The Department for Energy Security and Net Zero has opened applications for Heat Pump Ready Round 2, a £20 million innovation grant programme designed to accelerate the development and commercialisation of next-generation heat pump technologies. Launched on 21 April 2026, the scheme forms part of the expanded Warm Homes Plan, which has received a £30 million boost to drive decarbonisation across UK residential heating.

For UK entrepreneurs, cleantech founders, and established heating manufacturers, this represents a critical funding window to scale solutions that address both the climate emergency and household energy costs—a dual challenge facing millions of British families.

Understanding Heat Pump Ready Round 2: Scope and Opportunity

Heat Pump Ready Round 2 offers grants ranging from £200,000 to £2 million for projects that develop, test, and bring to market innovative heat pump technologies. Unlike conventional grants, this scheme prioritises innovation in heat pump design, efficiency, installation methods, and integration with UK housing stock.

The programme is open to a broad range of applicants: SMEs in the heating industry, technology companies developing smart heating controls, manufacturers of heat pump components, and consortia combining industry partners with research institutions. Notably, the scheme encourages cross-sector collaboration, meaning a small proptech startup could partner with a regional energy supplier or housing association to strengthen their application.

Key funding brackets include:

• £200k–£500k: Suitable for prototype development, feasibility studies, and early-stage commercialisation
• £500k–£1 million: For scaling manufacturing, field trials, or market rollout in specific regions
• £1 million–£2 million: Supporting large-scale deployment, supply chain development, or technologies with significant carbon abatement potential

Projects must demonstrate clear innovation, cost reduction pathways, and alignment with UK net-zero targets. The government is particularly interested in solutions that lower heat pump installation costs, improve performance in older properties (typically harder to retrofit), and reduce reliance on refrigerants with high global warming potential.

Timeline and Application Deadlines

The application window is tight. Businesses must submit their full applications by 25 June 2026—less than three months from launch. This compressed timeline reflects the government's urgency to move viable technologies from the lab to market quickly.

The expected project timeline varies by grant size, but most funded projects will run for 18–36 months, with interim review points at 12 and 24 months. This allows the government to monitor progress, ensure value for money, and redirect support if needed.

Key dates for applicants:

• 21 April 2026: Programme launch; application portal opens
• 4 June 2026: Closing date for clarification questions to the delivery body
• 25 June 2026: Hard deadline for full application submissions
• August–September 2026: Assessment and panel review
• October 2026: Funding awards expected to be announced

Unlike some innovation schemes, Heat Pump Ready does not require a separate expression of interest stage, so entrepreneurs should prepare their full business case, technical specification, and budget breakdown immediately.

Eligibility, Technical Requirements, and Strategic Fit

To succeed in Heat Pump Ready Round 2, applicants must meet several core criteria. First, they must be a registered UK business (sole trader, partnership, limited company, or academic institution). Second, projects must demonstrate genuine innovation—routine manufacturing improvement or standard installations do not qualify.

The government has published a detailed technical specification document via GOV.UK, which defines eligible technology categories:

• Next-generation heat pump components: High-efficiency compressors, low-GWP refrigerant systems, variable-speed drives
• Integration technologies: Smart controls, demand-side response capability, interoperability with renewable electricity and thermal storage
• Installation innovation: Novel pipework solutions, rapid deployment techniques, or modular designs that reduce on-site labour
• Retrofit solutions: Heat pumps optimised for older UK properties (pre-1980 housing stock), low-temperature radiator alternatives, or hybrid heating systems
• Supply chain resilience: UK-based manufacturing scale-up or import substitution for critical components

Applicants must also demonstrate cost reduction: most successful bids will show a credible pathway to reducing installed heat pump costs by at least 15–25% over the project period. This is vital because cost remains the primary barrier to adoption. Current installed costs for air-source heat pumps in the UK range from £8,000 to £15,000 depending on property type, whereas the government's target is to reduce this to £5,000–£8,000 by 2030 to achieve mass-market uptake.

Projects must also clearly articulate carbon abatement—how many homes could be heated using the technology, and what net CO2 savings would result. The government uses a standard methodology for calculating this, published in the programme guidance.

Context: The Broader Warm Homes Plan and Decarbonisation Goals

Heat Pump Ready Round 2 sits within the wider Warm Homes Plan, a government-backed initiative to improve home heating and reduce energy bills for households across the UK. The plan has expanded significantly: following consultation, the government allocated an additional £30 million across 2026–27, with Heat Pump Ready Round 2 claiming £20 million of that allocation.

The rationale is straightforward. UK buildings account for roughly 20% of carbon emissions, with heating responsible for around 85% of that building-related carbon. Over 8 million UK homes still rely on fossil fuel boilers (primarily natural gas), and switching them to electric heat pumps is essential to meet the legally binding net-zero target by 2050—and the interim 2035 carbon budget.

Currently, heat pump deployment is slow. Only around 3–4% of new heating installations are heat pumps, compared to 90%+ in Sweden and Denmark. Barriers include:

• High upfront capital cost
• Low consumer awareness and perceived reliability concerns
• Limited installer capacity and training
• Poor performance in poorly insulated older homes
• Grid infrastructure questions (electricity capacity at scale)

By targeting innovation funding at cost reduction and retrofit solutions, the government hopes to unlock the deployment acceleration needed to hit implied targets: roughly 100,000–150,000 heat pump installations per year through the 2030s, rising to 600,000+ annually by 2040.

Why This Matters: Jobs, Cost Savings, and Competitive Advantage

For UK entrepreneurs, Heat Pump Ready Round 2 creates tangible opportunities across the cleantech value chain. The scheme has been designed to favour businesses that can scale manufacturing, train installers, or develop digital tools that complement hardware.

Job creation: Successful projects are expected to support skills development and workforce growth. The heating engineer shortage is acute—the industry needs an estimated 10,000–15,000 additional installers and technicians by 2030. Grant recipients will likely need to invest in apprenticeships, which the scheme explicitly encourages.

Cost competitiveness: UK manufacturers who succeed in reducing heat pump costs could win export markets. Germany, France, and Scandinavia are investing heavily in domestic heat pump manufacturing. If UK firms can deliver cost reductions through innovation—whether via novel components, smarter supply chains, or installation techniques—they will be attractive to European distributors and could help reshore manufacturing capacity.

Household finances: If the sector achieves the target 20% cost reduction, a typical air-source heat pump installation could drop from £10,000 to £8,000. Combined with the Boiler Upgrade Scheme (which offers £7,500 grants toward heat pump installation), the consumer cost barrier drops significantly. Running costs are also lower: heat pumps typically cost 20–40% less to operate than gas boilers, saving households £200–500 per year in energy bills.

How to Apply: Practical Steps for Founders

The application process is competitive but transparent. Here are the key steps:

1. Establish eligibility: Confirm your organisation meets the definition of a UK business, and that your technology genuinely qualifies as innovation under the published guidelines.
2. Register on the grants portal: The scheme uses the UK government's standard grants management system. Create an account and register your organisation.
3. Develop your technical case: Write a clear, evidence-backed technical specification covering: the current state of the technology, your innovation, how it will be tested/validated, and the path to commercialisation. Include drawings, prototypes, or pilot data if available.
4. Build your financial case: Provide detailed project budgets (broken down by cost category: labour, equipment, materials, overheads), a spend profile (quarterly breakdown), and evidence that your organisation has the financial stability to co-invest or manage the grant responsibly. Applicants are expected to provide some match funding (typically 20–50% depending on project risk and applicant type).
5. Demonstrate impact: Quantify the expected carbon savings, cost reduction, market potential, and job creation. Use the government's impact calculation methodology, available in the guidance.
6. Show commercial viability: The scheme funds innovation, but not R&D for its own sake. Explain your route to market: who will manufacture or deploy the solution, how you will reach customers, and what the commercial model is (licensing, direct sale, etc.).
7. Submit by 25 June: Ensure all documentation is complete and uploaded by the deadline. Late submissions will not be accepted.

Common reasons for rejection include: vague technical specifications, unrealistic cost reduction claims, weak commercialisation plans, and poor value for money (i.e., the grant size is disproportionate to the expected output). Successful applicants typically work with innovation advisers or grant consultants to strengthen their proposal—an investment that often pays for itself in improved funding success rates.

Competitive Landscape and Real-World Examples

Heat Pump Ready Round 1 (launched 2024, £15 million) provides helpful precedent. Funded projects have included:

• A Sheffield-based manufacturer developing low-cost scroll compressors, reducing component cost by 22%
• A consortium of SME installers and a regional electricity network company piloting smart load management for heat pumps, enabling better grid integration
• A Welsh proptech firm building AI-driven heat pump sizing software to optimise installation for older properties

These examples show that the scheme supports diverse innovation models: hardware engineering, software/controls, supply chain, and installer capability. For Round 2, expect similar diversity, plus growing interest in hybrid heating (heat pump + boiler backup for peak winter demand) and industrial heat pump applications (small businesses, hospitality).

Internationally, similar schemes in Germany, France, and Belgium have proven effective. Germany's KfW bank has funded over 3,000 heat pump projects since 2021, and cost reductions have followed: German heat pump prices fell 15–20% over 2023–25. UK innovation funding can replicate this success if deployment keeps pace.

Regulatory and Supply Chain Considerations

Applicants should also be aware of evolving regulations. The Building Safety Bill reforms will gradually tighten standards for heating systems in new builds and major retrofits. Heat pumps must meet strict noise, efficiency, and safety standards, governed by the Environmental Protection Act and future standards under the Future Homes Standard (due 2025–26).

On supply chain resilience, the government is keen to reduce UK dependency on imported heat pump components, particularly from China and Southeast Asia. Projects that include UK-based manufacturing or component development will score well in assessment, particularly if they can demonstrate long-term cost competitiveness.

Additionally, projects should account for installer training and certification. The Microgeneration Certification Scheme (MCS) governs heat pump installer accreditation. Successful applicants may need to work with training bodies (such as BESA or the Institute of Plumbing and Heating Engineering) to ensure their solutions can be installed by certified engineers.

Looking Forward: Heat Pump Ready and the Net-Zero Transition

Heat Pump Ready Round 2 is a critical juncture in the UK's heating decarbonisation journey. The £20 million allocation is modest relative to the scale of the challenge—switching 8 million homes to electric heat pumps will ultimately require hundreds of billions in private and public investment. But innovation funding acts as a catalyst, de-risking new technologies and proving cost reduction pathways that attract subsequent commercial investment.

If the scheme succeeds, we should expect to see:

• A 20–30% drop in UK heat pump installation costs over 2026–2030
• Expansion of UK manufacturing capacity for key components, reducing import dependency
• Training and certification frameworks that enable rapid installer upskilling
• Retrofit solutions optimised for the UK's unique housing stock (Victorian terraces, rural properties, listed buildings)

For founders and innovators, the lesson is clear: the government's net-zero commitment is driving real, sustained funding. Heat Pump Ready Round 2 is one of several schemes designed to support the decarbonisation transition (others include Innovate UK's clean energy programmes, and the Levelling Up Fund). Entrepreneurs with credible solutions to cost, performance, or integration challenges have a genuine opportunity to secure funding, scale their businesses, and contribute to UK climate goals—all simultaneously.

The June 25 deadline is absolute. Organisations planning to apply should begin developing their technical and financial cases immediately. The scheme assessment panel typically favours projects that are not only innovative but also ready to move quickly into implementation and market testing.