The budget for each feasibility study will be between a minimum £50,000 and a maximum £300,000.” We plan to submit a single bid which includes multiple sites and so multiple feasibility studies. Can you please therefore confirm that the maximum budget of £300,000 will be per site/feasibility study, rather than for the bid as a whole?

The maximum budget (£300,000) is per project application for Phase 1. A single application could be made up of multiple feasibility studies, as long as the overall project application does not exceed the maximum allowed in Phase 1 (£300,000 excluding VAT).

Following feedback from stakeholders, we have increased the maximum allowable number of bids as the project lead from one per Lot to a maximum of three, across all Lots. As such, this could be three bids under the same Lot, or three bids spread across the different Lots. Each bid may include multiple sites, as long as the overall funding sought per bid is under £300,000 (ex. VAT).

17. The Guidance states that “the applicant is asked to explain where cost savings, from the point of view of HM government, will be provided compared to the case where the project would be carried out under an exclusive development contract.” One of our partners is therefore planning to make a contribution to the project to reduce the costs to government. However, the Guidance also states that “BEIS must fund 100% of eligible project costs, no match or in-kind funding is allowed.”

Can you please confirm that an approach whereby the contribution to the project is not included as part of the eligible cost submission, but rather referenced in the bid as a concurrent piece of related work self-funded by the partner, is acceptable to BEIS?

Yes, this approach is acceptable to BEIS. Please describe the contribution under criterion 4b: Value for money to HM government.

18. How do we account for in-kind contributions to the project from non-funded project partners?

Please detail any in-kind contributions that provide value for money for HM government under criterion 4b: Value for money to HM Government. These should not be included as part of the eligible cost submissions.

19. The Guidance states that “Estimated project costs should also be provided for the Phase 2 demonstration study.” There is space to complete a related ‘Project Quarterly Breakdown’ (through to March 2025) in the last tab of the Finance Form, but it is our understanding that the Phase 1 feasibility studies are carried out to determine the costs of Phase 2. Please confirm that if we do not complete this part of the form, then it is not scored as part of the evaluation.

We are seeking an initial, high-level view of Phase 2 costs, and do not expect a detailed cost breakdown in the Finance Form for the Phase 1 application. This could be included under the following section of the application: Criterion 1a: Technical feasibility, novelty, and performance of the solution, describe how the feasibility study phase will firm up costs for the demonstration phase and future commercialisation.

20. What cost category should we allocate energy costs to – Other Costs or Materials?

Any fuel or energy costs should be included under Materials.

21. Can we include the cost-of-service charges (e.g. rent, security services, general utilities) and if so, what cost category should we allocate energy costs to – Other Costs or Materials?

Costs listed can be included as long as they are incurred by the project work. The costs listed should be covered under Overheads.

22. The SBRI funding rules seem to limit the total project budget in both phases to £300,000 for feasibility and £6,000,000 for demonstration projects, since they require 100% funding of the project by BEIS. Is that correct? What about a study or demonstration that needs more than the maximum budget worth of work and inputs to deliver?

This is correct, BEIS must fund 100% of eligible costs of the proposed project, and each project must not cost more than the maximum amounts listed in the guidance notes. If a study or demonstration project requires more than the maximum budget, it is possible for the applicant to segment the project and only apply for a portion of the project that fits within the budget. For example, a £400,000 study can be broken up into two separate projects, at £300,000 and £100,000, with funding sought for the £300,000 study.

23. Regarding the limitation on maximum total project funding allowance, what if we have offers or need for contributions of materials, time, consumables, or equipment from partners – must it all be declared, costed and paid for at market price within the project budget?

BEIS must fund 100% of eligible project costs but, if possible, you may apply only for the portion of the project where funding is needed, explaining the overall project and describing how the other parts of the projects will be funded, under the overall project description and under criterion 4b – Value for Money for HM Government.

24. If hydrogen were produced at the test site by an electrolyser (e.g., an existing capital asset, or purchased or donated to enable the IFS2 project), does the cost of that electrolyser need to be dealt with outside of the IFS2 project, and only the electricity bill claimed as operational cost?

You may include the cost of fuel production, including capital expenditure appropriately apportioned for the project lifetime, if this enables the fuel switch and fits within the project budget. If the cost of an electrolyser falls outside of the budget, the cost should not be included in the finance form (criterion 4a) but can be mentioned under section 4b. Operational costs, such as electricity, required to carry out the project, are eligible for funding.

25. A bottleneck of our natural gas to hydrogen project could be availability of hydrogen during the demonstration phase. Can you clarify if the funding at the demonstration phase would cover the cost of an electrolyser and would the funding cover capital expenditure and/or operating costs of the electrolyser over the duration of the project?

The funding eligibility states that 100% of the project costs must be covered by the grant, but it also mentions that fuel production for the fuel switch may not be covered.

As stated in the competition guidance, all applicants are encouraged to evidence engagement with a hydrogen supplier as part of their application, to ensure that timely solutions can be found for hydrogen supply. If the electrolyser enables the fuel switch and fits within the project budget, you may include the cost of an electrolyser, including capital expenditure, appropriately apportioned for the project lifetime. Operational costs, such as electricity, required to carry out the project, are also eligible for funding.

However, if the cost of an electrolyser falls outside of the budget, the cost should not be included in the finance form (criterion 4a) but can be mentioned under section 4b. Whilst the funding must cover 100% of the eligible project costs, it is possible to segment your overall project (see answer to question 22).

26. The guidance does not mention facility costs – however its standard practice for our projects to be charged for facilities. Is this allowed and how should it be shown on the application form and claim forms?

Facilities costs can be included, and normally fits under overhead spend. Any overheads exceeding 20% should be fully justified, as outlined in the competition guidance.

27. With existing capital equipment, we might want to use, can we claim a fair proportion of these over the course of the project? If we buy something new, can we claim the whole value or a proportion, perhaps dependent upon life after the project?

BEIS will provide funding for costs associated with existing or capital equipment that are directly related to the delivery of the project. BEIS will not fund capital equipment costs beyond or outside of the project work.

28. What guidance is there on milestones? Can we have payments upfront or is it always in arrears? Do we need to supply claim forms as we do with other Innovate UK grant funded projects?

Payments for milestones will be agreed with the project team after successful applicants have been notified. Details of claims forms and payment processes will be discussed with successful applicants at the kick-off meeting. It is standard policy for BEIS to pay in arrears, based on work done. However, we will consider requests for other arrangements on a case-by-case basis.

Assessment criteria

29. In Q3, Social Value, can we include future development of training activities linked to this project, even if not directly being developed within this project?

This can be included as part of your response. The description of what is expected of applicant includes providing quantitative and qualitative information about UK jobs, training, or educational opportunities created as a result of the funding awarded for, and beyond the industrial fuel switching competition. Future development of training activities fits under the category of ‘beyond the industrial fuel switching competition’.

30. Please provide more clarity in terms of how to assess the lifetime costs of the proposed approach, under assessment criterion 1a. Are you asking how the current project might help provide insights into how much it might cost to switch from natural gas to the proposed new fuel plus impact on future running costs once the new fuel is implemented?

Yes, please describe the current understanding of lifetime costs of the proposed solution, for example the capital expenditure and ongoing operational and fuel costs, and how completing the proposed project will enhance understanding and accuracy of the lifetime costs.

31. In question 1b, we are asked to provide emissions factors for the proposed technologies; the link to the Greenbook does not include any reference to hydrogen. Can we assume that hydrogen will have an emission factor of zero (i.e., fully decarbonised)?

As BEIS is currently working on defining a low carbon hydrogen standard, and agreed emissions factors, for the purposes of this competition you may use information from the Options for a UK low carbon hydrogen standard published by BEIS alongside the low carbon hydrogen standard consultation. Please note that this may not be the chosen Low Carbon Hydrogen Standard methodology, it is not BEIS policy, and will not determine your compliance with a future standard.

You may also use your own emissions factors, as long as you provide justification and evidence to back them up.

Commercial

32. The Guidance states that “The declarations can be completed by the lead organisation on behalf of other consortium members, it must be clearly stated that this is the case.” Could you please confirm that, assuming confirmation is provided by the lead partner (via a letter included as ‘Further Information’) that it has permission to complete the declarations on behalf of all partners, then it is only that lead partner that needs to complete declarations 1-6?

If this is not the correct interpretation, then please confirm which declarations (or parts of declaration, in the case of Declaration 4, which has many parts) need to be completed by the other partners.

It is preferable for each consortium partner to complete the declarations; however, within the application, it is allowable for the lead organisation to complete on behalf of the partners and provide a letter as described. Note that in the event of the application being successful, BEIS will request that all consortium members complete the declarations.

33. Paragraph 18(7) of the Terms and Conditions states that “… the amount of liability under this clause shall be twice the contract value, whichever is the greater, or such other sum as may be agreed in writing between the Head of Procurement on behalf of the Authority and the Contractor.” It appears that either some wording is missing, or some of the words should be deleted? Could you please clarify.

The wording has now been corrected in the guidance notes, and reads as follows:

18(7) Except in relation to death or personal injury as referred to in Condition 18(1), and subject to Conditions 18(5) and 31(16) the amount of liability under this clause shall be limited to a sum of £4,000,000 or twice the contract value, whichever is the greater, or such other sum as may be agreed in writing between the Head of Procurement on behalf of the Authority and the Contractor.

34. Does the lead partner have to set up a collaboration agreement if all other project partners are not receiving any grant?

Yes, the lead partner is expected to set up a Collaboration Agreement if the project partners are responsible for delivering work for the project. No Collaboration Agreement is needed between the project lead and any sub-contractors.

Technology eligibility – general

35. Is there an available definition of industrial when used in the context of industrial fuel switch, and does the definition cover any of the following: heat for a micro-brewery, grain drying, heating of greenhouses and sterilisation of bottles in a bottling plant?

The definition of industrial in the context of the industrial fuel switching competition is broad and includes processing of materials and the manufacture of goods. The examples listed in the question are considered industrial under this competition. The competition excludes fuel switches that do not power an industrial process, such as transport and domestic applications.

36. Can we upgrade our pilot plant with the funding of Phase 1?

Phase 1 funding is intended for project feasibility studies, rather than upgrades of facilities. Depending on the specifics of your project, you may wish to consider applying for Phase 2 of the NZIP Industrial Fuel Switching Competition, which will look to fund demonstration projects. We intend to launch this competition during Autumn 2022.

37. Can you clarify is this competition applies to vehicles, such as vehicle fleets and refrigeration units that run on red diesel?

The NZIP Industrial Fuel Switching competition is open to switching fuels that power an industrial process, and technology to enable industrial fuel switches, this includes industrial refrigeration. However, all transport applications are out of scope of this competition.

38. Is feasibility work around the viability for green ammonia production at a specified site, for use in net zero shipping eligible?

Fuel switching for transport applications are out of scope for this competition.

39. Is a 30-tonne dumper truck classed as transport or is this an industrial process for quarry mining?

A fuel switch for a dumper truck would be classed as a transport application, which is out of scope for this competition. Depending on the technology and innovation involved, this may be eligible for the Red Diesel Replacement (RDR) programme.

The current deadline to register to apply for the RDR programme is at 2pm on 15 November 2021, with applications closing at 2pm on 22 November. Please check the competition website for any updates on the competition.

40. For a Phase 2 project, does the whole site need to switch its fuel or could we convert one production line?

This is a demonstration phase, so the whole site does not need to switch, one production line would be sufficient, depending on the specifics of the project.

41. Does the competition also fund fuel switching enabling technologies e.g., wind/solar to create hydrogen/electricity to then be consumed by the industrial site?

Yes, if this can be shown to enable an innovative fuel switch and is not the main focus of the project/ funding. The project must fit within the budgets set out in the competition guidance and meet the rest of the competition eligibility criteria.

42. Would majority software solutions that encourage and ease transitions to existing or emergent fuels, but is not itself a new fuel development be in scope as an ‘enabling technology’? If not are there more suitable schemes?

This depends on the specific project. Software solutions are not excluded from the competition if they can clearly enable an industrial fuel switch. Phase 2 of the competition seeks demonstration projects, so a software solution trialled on a real industrial site may be eligible. Digital solutions that reduce energy/ resource efficiency for industry are eligible for the Industrial Energy Efficiency Accelerator (IEEA).

43. Is the funding aimed at the source of production of new fuels or the use of a new fuel at source? I.e., an industrial site? In other words, are you looking to fund production of new fuels or the implementation of new fuels?

The competition is looking to fund the use or implementation of new fuels, to demonstrate decarbonisation on industrial sites, rather than the production of new fuels.

As per the technology exclusions list set out in the competition guidance notes, fuel production for the fuel switch is excluded, unless this is innovative, enables the fuel switch, and fits within the competition budget without being the main focus of the project.

Technology eligibility – hydrogen

44. Are nuclear for hydrogen projects eligible under this call or elsewhere in NZIP, if integrated with end uses?

Fuel switching industrial processes from higher carbon fuels to hydrogen is eligible under this competition. If nuclear for hydrogen enables an industrial fuel switch, this would be eligible for the competition.

45. Would a nuclear decommissioning project looking to fuel switch from heavy fuel oils to hydrogen for boilers and steam generation plant be eligible for a feasibility study? Would switching to kerosine, which is less harmful than heavy fuel oil, be eligible?

Industrial fuel switches from fossil fuel to hydrogen are eligible for this competition, as long as they meet the rest of the competition eligibility criteria. Fuel switches to fossil fuels, and fuel switches which are not compatible with net zero, are excluded from this competition and will not be eligible for innovation funding.

Technology eligibility – electrification

46. We are partnering with a supermarket which operates a network of temperature-controlled logistics hubs. The project replaces diesel-powered trailer refrigeration units with electricity, to power the Trailer Refrigeration Units (TRU), when docked at a distribution depot and disconnected from the tractor unit. Is this project in scope for Lot 2 Electrification - Storage systems or other infrastructure that supports fuel switching to renewable electricity?

If the focus of the project is on fuel switching for industrial refrigeration, rather than transport, then the project would be in scope under Lot 2 – Electrification.

47. We are currently in discussion with a water treatment company that is using a diesel generator for backup power and meeting the site demand during high electricity price periods. Our proposition for this competition is to use a TRL 7 electrical energy storage technology to replace the existing diesel generator and allow to time-shift solar PV generated energy accordingly.

Could you please confirm this type of project is eligible for the competition?

This type of project would be eligible for the Industrial Fuel Switching competition, providing that the switch being made is innovative and that the system for the switch sits within TRL 4 to 7 at the start of the project.

48. Definition of ‘enabling’ technology: we have developed a heat storage technology that can be electrically charged, and discharges heat for industrial processes. It is currently being hand built in small volumes; automating the production process can achieve cost reductions.

Can we apply for funding to develop production process? Does this classify as fuel switch enabling technology?

The definition of fuel switch enabling is broad, it is up to the applicant to describe how their proposed project will enable industrial fuel switching, and the potential contributions to industrial decarbonisation. As such, the project described in the question classifies as fuel switch enabling.

49. We have significant resource of diesel power generators for use if electricity supply is suspended and the grid infrastructure is not sufficient to allow ‘cold ironing’ plug in of vessels in a port to rely on off peak renewable energy.

Therefore, would a feasibility study to understand how battery storage may replace standby diesel generators and provide ‘buffer’ capacity for renewable energy be in scope? The storage will not be used on the ferries, it will be for port operations. This project would complement a DfT Clean Maritime funded project looking at electrification of the ferries.

If the fuel switch is innovative, involves developing technologies at TRL 4 – 7, and helps an industrial sector, including port operations, to switch from high to lower carbon fuels, and meets all other eligibility criteria listed in the guidance notes, then this proposal could be in scope. The applicant must ensure that the funding sought from this competition is for new work, not already funded by other programmes, such as DfT’s Clean Maritime Demonstration competition.

Technology eligibility – biomass, wastes, other

50. Is gasification of non-fossil fuels such as waste biomass from the agricultural sector included in this funding competition?

This depends on the intended end use of the fuel produced. As this competition focuses on industrial fuel switching, the core of the project needs to be about switching an industrial process from a high carbon to lower carbon fuel. Gasification of non-fossil fuels could be eligible if it enables an industrial fuel switch. The project would also need to be innovative and meet the eligibility/ sustainability criteria as set out in the competition guidance notes – please check the guidance document for more detail on this.

51. We are an off-grid energy supplier providing customers with fossil LPG today but in the transition to bio/renewable alternatives such as bio-LPG and other low carbon liquid fuels. Is a fossil LPG switch to bio-LPG in scope of the competition, or would it have to be literally a different fuel i.e., diesel/oil to bio-LPG?

The competition is looking to support industry to switch from high to low carbon fuels, so the example of fossil LPG to bio-LPG would be in scope of the competition, if it enables an industrial fuel switch and meets the rest of the competition eligibility criteria.

52. Is a fuel switch from fossil LPG to rDME eligible?

Switching an industrial site from a fossil fuel to a lower carbon fuel is eligible for this competition, as long as the project meets the rest of competition eligibility criteria.

53. Can we seek funding for the feasibility of trialling a 100% bio-LPG product within an industrial process setting?

This would be eligible if the industrial process currently uses a higher carbon fuel, and the project meets the rest of the competition’s eligibility criteria.

Other questions

54. We are interested in collaborating in this space: do you have the means to facilitate this?

Following the competition launch event, we sent a list of all attendees who agreed for their contact details to be shared when signing up for the event. We are unable to provide any further facilitation and cannot engage directly with projects while the competition is live (between 11 October and 29 November 2021).

55. Can other government departments (OGDs) or local authorities bid into the competition?

OGDs and local authorities are not eligible to enter as the lead applicant for an industrial fuel switching project, but they can act as a project partner or sub-contractor.

56. Does the lead partner manage the funds, paying other partners retrospectively then making a claim to BEIS, or can individual partners invoice BEIS directly? Are payments made on a quarterly basis?

BEIS will have a contract with the lead organisation, who will manage the funds and distribute to partners; partners do not invoice BEIS directly. Lead organisations and project partners should form an agreement on how payments will be structured between them. Any claims to BEIS will need to be evidenced, for example with deliverables and invoices. Payments are made in arrears.

Regarding timing of payments, a milestones/deliverables/payment schedule will be agreed between BEIS and the project lead following successful application and before projects start. Historically, payments have been monthly or quarterly.

57. Can the lead partner change between Phase 1 and Phase 2 of the competition?

Yes, this is allowed.

58. Can a university use the Transparent Approach to Costing (TRAC) methodology to apply the overhead rate for this competition when completing the finance forms and justification?

BEIS will not normally pay overheads over 20% but can if robust justification is provided by the applicant for overheads higher than 20%. An industry standard methodology for calculating overheads, clearly explained, and justified, will be acceptable.