Publication - Advice and guidance

Scottish Industrial Energy Transformation Fund - 2nd call: guidance

Last updated: 25 Nov 2021 - see all updates
Published: 5 Oct 2021

Guidance and forms for the 2nd call (autumn 2021) of the Scottish Industrial Energy Transformation Fund (SIETF) to provide grant funding to reduce energy costs and emissions through increased energy efficiency.

Scottish Industrial Energy Transformation Fund - 2nd call: guidance
Finance and subsidy control

Finance and subsidy control

The eligible costs and the maximum percentage of total project costs that a business can apply for via the SIETF is determined by subsidy control rules. This section allows checks on which project costs and eligible, and that the funding requested does not exceed the maximum aid intensity available for the lead applicant and each project partner.

Eligible costs

You will need to justify that the costs you intend to claim against are necessary and directly linked to the study or successful deployment of the project. Where the lead applicant is collaborating with other project partners in a consortium, the lead applicant may set out in the application each project partner’s eligible costs.

The following costs are ineligible for all strands of the competition:

  • costs not directly linked to the achievement of the study, deep decarbonisation or energy efficiency benefit
  • the value of contributions in kind, for example a contribution in goods or services as opposed to money
  • the costs of any preparatory work conducted before the Grant Funding Agreement is signed
  • costs incurred from production down-time

Deployment costs have to be for item of property, plant or equipment and can include costs directly attributable to:

  • purchase price, including import duties and non‑refundable purchase taxes, after deducting trade discounts and rebates
  • bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended
  • site preparation; initial delivery and handling; installation and assembly; testing and commissioning; or clearly associated  professional fees

Subsidy intensities

Subsidy intensity is the proportion of a project’s eligible costs that grant funding may cover. The subsidy intensities for the SIETF are compatible with both UK and EU rules, meaning that projects covered by the Northern Ireland Protocol are eligible for the same intensity of funding as any others in the UK.

Applicable subsidy intensities will depend on:

  • the competition strand you are applying to
  • your organisation’s size
  • tour organisation’s location
  • the type of organisation

Deployment projects

The SIETF will provide grant funding towards the up-front costs of deploying an energy efficiency or a decarbonisation measure. Examples of the type of costs that are eligible in the deployment competition are capital and material costs, subcontractor costs, and direct labour costs for the installation of the measure. Ongoing operating costs are not covered by this competition. The SIETF will only award grant funding towards projects where it can be demonstrated that these costs are additional and necessary to achieving the energy or emissions saving. The investment costs necessary to achieve the higher level of energy efficiency or decarbonisation will be determined as follows:

  • where the costs of investing in energy efficiency or decarbonisation can be identified in the total investment cost as a separate investment, this cost will constitute the eligible costs. The reference case is zero investment.
  • in all other cases, the costs of investing in energy efficiency or decarbonisation are identified by reference to a similar investment (for example, replacing equipment on a like for like basis) that would not achieve the desired outcome. The reference investment should be similar in terms of size, capacity, and all other technical characteristics besides those that achieve the energy or emissions saving and meet relevant minimum standards. The difference between the costs of both investments identifies the energy efficiency or decarbonisation-related cost and constitutes the eligible costs.

Specifying the eligible costs in this way helps ensure that the costs supported by the SIETF can be fully justified on the basis of the energy saving or decarbonisation benefit. The use of a reference case removes costs that might otherwise be associated with the general maintenance and upkeep of the site’s productive capacity, expansion of capacity, or investment that might be needed to comply with current or future regulations. The full costs of replacing productive industrial process equipment would therefore typically not be covered.

In some instances, companies may be replacing equipment ahead of standard investment cycles. In this case, for decarbonisation measures, eligible costs can be the full costs of replacement if without SIETF support they would not have replaced the equipment in the next five years. This aims to encourage early action and also recognises that there is typically no financial return to investing in decarbonisation measures (as there is for energy efficiency measures). Evidence such as maintenance or overhaul schedules that are benchmarked against similar specific installations will be required.

Energy efficiency deployment

If your project is located in a type ‘A’ assisted area you could receive funding for your eligible project costs of:

  • up to 65% if you are a micro or small organisation
  • up to 55% if you are a medium-sized organisation
  • up to 45% if you are a large organisation

If your project is located in a type ‘C’ assisted area you could receive funding for your eligible project costs of:

  • up to 55% if you are a micro or small organisation
  • up to 45% if you are a medium-sized organisation
  • up to 35% if you are a large organisation

If your project is located in another area you could receive funding for your eligible project costs of:

  • up to 50% if you are a micro or small organisation
  • up to 40% if you are a medium-sized organisation
  • up to 30% if you are a large organisation

Deep decarbonisation deployment

If your project is located in a type ‘A’ assisted area you could receive funding for your eligible project costs of:

  • up to 85% if you are a micro or small organisation
  • up to 75% if you are a medium-sized organisation
  • up to 65% if you are a large organisation

If your project is located in a type ‘C’ assisted area you could receive funding for your eligible project costs of:

  • up to 75% if you are a micro or small organisation
  • up to 65% if you are a medium-sized organisation
  • up to 55% if you are a large organisation

If your project is located in another area you could receive funding for your eligible project costs of:

  • up to 70% if you are a micro or small organisation
  • up to 60% if you are a medium-sized organisation
  • up to 50% if you are a large organisation

Deployment cost reference investment

If you are applying with a deployment project, you must describe your reference case in your application. The reference investment should be similar in terms of size and capacity. The reference investment should be a technically comparable investment, meaning an investment with the same production capacity and all other technical characteristics (except those directly related to the extra investment for the targeted objective). Your reference investment is your justification for your eligible costs and will be tested at assessment and due diligence stages.

To help interpret subsidy control rules for your own project we have provided some flow diagrams which suggest what the appropriate reference case might be in different scenarios. This logic should be applied to all individual elements of the project(s), testing whether the specific energy or decarbonisation costs can be separated out or otherwise justified.

Studies

Feasibility studies

For feasibility studies you could receive funding for your eligible costs of:

  • up to 70% if you are a micro or small organisation
  • up to 60% if you are a medium-sized organisation
  • up to 50% if you are a large organisation

Engineering studies

For engineering studies, you could receive funding for your eligible costs of:

  • up to 45% if you are a micro or small organisation
  • up to 35% if you are a medium-sized organisation
  • up to 25% if you are a large organisation

If your engineering study project qualifies as an ‘effective collaboration’ or widely disseminates knowledge, you could receive funding for your eligible costs of:

  • up to 60% if you are a micro or small organisation
  • up to 50% if you are a medium-sized organisation
  • up to 40% if you are a large organisation

‘Effective collaboration' means collaboration between at least 2 independent parties. The goal must be either:

  • to exchange knowledge or technology, or
  • to achieve a common objective based on the division of labour where the parties jointly define the scope of the collaborative project, contribute to its implementation and share its risks, as well as its results

Contract research and provision of research services are not considered forms of collaboration. For effective collaboration to apply between businesses no one business partner can take more than 70% of the total eligible project costs. For collaborations between businesses and research organisations, the research organisation must bear at least 10% of the total eligible project costs and have the right to publish its own research.


Contact

Email: SIETF@gov.scot

First published: 5 Oct 2021 Last updated: 25 Nov 2021 -