Commercial Heat Pump Funding FAQs

The grants and funding schemes available for your heat pump project will vary depending on your type of organisation, the building, and its location.

Funding options may include:

• SME Loan & Cashback Scheme – loans and cashback grants for SMEs, charities and not-for-profits in Scotland
• Green Heat Network Fund (GHNF) – grants for heat pumps that feed into low-carbon district heating (Round 12 has now closed but Round 13 is planned)
• Heat Network Efficiency Scheme (HNES) – grants for improvements to existing district or communal heat networks

Many other grants and funding schemes are still running but no longer accepting new applications. These include the Public Sector Decarbonisation Scheme (PSDS) and the Warm Homes: Social Housing Fund (formerly the Social Housing Decarbonisation Fund or SHDF).

If your project doesn’t qualify for available grants and funding schemes, commercial finance and tax incentives could provide an alternative way to fund your heat pump installation.

PSDS funding refers to grants issued to public sector bodies through the Public Sector Decarbonisation Scheme.

These grants help fund heat decarbonisation and energy efficiency measures for bodies such as schools, hospitals and councils. The goal is to help reduce emissions from public sector buildings by 75% by 2037 (compared to the 2017 baseline).

The PSDS scheme is delivered by Salix Finance on behalf of the UK government.

Although PSDS is still in operation, it’s no longer accepting new applications.

No, PSDS is no longer open to new applications. However, it is still supporting the projects that have already received awards through the fund.

PSDS is currently in Phase 4 of its delivery stage, which will be the final phase of the programme.

Although PSDS funding is no longer available for new projects, public sector organisations can still access other funding options.

These include:

• Local net zero accelerator pilots
• Heat Networks Delivery Unit (HNDU) to support local councils in planning low-carbon heating systems
• Green Heat Network Fund (GHNF) to help fund heat pumps that feed into low-carbon district heating
• Heat Network Efficiency Scheme (HNES) to help fund improvements to existing district or communal heat networks
• Great British Energy (GBE) Community Fund to help test, develop and build community-owned clean energy assets
• GBE Partnerships Grant for Local Authorities actively collaborating with community organisations working on community energy projects

The Social Housing Decarbonisation Fund (SHDF) has been rebranded and replaced by the Warm Homes: Social Housing Fund.

The scheme issues funding to registered providers of social housing (both private and local authority landlords) to help decarbonise and upgrade the energy performance of social housing across the country.

SHDF is still in operation, but under a new name – the Warm Homes: Social Housing Fund.

It is currently in Phase 3 of its delivery stage, and is still actively delivering low-carbon heating across England. However, it is now closed for new applications and there won’t be a direct Phase 4.

Instead, the fund will be consolidated into a single new low-income grant scheme in 2027 or 2028 onwards. This will replace both the Warm Homes: Social Housing Fund and Warm Homes: Local Grant.

Yes. Depending on your business, tax allowances may be able to reduce the effective cost of investing in low-carbon equipment like a heat pump.

For example, companies may be able to claim full expensing for qualifying new and unused plant and machinery like a heat pump. This could allow 100% of the cost to be deducted from taxable profits in the year it was purchased.

Eligibility depends on the equipment and circumstances of the business. Always get advice from a qualified tax professional before making investment decisions.

Yes, commercial heat pump finance can help spread out the upfront cost of a heat pump.

This can be especially useful where businesses aren’t eligible for grants and funding schemes (or where the available grant doesn’t cover the full project cost).

Heat pump financing is a loan, lease or payment plan that allows you to spread out the upfront cost of buying and installing a heat pump over time.

Repayment terms typically range from three to 15 years, with varying APR rates depending on the provider.

Heat-as-a-service (HaaS) funding for heat pumps involves customers paying a simple recurring fee to cover the upfront cost of a heat pump, as well as ongoing maintenance, repairs and performance monitoring.

This not only spreads out the upfront cost of a heat pump installation. It also removes the risk. Instead of the customer shouldering any maintenance and repair costs, the provider takes on the financial and operational risk of equipment breakdowns, maintenance and efficiency optimisation.

Heat-as-a-service funding is typically available from third-party providers or specialised energy companies.