Red Diesel Replacement Competition

Red Diesel Replacement Competition

In the March 2020 Budget, the Chancellor announced the partial removal of the entitlement to use red diesel and rebated biofuels from April 2022, to encourage the selected sectors which use red diesel to decarbonise. In 2020, The Department of Business, Energy & Industrial Strategy (BEIS) commissioned a study by sustainability consultancy E4tech to engage with impacted red diesel sector stakeholders to gather information and provide recommendations for a programme to support this decarbonisation.

The Red Diesel Replacement competition aims to address this challenge by providing £40 million in grant funding for projects that develop and demonstrate lower carbon, lower cost alternatives to red diesel for the construction, and mining and quarrying sectors. It will be delivered in 2 consecutive phases.

Phase 1

A total of £9.2 million in grant funding for Phase 1. Up to £460,000 for projects that develop technologies within any of the three innovation lots at technology readiness level (TRL) 4 and above:

  • Lot 1: Distribution, storage and refuelling systems development
  • Lot 2: Development of vehicle (components/sub-systems) and fleet management infrastructure (facilities for maintaining, hosting and servicing vehicles)
  • Lot 3: Fuel development

It is envisaged that the separate technologies will be presented at a matchmaking workshop mid-way through this phase to allow consortia to form for Phase 2.

Phase 2

A total of £30 million in grant funding for Phase 2. Up to £15 million for projects at TRL 5-6 that demonstrate a low carbon integrated system that includes elements of all three technology lots from Phase 1 on a construction and mining/quarrying site. Projects must demonstrate that the technology is at TRL 7 upon completion.


This competition will support technologies that have a clear progression pathway in reducing carbon emissions, air pollution emissions and reliance on biomass at each step towards the final goal of deploying a low carbon, zero biomass solution in the longer term. The long-term energy pathways that could enable this are:

  • direct electricity
  • battery
  • hydrogen
  • e-diesel
  • e-methanol
  • e-methane
  • ammonia

To be eligible for this competition, the technologies must prove that after Renewable Transport Fuel Obligation (RTFO) support, it can achieve a total cost of ownership (capital and operational costs) that is at least as good as current fuel/vehicle systems after the removal of the red diesel rebate.

BEIS is keen to raise awareness of this competition amongst as many firms, research institutions and clients within the construction supply chain as possible, and to encourage them to develop proposals for the competition or to publicise this to their networks. Full details of the competition can be found via this link.

Get the latest news from CONSTRUCT