The government is investing £20m to support development of electric vehicles (EVs) capable of returning electricity to the grid.

The new investment will support vehicle-to-grid projects as part of the government’s Industrial Strategy and create a smarter energy system, while increasing the numbers of electric cars on UK roads.

The projects will investigate technology that allows plug-in electric vehicles to not only draw power from the grid when charging, but return it to people’s homes or back to the grid.

Minister of state for climate change and industry, Claire Perry said: “The government is a world leader in tackling climate change and we are committed to investing in clean energy innovation to support the UK’s transition to a low carbon economy.

“Vehicle to grid technology provides another opportunity for the UK to showcase to the world our leading expertise in research and development which is at the heart of our ambitious Industrial Strategy. This competition could unlock significant economic benefits for the UK – helping to create jobs in this burgeoning sector while helping to reduce our emissions.”

The new funding is from the Department for Business Energy and Industrial Strategy and the Office for Low Emission Vehicles (OLEV), and will be awarded to three types of innovative vehicle to grid projects:

• feasibility studies – investigating the ways vehicle to grid technology can be used in the future;

• industrial research or experimental development – for example, to develop vehicle-to-grid charging equipment;

• demonstrator trials in the real-world environment – projects that trial vehicle to grid technology in different locations across the country.

Transport minister Jesse Norman said: “Electric vehicles are already helping thousands of motorists cut their fuel costs, and now there is an extra financial incentive for motorists to go green.

“The number of ultra-low emission vehicles on our roads is at record levels, with the latest figures showing that there are over 100,000 plug-in cars and vans registered.

“The government’s ambition is that nearly all cars and vans on our roads are zero emission by 2050.”

The competition process will start in the next few weeks with the aim of winners being notified in December and projects starting in early 2018.