Industrial and high-temperature heat pump grants after IETF

Why industrial process heat is where the biggest commercial heat pump grants live

If your site uses gas or oil to raise process heat or hot water, the funding question needs checking carefully. The Industrial Energy Transformation Fund was a dedicated fuel-switching fund for industrial heat pumps and waste-heat recovery, but it is now closed (gov.uk lists it closed from July 2025, with no further extension or successor planned; projects already funded continue), so it cannot be relied on as an available route. For an energy-intensive manufacturer, food producer, laundry or recycler the realistic routes today are the tax reliefs on qualifying plant (the Annual Investment Allowance and other capital allowances) and, for very small systems, the Boiler Upgrade Scheme, which is not limited to homes but pays a flat grant per installation up to 45 kWth and so suits small systems and not process-scale plant.

Industrial heat pumps do more than swap a fuel. Modern high-temperature units deliver process heat and hot water at 70 to 90C and above, the temperatures real manufacturing, laundries and food processing need, and they can recover waste heat from refrigeration, compressors or process streams to lift overall efficiency. On an energy-intensive site that means large carbon savings and reduced Climate Change Levy exposure, and on a site supplying sustainability-conscious clients it can become a genuine tender differentiator. Because funders and boards both look for exactly this kind of fuel-switching and recovery, the strongest industrial schemes are the ones where the business case and the engineering are built together from the outset rather than bolted on afterwards.

The pressures driving these projects are real and rising. Energy is often one of the largest single operating costs on an industrial site, gas prices are volatile, and the Climate Change Levy sits on top of every unit burned, so a fuel switch protects the operating budget as well as the carbon position. Sustainability-conscious customers increasingly write decarbonisation expectations into their contracts, which turns process-heat carbon from a compliance cost into a commercial advantage. The barrier has always been capital and the risk of an over-promised quote, which is why every figure should be anchored to recognised performance standards and your own consumption data, and why any funding eligibility should be checked as a design input from the first conversation rather than an afterthought.

What a typical install looks like and how it is sized

Industrial process schemes span a wide range, generally 100 kW to 2 MW or more of thermal output, using high-temperature units delivering 70 to 90C and above flow, often with waste-heat recovery loops, sited in a plant compound whose size varies with the process. A scheme of that scale delivers in the region of 200,000 to 5,000,000 kWh of heat a year and removes roughly 35 to 900 tonnes of CO2 annually. Sizing is driven by the process heat demand and its profile, established from a heat-loss and process survey plus at least 12 months of consumption.

The design then hunts for waste-heat sources, refrigeration reject heat, compressor heat or process exhaust, that can be recovered to raise the effective efficiency, because on an industrial site recovered heat is often the single biggest lever on the whole-life numbers. Even at high flow temperatures a well-designed industrial heat pump returns a useful SCOP, and that figure, rated to recognised standards, is the heart of any funding or investment case, so the survey and the evidence are one and the same exercise. Where the process can tolerate a slightly lower flow temperature for part of its duty, the design should allow for it, because every degree of reduced flow temperature lifts the SCOP and strengthens the running-cost case.

Costs, payback and tax relief

Industrial process schemes typically run £200,000 to £3,000,000 or more depending on scale and the degree of waste-heat integration, with a simple payback near 9 years before any grant funding. The plant generally counts as plant and machinery, so the Annual Investment Allowance and other capital allowances (AIA, £1m a year) are tax reliefs that can apply to qualifying spend; relief applies to the cost the business itself funds, and treatment should be confirmed with an accountant. On an energy-intensive site the combination of tax relief and the avoided gas cost and Climate Change Levy is what can turn a large capital number into a defensible investment. Our cost guide sets out installed cost and tax treatment for process schemes.

Funding routes in detail

The Industrial Energy Transformation Fund (IETF), run by DESNZ for eligible industrial sites, is closed: gov.uk guidance lists it closed from July 2025, with no further extension and no successor planned, although projects already funded continue. It should not be treated as an available route, and the fund has closed, so anyone quoting IETF funding for a new project should be asked what scheme they mean. Check gov.uk for any new industrial decarbonisation programme before relying on grant funding.

Any business can also use the Annual Investment Allowance or other capital allowances on the qualifying plant, limited to spend the business itself funds, so a grant reduces the qualifying spend. The Public Sector Decarbonisation Scheme is for public bodies and is closed to new bids, and the Green Heat Network Fund is for heat networks (Round 12 closed on 25 September 2026), so neither usually fits a private industrial site. Ask the installer to confirm eligibility for any route against your circumstances rather than assume; the detail sits on our grants and funding page.

Compliance and sector considerations

High-temperature duties drive refrigerant choice. The F-Gas phase-down of high-GWP gases pushes industrial designs toward natural refrigerants, R290 propane, ammonia and CO2, which deliver the high temperatures process heat needs but carry DSEAR and ATEX considerations for flammable-refrigerant plant, all of which the design must allow for. Refrigerant work should be done by F-Gas certified engineers under the UK F-Gas Regulation (ask the installer to confirm), and systems should be designed to BS EN 378 for safety and environmental compliance.

Performance is rated to BS EN 14511 (rated COP) and BS EN 14825 (SCOP) so the SCOP in any funding or investment case is comparable and credible against any other compliant supplier. As with every route, the large electrical load means DNO supply capacity must be checked early, and on an industrial site the supply upgrade can be the longest-lead element of the programme, so that conversation should start at feasibility, with phasing or demand management considered where the supply is constrained. Where the site already operates to ISO management standards, those feed naturally into the procurement and grant documentation.

The choice of natural refrigerant is itself a compliance and design decision with funding implications. R290 propane, ammonia and CO2 each suit different duties and each carries its own siting, ventilation and safety requirements under DSEAR and ATEX, so the plant compound has to be laid out for the refrigerant chosen rather than the other way round. Getting this right matters because funders and boards want proven technology, and a well-evidenced design using established natural-refrigerant plant gives them confidence that the scheme will deliver the carbon savings claimed. The refrigerant circuit, the safety provisions and the recovery loops should be designed together so that the engineering, the safety case and the business case all point at the same set of figures.

How a good installer approaches this kind of project

A good installer starts with a process and heat-loss survey and at least 12 months of consumption, because a sound design and any funding case both need the real demand profile and the genuine waste-heat opportunities mapped. They design for the lowest viable flow temperature that the process allows to protect the SCOP, integrate waste-heat recovery wherever the streams exist, and select the refrigerant and the DSEAR and ATEX provisions to suit the duty. They raise the DNO supply enquiry early given the load, and check the plant compound before quoting. Ask for a written proposal with running cost, carbon and Climate Change Levy impact modelled from your own data, and the warranty terms in writing. Ask to see the full model and take a second opinion, because on a project of this scale the funder and the board both need numbers they can trust.

An illustrative example

As an illustrative composite scenario based on typical UK building types, and not a real project or client: a commercial industrial laundry using gas to raise process hot water above 75C finds energy is a major operating cost and needs to cut both cost and carbon to retain contracts with sustainability-conscious customers. A typical design would be a 600 kW high-temperature, natural-refrigerant heat pump recovering waste heat from the wash process and lifting it to a 78C process flow, delivering around 1,800,000 kWh of heat a year at an SCOP of about 3.2 at that high flow temperature. It would save roughly 330 tonnes of CO2 a year, with the waste-heat recovery lifting overall efficiency and Climate Change Levy exposure reduced. The indicative saving would be about £140,000 against the prior gas cost for a payback near 6.5 years, before any grant. The figures are illustrative and depend on your process, site eligibility and the funding you secure.

Where the process plant could also serve neighbouring buildings, see heat networks and ambient loops, and for space-heating duties look at commercial air-source heat pumps. To weigh the economics, read the cost guide and the grants and funding routes, browse the FAQs, then send an enquiry and ask the installer to work from your consumption data.