Notice

RDR Phase 2: Clarification questions with responses (added 24 March 2023)

Updated 13 September 2023

These are answers to questions asked about Phase 2 of the Red Diesel Replacement (RDR) competition.

Further details are provided in the Red Diesel Replacement Phase 2 Competition Guidance documents.

Phase 2 Competition Launch Event Q&A (25 January 2023)

1. Can eligible project costs outside UK attract a grant claim?

Eligible project costs incurred outside of the UK must be equivalent to less than 50% of the funded project work (by financial value) for the project to be eligible for grant funding. Note that the physical demonstration of the proposed solution must be conducted in the UK.

2. Can companies located outside of the UK be an official partner in the consortium or are they allowed to participate only as sub-contractors / linked third parties?

Companies based outside of the UK can be official partners or sub-contractors / linked third parties in a consortium, however over 50% of the funded project work (by financial value) and the physical demonstration must be conducted in the UK for the project to be eligible for grant funding.

3. Are the foreign companies located outside of the UK still eligible to receive funding from Department for Energy Security and Net Zero (DESNZ)?

Please see the response to Q1 and Q2.

4. What constitutes “moderate scale”?

One of the aims of the Red Diesel Replacement programme is to demonstrate an integrated, low-carbon solution at a moderate scale on site for the quarrying and mining sector, and the construction sector. There is no set definition of “moderate scale”, and it is up to projects to decide what is achievable for them in the timescale given.

The competition seeks to support projects that will contribute positively to net zero targets, maximising the reduction of greenhouse gas (GHG) emissions (target 75% reduction compared to a current red diesel system), air quality emissions (target 50% reduction in NOx, SO2, and PM (PM2.5 and PM10) emissions compared to the current EU Stage V emissions standards for Non-Road Mobile Machines (NRMM) for the end-use equipment being demonstrated (tailpipe emissions)), noise and other emissions. These will be assessed as part of Criterion 1 described in Section 7.1 of the Phase 2 Competition Guidance Notes.

Projects will score higher if they can achieve the emissions targets described or can provide a clear route achieving them.

5. Are the reimbursements percentage shown in Table 2 of the Phase 2 Competition Guidance Notes just applicable to private enterprises? Can Research and Technology Organisations (RTOs) claim 100%?

Grant intensity is related to the size and type of the organisation receiving the grant funding, and the type of innovation activity being carried out. RTOs that are not higher education institutions can receive up to 100% funding if they are not undertaking economic activities in the project.

Non-economic activities are those which could not be completed and delivered by private sector organisations, like performing a public function and not placing goods or a service on a competitive market. For example, the provision of consultancy services to businesses or to government or the provision of contract research services would qualify as an economic activity.

Research organisations which are engaged in economic activity as part of the project will be treated as business enterprises for the purposes of funding and the grant intensity which is relevant to the size of that organisation and type of activity being carried out would apply.

It is possible for research organisations to carry out a mixture of non-economic and economic activities in which case different grant intensities will apply to the different categories of work.

6. Is there a specific cap on overall grant rate across the whole consortia up to 50% of all eligible costs in the project?

The cap on the overall grant rate for the whole consortia is based on aggregated total of the maximum amount of grant funding of the individual consortium members. The maximum amount of grant funding of each individual consortium member will depend on the type of organisation, the organisation size and the activity being undertaken. Please refer to Section 5.2 of the Phase 2 Competition Guidance Notes for further details.

7. Will you be taking a portfolio approach when selecting the winning proposals, for example to reflect the industrial sectors covered in the scope?

The RDR programme is focused on the construction, mining and quarrying sectors only. Projects demonstrating solutions that are not normally deployed in a mining and quarrying or construction environment are not eligible to receive grant funding.

The successful applications will be ranked in order of merit. The highest-scoring proposals will be put forward for Phase 2 funding if they meet the minimum scores and eligibility for funding.

8. Is location of projects around the UK a consideration in selecting projects in this competition?

Location of projects in the UK is not considered as part of the selection criteria for projects. Projects which meet the eligibility criteria will be assessed against 3 assessment criteria, with sub-criteria. Please refer to Section 7.1 of the Phase 2 Competition Guidance for full details of the assessment criteria.

9. How can projects find demonstration sites to work with on the Phase 2 demonstration project?

The Department for Energy Security & Net Zero (DESNZ) formerly the Department for Business, Energy & Industrial Strategy (BEIS), launched the RDR match-making platform in November 2022 to help organisations find partners for a Phase 2 demonstration project. Visit the match-making platform which is still available. Registration is required to access the platform.

10. Is there a match-making event?

DESNZ held a match-making event online via MS teams in November 2022 to introduce the RDR match-making platform and enable participants to network with each other. No further match-making events are planned.

11. Will a project funded by this grant still be eligible for Renewable Transport Fuel Obligation (RTFO) support?

Eligible costs for the Phase 2 demonstration project are those directly associated with the development and implementation of the end-to-end system. Fuels produced as part of the Phase 2 demonstration project may receive support under the RTFO in the form of Renewable Transport Fuel Certificates (RTFCs) if it meets the eligibility criteria and are not subsidised elsewhere in the UK or European Economic Area (EEA). Please refer to the RTFO guidance for further details.

12. Must Technology Readiness Level (TRL) be below 7 at the start of the project and then reach TRL 7 via the project?

Individual components/specific technologies within the end-to-end system must be innovative and unproven prior to launch and are permitted to be at varying levels of maturity (i.e. between TRL 5 to 8) at the start of the project, however the end-to-end system being demonstrated must achieve a minimum of TRL 7 by the end of the project to be eligible for funding. Any system/solution that is below TRL 4 or will not reach TRL 7 by the end of the project (14 March 2025) will not be eligible. Please refer to Appendix 1 of the Phase 2 Competition Guidance Notes for the definitions of the Technical Readiness Levels.

13. Can you take a blended view of TRL of the system proposed, if one component is not quite TRL 4 and others are at TRL 5 or 6 and the system ends at TRL 7 by the end of the project?

Individual components/specific technologies within the end-to-end system must be at least TRL 5 at the start of the project to be eligible. Applicants must estimate and justify the TRL of the system and separately its component technologies at the start and end of the proposed project, and how they will ensure that the system achieves TRL 7 by the project end; this will be assessed as part of Criterion 1b. Please refer to Section 7.1 of the Phase 2 Competition Guidance Notes for further details.

14. Is it focused on new technologies only? What about processes and operational procedure development, e.g. there are lots of operational safety and process related developments needed to successfully deploy hydrogen technologies, it isn’t just the technology that needs innovation and development.

This competition supports technologies that are innovative and unproven (i.e. below TRL 9) and systems that cannot be procured as a whole on the open market. Activities are classed as Industrial Research and/or Experimental Development, which includes scope for the improvement of existing products, processes or services, or development of new products, processes or services. However, the main objective of the Phase 2 project must be related to demonstrating the innovative, low carbon end-to-end system on construction, mining or quarrying sites. The applicant must ensure that the system being demonstrated is safe and the associated hazards are managed to the requirements of the site owner/operator. The approach to safety during the demonstration will be assessed as part of Criterion 1c. Please refer to Section 7.1 of the Phase 2 Competition Guidance Notes for further details.

15. Can a remote quarry site running on generators receive a grant for installing mains electricity?

To be eligible for grant funding, the proposal must support the physical demonstration of an end-to-end system/solution replacing existing red diesel-using technologies on construction and mining or quarrying sites. Projects must include the end-to-end solution which encompasses the following stages in a single project:

• Generation (e.g. producing electricity via a solar farm) or
• Production (e.g. taking a feedstock and converting it to a particular fuel)
• Distribution and storage, including refuelling/energy delivery
• End use

The applicant must justify that the end-to-end system and/or specific technologies within are innovative and unproven prior to launch. A project to install mains electricity does not incorporate all stages of the end-to-end system and is therefore not in scope of the Phase 2 competition. Please refer to the Section 2.2 of the Phase 2 Competition Guidance Notes for further details.

16. Would electrolyser projects need to be powered by renewables on site or can that be supplied via renewable energy from the grid?

Both sources of electricity for electrolyser projects are eligible, although the project using renewable energy from the grid must provide justification for additionality in their application. Additionality in this context refers to whether the renewable energy can be considered additional, in that it would not have been produced or would have been wasted if it were not consumed in the production process. Please refer to the proposed method described in DfT’s RTFO Guidance for Renewable Fuels of Non-Biological Origin for more information.

17. To convert an excavator to hydrogen, does the hydrogen need to be produced onsite to make it an end-to-end project and include refuelling technology as well?

The hydrogen does not need to be produced on site, it could be produced elsewhere and then transported to the demonstration site, however safe storage and refuelling to the end-use equipment on site must be demonstrated on the Phase 2 project.

18. What is required in terms of the evidencing of the benefits, i.e., when the consortium is put together, does it require Monitoring & Evaluation to ensure claims that are made about reductions in carbon are measured over the longer term?

How the relevant environmental impacts will be monitored, measured, and mitigated during the demonstration project will be assessed as part of Criterion 1c. Please refer to Section 7.1 of the Phase 2 Competition Guidance Notes for further details.

DESNZ requires all funded projects under the Net Zero Innovation Portfolio (NZIP) to report on key performance indicators (KPIs) to provide a consistent approach to reporting evidence, and to track and measure key outputs, outcomes, and impacts. The evidence collected is used to demonstrate the impact of the NZIP on achieving the government’s Net Zero ambitions and is necessary to be able to run future competitions. KPIs, such as CO2 emissions reduction, will be collected at various intervals including at the start of the project, during project delivery, at project closure and after project closure. DESNZ will appoint a Monitoring Officer to each successful project to monitor and support the delivery of the demonstration project, including collection of KPIs and ensuring the project is on track to meet the targets described in their application.

19. If there was an operator from the waste industry that wished to change his red diesel machines to electric or hydrogen, would the grant cover purchasing a new fleet of machines?

This would not be eligible for Phase 2 funding as projects need to demonstrate an innovative, low carbon end-to-end system on a representative construction, mining or quarrying site.

20. We are concerned about the tight timelines for a project finish by March 2025, for example, considering the time required for planning permissions for a wind turbine. Can DESNZ extend the Phase 2 timeframes?

All project work related to the demonstrator, including the final DESNZ-approved report, must be completed by 14 March 2025. The funding period ends on 31 March 2025 in accordance with wider Government Spending Review funding allocations. For this reason, there is no flexibility on this timescale. The longer DESNZ allocates for preparing applications for Phase 2, the shorter the timeframes for Phase 2 delivery.

The project delivery plan will be assessed as part of Criterion 2b, and applicants are expected to provide early information (e.g. letters of support or draft agreements) from key organisations and relevant authorities to provide evidence that the delivery plan is feasible in the timeframes i.e. to complete the demonstration by February 2025. Please refer to Section 7.1 of the Phase 2 Competition Guidance Notes for further details.

Questions received in the Q&A window (closed 8 February 2023)

21. Do RDR Phase 1 participants have to have achieved a full Monitoring officer sign-off as a pre-requisite condition for Phase 2 submission?

For organisations currently involved in Phase 1 of RDR, please note that the Phase 1 final report must have been fully approved by DESNZ prior to a Phase 2 grant being awarded to a consortium of which they are a member, following a successful outcome at the assessment stage.

22. Do you need to have completed Phase 1 to participate in Phase 2 or are they independent?

Please see response to Q21.

23. Would the development of an existing prototype, to broaden its application in the fields addressed in this bid be eligible?

The end-to-end solution and/or specific technologies within it must be innovative (i.e. between TRL 5 to 8) at the start of the project and be demonstrated under real-life operating conditions in a representative construction, mining or quarrying site to be eligible for funding. End-use equipment types that are not normally deployed in a mining and quarrying or construction environment is not eligible.

24. We are in the process of ordering 3 x Electric forklifts replacing existing diesel ones which changed from red diesel to white diesel in April ‘22. There needs to be development in our yard to house these and establish a charging area within our boundaries. Are we, as a company, entitled to any grant / monies for both the change of forklifts and establishment of a charging area?

Please see response to Q15.

25. The consortium is planned to involve an industry partner whose legal entity in the UK does not host engineering sources that are needed for the project. Is it possible to engage another legal entity belonging to the same parent company, but situated outside of the UK (in a EU country), as a subcontractor or a linked third party. In this case, can the latter company receive grant funding for the resources employed in the project?

Please see response to Q2.

Please note that justification for the selection and costing of subcontractors, including why they are not project partners, will be assessed as part of Criterion 3a, and justification for why the project presents good value for money, such as through reduced rates on subcontracts, will be assessed as part of Criterion 3b. Please refer to Section 7.1 of the Phase 2 Competition Guidance Notes for further details.

26. Would the funding support the replacement of red-diesel fork trucks used within warehousing and storage?

This competition focuses on the construction, mining and quarrying sectors only, therefore projects focused on demonstration of technologies for deployment in the warehousing and storage sector is not eligible for funding.

27. We want to use manure derived biomethane (produced close to the quarry) with dual fuel biomethane - diesel vehicles/machinery. Is this allowed?

Biomethane-diesel dual fuel technology is not eligible for funding in this competition. Projects must support or aligns to a technology that uses one or more of the following long-term energy vectors:

• Hydrogen
• Direct electricity
• Battery
• E-Fuels (E-Diesel, E-Methanol, E-Methane)
• Ammonia
• Renewable dimethyl ether (rDME)
• Renewable Transport Fuel Obligation (RTFO) Development Fuels

Applicants should show how blending is a stepping-stone to 100% low carbon fuel use (without blending with any fossil fuel derived fuels or hydrotreated vegetable oil (HVO)) and outline their plan to achieve this.

28. There are some dual fuel (compressed biomethane and diesel) trucks in operation in the world but we have not (to date) found any focused on the quarry sector. Can you please confirm that biomethane - diesel dual fuel is eligible to apply?

Please see response to Q27.

29. For Phase 2 I understand we will need to demonstrate TRL 7 with working equipment on customers’ sites. Our concern for Phase 2 is that there is a potential that large scale commercial volumes of rDME may not yet be available in time to allow us to ship product to multiple customer facilities and to implement a rDME cylinder production line. Would it be acceptable to DESNZ for Phase 2 to intend to demonstrate system reliability / durability / success using propane?

Demonstrating the system using propane is not eligible for funding in this competition. Projects must support or align to a technology that uses one or more of the following long-term energy vectors to be eligible for funding:

• Hydrogen
• Direct electricity
• Battery
• E-Fuels (E-Diesel, E-Methanol, E-Methane)
• Ammonia
• Renewable dimethyl ether (rDME)
• Renewable Transport Fuel Obligation (RTFO) Development Fuels

Applicants must also justify that the use of other hydrogen carriers, such as rDME, is widely applicable to UK industry and fully compatible with a net zero future. They must be produced from hydrogen which meets the Low Carbon Hydrogen Standard, or if this cannot be met they must provide strong justification. Furthermore, the delivery plan of the project will be assessed and this includes providing evidence of access to specialist facilities or materials needed to complete the project.

30. Can a Tier 1 construction contractor be project lead for more than one RDR P2 bid application?

Lead applicants may submit up to a maximum of 3 applications, but applications must be materially different. Furthermore, if successful they must be able to deliver on all projects. DESNZ will award no more than £10 million to a single organisation, which may be for one project or across multiple projects.

Frequently asked questions

31. When can I apply for Phase 2 of the Red Diesel Replacement competition?

The competition opened for applications on 20 January 2023 and will close at 2pm on 30 March 2023.

32. How can I apply?

Applications must be submitted online by the deadline. Applicants must register for a password to access the online application form. Registration closes at 2pm on 23 March 2023.

33. Who can apply?

The Phase 2 competition is open to all organisations, not just grant recipients in Phase 1. However, please note that consortia cannot be led by universities.

34. Do I need to have registered my expression of interest to be able to apply for Phase 2 of the competition?

You do not need to have registered your expression of interest to apply for the competition.

35. How much funding is available in total for Phase 2?

The total budget available for Phase 2 is £32.5 million.

36. What is the minimum and maximum amount of funding that DESNZ will provide per project?

DESNZ can provide up to a between £1 million and £12 million for each demonstration project. Exceptional Phase 2 project proposals below the minimum budget of £1 million may be considered so long as the proposal meets the goals of the competition and is of sufficient scale.

37. When are Phase 2 demonstration projects expected to start and finish?

Phase 2 demonstration projects are expected to start in July 2023 and finish by March 2025.

38. When will applicants be notified about the results of their applications?

Applicants can expect to be notified in May 2023, depending on the number of applications we receive. Letters will be sent to successful and unsuccessful bidders.

39. I need help finding partners to form a consortium in Phase 2. Are you planning to do anything to help?

DESNZ held a match-making event in November 2022 to introduce the RDR match-making platform and enable participants to network with each other. Registration is required to access the platform. No further match-making events are planned.

40. Is the competition open only to UK based organisations? Can non-UK based organisations lead a project?

The competition is open to all organisations, independent of where they are based. Projects can work with international partners, but over 50% of the project’s costs must be incurred in the UK.

Non-UK based organisations can lead a project, however, please note if successful organisations are required to provide appropriate financial information about their organisation to pass due diligence.

41. Can I submit more than one application as a lead applicant?

Lead applicants may submit up to a maximum of 3 applications, but applications must be materially different. Furthermore, if successful they must be able to deliver on all projects. DESNZ will award no more than £10 million to a single organisation, which may be for one project or across multiple projects.

42. Can my organisation apply as part of multiple consortia?

Consortium member(s) can take part in multiple successful bids. However, if project consortium member(s) are part of multiple successful bids (maximum of 3) they must be able to deliver on all projects and they must not have applied for funding for the same piece of work more than once. DESNZ will not provide more than £10 million to a single organisation in Phase 2, which may be for one project or across multiple projects.

43. Can the project be led by an academic/research organisation, or does the lead need to be from industry?

Applications must be led by private organisations or research and technology organisations (RTOs) and may not be led by universities or non-commercial organisations.

44. What evidence is required on match funding at application stage and prior to first payment milestone? Can match funding be approved later during the project?

Confirmation that match funding will be available must be provided at application stage, for example a Letter of Intent from the funder/investor specifying their intent/agreement to provide an amount of funding and any conditions on that funding. This can be included in the Supporting Information document of the online application form. Match funding for the whole project must be confirmed/approved and evidenced within 3 months of the Grant Funding Agreement being signed, and in advance of the of the first payment milestone. The evidence provided could, for example, be a bank statement, Memorandum of Understanding or agreement within the signed consortium agreement. This will be taken into consideration for the first stage gate (approx. 6 months into delivery).

Debt and equity are acceptable sources of match funding, provided that this is accessible and projects are able to provide evidence of the availability of this funding within the timescales outlined. In circumstances where equity or debt is not accessible for use against project costs by the first milestone, for example where equity has not been sold/released, this would not be an acceptable form of match funding. In kind contributions such as staff time can be included in the match funding total, as long as they relate to eligible project costs, are appropriately costed at a fair market value, and are robust, realistic and justified in terms of the proposed project plans.

Unacceptable sources of match funding include, but are not limited to, other public-sector funding, funding granted to another project, illegal or fraudulent activity, and contributions of things which are considered ‘ineligible costs’ e.g., value of intellectual property.

45. Is contingency an eligible cost?

Applicants should ensure that their cost estimates are as realistic and as accurate as possible. All costs must be clearly justified in the Project Cost Breakdown forms and any excessive or unreasonable costs will lead to projects being marked down in the application stage. General project contingency funds should not be included in project costs. Contingency for a specific cost item can be included where there is reasonable justification, and assessors/DESNZ will consider whether this is reasonable and sufficiently justified at assessment and due diligence stage (contingency on labour costs is not eligible). Any such costs included in the total amount of funding being requested at bid stage will be included in assessments of whether the project represents value for money i.e. the assessment will be based on the full amount. However, DESNZ will only pay projects for actual costs and in arrears of work done. Projects cannot use any contingency funds without DESNZ approving a change request. Please also see the Phase 2 Competition Guidance Notes Section 2.2 for project scope and Appendix 2 for eligible costs and for information on inflation allowances.

46. Are decommissioning costs eligible? Are remediation/decommissioning costs eligible, if not a successful demonstration?

Projects will have responsibility for decommissioning demonstration equipment/assets when the project has been completed if it is not feasible to continue to operate/develop the equipment. When applying, applicants need to include any decommissioning costs, at fair market value, in the total estimated costs for the demonstration project.

Where the project does not plan to decommission but there is a risk that this will be needed depending on the outcome of the demonstration, this cost can be included as a specific contingency cost; please see response to question 45.

Questions received after the Q&A window (closed 8 February 2023)

47. Can you please confirm whether Declaration 6 Parts 1&2 are to be completed by project partners and sub-contractors accounting for more than 10% of the contract value and not all sub-contractors? (added 24 March 2023)

We have amended a small error found on Declaration 6 on 23 February 2023; please use the latest version found on the Phase 2 competition page in your application submission.

Declaration 6 Part 1 & 2 must be completed by all organisations that are significant to the delivery of the proposed project, including all sub-contractors that are listed in Annex 3 – Project Cost Breakdown Form.

48. We have insufficient number of rows for our project in the mandatory project cost breakdown form. How can I capture the additional information? (added 24 March 2023)

You can unprotect the workbook/sheet within the Project Cost Breakdown Form Excel document using the following password to add additional rows: RDRP2-23

If you add additional rows below please double check that the Total cells sums the additional data, otherwise the ‘Summary’ sheet may not be correct.

49. Can multiple users complete the online application form simultaneously? (added 24 March 2023)

When completing the application, you may be working collaboratively on it with other colleagues particularly if you are using the offline Word template to compose your responses before adding them to the online application form.  Please be aware though that SmartSurvey is designed to be used by a single respondent at any one time. Sharing ‘save and continue’ links to the online application form with multiple respondents could cause confusion about what content has been saved and what hasn’t, particularly if they are working on the online application form at the same time.

When a respondent clicks submit application from their browser, it will only take into account the status and details held within the survey from that particular Laptop/PC at the time. The online application will not record activity from multiple users across multiple browsers in multiple locations at the same time prior to submission.