Applications open for the Public Sector Decarbonisation Scheme

Phase 4 of the Public Sector Decarbonisation Scheme (PSDS) is live, and organisations have until Monday 25th November 2024 at 2pm to apply for their share of funding.

PSDS provides grant funding to public sector organisations in England, as well as those with reserved functions operating in the devolved administrations, to install heat decarbonisation and energy efficiency measures in their buildings.

The government scheme, delivered by Salix, will make capital funding available from 2025/26 to 2027/28.  The value of available funding and the profile split across the three financial years is yet to be confirmed.

Key features of PSDS Phase 4

• Building eligibility: Applicants will be a public sector organisation in England or have reserved functions operating in the devolved administrations. Applicants must either own the relevant building or have a lease arrangement where the tenancy agreement places the responsibility for operation and maintenance of the building services on the applicant. Buildings with a Private Finance Initiative (PFI) arrangement where operation and maintenance are funded from Private Finance Initiative unitary charges paid by the applicant, are also eligible.
• Existing heating system requirements: Each building within the application must be served by a fossil fuel heating plant at the end of its useful life. This is generally 10 years or older.
• Minimum recipient contribution: Applicants must contribute the cost for a like-for-like replacement of the existing fossil fuel heating plant at a minimum of 12% of total project costs.
• Additionality: The project must be additional; this means that the project would not take place without the Public Sector Decarbonisation Scheme grant. It also must not have already started, and measures must not be required to be installed by law.
• Whole building approach: Applicants must consider the inclusion of building fabric improvements and energy efficiency measures as appropriate, where they reduce the heat or electrical demand of the building being heated by the proposed low-carbon heating system.
• Proposed heating system requirements: Applications must propose low-carbon heating for all buildings. No technologies reliant on the use of fossil fuels are eligible.

Key changes for Phase 4

There are some key changes announced in Phase 4 of the PSDS:

Targeted allocation: Phase 4 sees a move away from allocating funding on a first-come first-served basis, as has been applied in previous phases. The order in which grants are awarded will now primarily be driven by the application’s grant carbon cost.  Applications are prioritised by carbon cost initially, although this will also be impacted by the sector (‘education’, ‘health’ and ‘other’) and annual funding profile.

Calculating the application’s grant carbon cost: An application’s grant carbon cost will now be a key factor in determining which applications will be funded.  The grant carbon cost of the application will be calculated by dividing the requested grant value by the direct carbon savings delivered by the measures that are funded by the grant only. Applications must have a grant carbon cost of no more than £510 per tonne of direct carbon saved over the lifetime of the measures (£510/tCO2e LT). Applications with a lower grant carbon cost are more likely to receive funding.

Definition of public sector organisation: The definition of ‘public sector organisation’ has changed to align with up-to-date legislation. Organisations must meet the definition of a ‘public authority’ as defined by the Procurement Act 2023.  This may impact the eligibility of higher education institutions.

Key dates

The PSDS portal opened for applications on Wednesday 9 October 2024 at 2pm and will close on Monday 25 November 2024 at 2pm.

Applications will be assessed once the application portal closes, and all successful applications will be awarded funding by approximately the end of May 2025.

Projects must be delivered by 31 March 2028.

Advice and support

Concept has successfully supported many organisations with Salix-funded projects. Get in touch for advice, or if you’d like to learn more.