IETF Phase 3 Guide | Closure Status & What's Next 2026

The Industrial Energy Transformation Fund Phase 3 has £185 million allocated through 2028 and is the largest direct grant currently available for UK industrial decarbonisation. We have authored 14 IETF Phase 3 applications since the programme opened in late 2023, of which 11 have secured awards averaging 24% effective grant rate. This piece sets out what actually wins.

What IETF Phase 3 is, and isn’t

IETF is a competitive, scored grant. It is administered by the Department for Energy Security & Net Zero (DESNZ) and delivered through a combination of internal DESNZ assessment and external technical reviewers. Phase 3 windows have run quarterly through 2024 and 2025, with the programme expected to continue through 2028.

The fund covers two routes. The Energy Efficiency strand pays up to 30% of capex on energy-efficiency measures. The Deep Decarbonisation strand pays up to 50% on measures specifically targeting deep cuts in process emissions — fuel switching, electrification of heat, hydrogen pilots, carbon capture pilots and major efficiency programmes. Solar PV alone usually fits the Energy Efficiency strand. Solar combined with heat pump retrofit, process electrification or substantial battery storage usually fits Deep Decarbonisation.

The single most-misunderstood thing about IETF Phase 3 is that it is not a “first come first served” fund. Applications are scored against a fixed set of criteria, ranked, and the top-scoring applications win until the window’s allocation is exhausted. This means the winning play is not to apply early — it is to apply with the highest-scoring narrative.

Eligibility — the gate before scoring

IETF eligibility is checked before any scoring happens. If you fail eligibility, you don’t get scored. The five eligibility tests:

SIC code. Your business must operate in one of the eligible SIC codes — broadly UK manufacturing (SIC 10–32), data centres (SIC 63.11), and a small set of associated activities. Service-economy businesses, retail, hospitality and most professional services are not eligible.

Energy intensity. Your site must demonstrate sufficient energy intensity to qualify. The threshold is not published as a hard number, but in practice IETF assessors look for sites with annual electricity demand above 2 GWh or annual gas demand above 5 GWh. Smaller sites can sometimes qualify if the energy-cost-to-revenue ratio is high.

UK delivery. The project must be delivered in the UK. The applicant entity must be UK-incorporated or have a UK branch.

Project unstarted. The project must be unstarted on the day of submission. Spend incurred before submission is not eligible. This is a hard rule and the most common reason awards are clawed back.

Capex bracket. Phase 3 covers projects with capex between £100,000 and £14,000,000. Smaller projects don’t have the absorptive capacity for the application overhead; larger projects sit in separate routes (NZIP, Hydrogen Business Model, etc.).

If all five tests pass, the application enters scoring. If any fail, it does not.

The scoring framework — what assessors actually do

IETF Phase 3 scoring runs on five weighted criteria. The exact weights are not published but our pattern-matching across 30+ applications (ours and clients we have audited) suggests the following approximate weighting:

Carbon savings per pound of grant (35–40% of total score). Calculated as tCO2e/£100k of grant. This is the dominant scoring factor. A typical solar-only project scores 4.0 to 5.5 tCO2e/£100k. A solar-plus-heat-pump project scores 7.0 to 9.0. A deep decarbonisation project (fuel switching, process electrification) scores 12.0 to 25.0.

Project deliverability (15–20%). Can the project actually be delivered? Assessors look at supplier quotes, programme schedule, organisation capability, planning consents, DNO position. A project with named suppliers, signed letters of intent, and DNO offer in hand scores materially better than one with TBD suppliers.

Strategic fit with industrial decarbonisation pathway (15%). Does the project align with the published industrial decarbonisation strategy for your sector? IETF prizes coherence — projects that are part of a documented decarbonisation roadmap score better than one-off opportunistic projects.

Co-funding and value for money (10–15%). What proportion of the project is the applicant funding? Higher applicant contribution (lower grant intensity) is favoured at the margin. This is why the average IETF effective grant rate sits around 22%, well below the 30% headline cap.

Innovation and replication potential (10%). Does the project demonstrate something novel that other businesses could learn from? Applications that include monitoring & verification commitments to share results score better.

Programme management (5–10%). Quality of risk management, contingency, monitoring proposals.

The pattern is clear. The winning play is to maximise the carbon-savings-per-pound score while passing all the other gates. That means bundling measures.

Why bundling wins

A solar-only IETF application is structurally hard to win because the carbon-savings score is too low. A 1 MWp solar PV system at a manufacturing site typically saves 280 tCO2e/year. At a 30% grant rate of 0.30 × £700,000 = £210,000, that’s 13.3 tCO2e per £100k of grant lifetime, or 4.0 tCO2e/£100k annual.

Now bundle that solar with a heat pump retrofit displacing gas process heat. The heat pump might save 220 tCO2e/year against an additional capex of £200,000. The combined project saves 500 tCO2e/year against £900,000 capex. At 30% grant intensity that’s £270,000 of grant — and 5.6 tCO2e/£100k annual. The bundled project scores higher.

Now add battery storage that firms up solar self-consumption from 65% to 85% — saving an additional 80 tCO2e/year through reduced grid imports. With £80k of battery capex on top, the project hits 580 tCO2e/year against £980,000 capex, with £294,000 of grant — 5.9 tCO2e/£100k.

Now add a process electrification measure — replacing a small natural gas burner with electric process heat — saving 150 tCO2e/year for £150k. Total project: 730 tCO2e/year against £1.13m capex, with £339,000 grant. That’s 6.5 tCO2e/£100k, comfortably above the typical winning threshold.

The bundling principle is universal. We have not seen a winning Phase 3 IETF application that was solar-only. Every winner has included at least one heat or process measure alongside the PV.

The deep decarbonisation route — when to use it

The Deep Decarbonisation route covers up to 50% of capex but has tighter eligibility. The qualifying measures are limited to:

• Fuel switching from natural gas to electricity, hydrogen, biomass or biogas
• Process electrification (replacing fossil-fuel process heat with electric)
• Carbon capture, utilisation and storage (CCUS)
• Hydrogen production and use
• Major industrial heat pump deployments

If your project has one of these as the dominant measure, apply under Deep Decarbonisation — the higher grant rate is worth the tighter scoring criteria. If your project is dominated by efficiency measures with electrification as a secondary feature, apply under Energy Efficiency.

The Energy Efficiency strand currently has a higher success rate (around 45% of submitted applications win) versus Deep Decarbonisation (around 35%) because Deep Decarbonisation attracts more applications but the carbon savings per pound figures are typically higher, so the scoring competition is more intense.

Application document structure

A complete IETF Phase 3 application includes:

1. Cover sheet and applicant details. Standard form. Watch the “lead applicant entity” line — it must match the entity holding the asset.

2. Project description (typically 8–15 pages). Narrative description of the project, the site, the existing energy and process flows, the proposed measures, and the integration between measures.

3. Energy and emissions baseline (typically 6–12 pages). Detailed analysis of the existing site energy use, broken down by load type, with at least four years of half-hourly data for electricity. This is the most-skipped section in losing applications.

4. Project economics (4–8 pages). Capex breakdown, opex savings, payback, IRR, NPV at three energy price scenarios. Must reconcile with supplier quotes.

5. Carbon emissions methodology (3–5 pages). How tCO2e are calculated. Must use Defra Greenhouse Gas Conversion Factors for the latest year.

6. Decarbonisation pathway alignment (2–4 pages). How the project fits with the relevant Industrial Decarbonisation Strategy or sector pathway.

7. Risk register and contingency. Standard project management.

8. Monitoring & verification plan. How carbon savings will be measured and reported post-completion.

9. Supplier quotes (appendix). At least three quotes per major measure.

10. Letters of support. Optional but useful — particularly from sector trade associations.

The total document set is typically 60–120 pages. Drafting takes 6 to 8 weeks of consultant effort if the underlying data is in good order.

What can go wrong

Poor energy data. The most common failure mode. Half-hourly meter data with gaps, anomalies or aggregation issues drives non-compliant baseline calculations and either fails eligibility or scores poorly.

Inflated carbon savings claims. Assessors check carbon claims against supplier-quoted equipment performance. Optimistic claims are flagged and reduce score.

Weak decarbonisation pathway alignment. Generic statements about “supporting net zero” don’t score. Specific reference to sector-specific pathways (NZIP roadmap for the chemical industry, Jet Zero Strategy for aerospace, Made Smarter for manufacturing more broadly) score materially better.

Late supplier quotes. Quotes that arrive after submission cannot be considered. Quotes that have lapsed (over 90 days old) are rejected.

Subsidy control issues. Stacking IETF with another DESNZ grant for the same plant is not permitted. Stacking with tax allowances (Full Expensing, AIA) is fine and should be modelled into the financial case.

Timing — when to submit

IETF Phase 3 windows run quarterly. Within a window, application timing has marginal effect — there is no advantage to submitting on the first day vs the last. The advantage comes from picking the right window for your project’s readiness.

The factors that affect window choice:

• Supplier quotes. Quotes need to be valid through to submission and ideally for 90 days afterward. Quote lifetime affects window selection.
• DNO offer. Where DNO connection is in the project scope, having an offer in hand materially improves deliverability scoring. DNO offers take 60–110 working days depending on region.
• Decarbonisation pathway updates. If the relevant industrial decarbonisation pathway is being updated by DESNZ or BEIS (now subsumed into DESNZ), waiting for the update can improve scoring.

Most of our successful applications have had a 3 to 4 month preparation cycle into a target window. Faster cycles are possible but produce weaker applications.

How we charge for IETF work

We use a fixed-fee structure with a success-fee variant available for larger applications:

• Fixed-fee application: typically £4,500 to £8,500 + VAT depending on application complexity. Includes everything from energy audit through to submission.
• Success-fee variant: 3% of awarded grant, capped at £40,000 + VAT. Available for projects with capex above £750k.
• Energy audit only: £1,800 + VAT for an IETF-compliant baseline audit if you want to assess viability before committing to a full application.

We do not charge upfront for the eligibility scoping conversation. Our success rate on submitted Phase 3 applications has been 79% (11 wins out of 14 submissions). The three losses had specific identifiable scoring weaknesses that have been addressed in subsequent submissions.

Where to start

If you think your business might fit IETF Phase 3, the right first step is a 30-minute scoping call. We need to know your SIC code, annual electricity and gas demand, the asset you’re considering decarbonising, and your rough timeline. Within 24 hours of the call we’ll come back with a written eligibility assessment and an indicative scoring estimate.

The fastest route in is the free funding review form. Or call the office directly on the number in the header.