Concept’s guide to Phase 3b of the Public Sector Decarbonisation Scheme
If you’re managing public sector estates then you may already be familiar with the Public Sector Decarbonisation Scheme (PSDS), which funds low carbon heating projects in public sector buildings.
Phase 3b of the scheme has recently been announced – and it opens for applications in September 2022.
Here’s our quick guide to help you understand which projects are eligible, and how you can apply.
PSDS – in a nutshell
The Public Sector Decarbonisation Scheme provides funding for projects that decarbonise heating systems and improve energy efficiency in public sector buildings.
Applicants must have, and be using, a fossil-fuelled heating system, that is coming to the end of its useful life.
The latest phase – Phase 3b – will allocate up to £635m of funding to public sector organisations.
What is the purpose of the PSDS scheme?
One of the greatest challenges today in meeting the UK’s 2050 net zero target is decarbonising the way buildings are heated. In fact, most of the buildings in the public sector still rely on fossil fuel-based heating. The funding aims to support public sector organisations to move to low carbon heating when existing systems reach the end of their working lives.
Which public sector bodies can apply?
The following public sector bodies can apply for PSDS funding:
- Central government departments and their arm’s length bodies
- Emergency services
- Institutions of further and higher education
- Local authorities
- Maintained schools within the state education system, including academies, Multi-Academy Trusts and free schools
- Nursery schools maintained by a local authority
- NHS Trusts and Foundation Trusts
What projects can be funded under the PSDS scheme?
Projects must include the replacement of fossil fuel heating systems (such as gas boilers) with low carbon heat sources, such as air source heat pumps or solar thermal. Existing heating systems must be coming to the end of their useful life.
In addition, this may be ‘bundled’ with energy efficiency measures where possible, such as building management systems, insulation, and metering.
The reason is to ensure applicants take a “whole building” approach to decarbonisation of heat in buildings. This means the building should be made as energy efficient as is practical before the low carbon heating is installed. For example, improving the building fabric insulation will reduce the overall size of low carbon heating plant required (and save on fuel bills).
The full list of eligible technologies is in the guidance notes on the Salix website.
What is new in Phase 3b of the PSDS?
There are several new elements to Phase 3b of the PSDS:
- Sector soft caps: these have been introduced to allocate the funding fairly across the public sector. The caps have been determined by each sector’s share of public sector carbon emissions. Education will get 37% of Phase 3b funding, Health will get 28%. The remaining sectors fall into the “Other” pot, which is capped at 35%: this includes (but isn’t limited to) emergency services, clubs and community centres, museums and theatres, leisure centres, prisons, Ministry of Defence buildings and law courts. Applications will be allocated on a first-come-first-served basis until a sector cap is reached, at which point further funding will only be allocated to that sector if other sectors are under-subscribed.
- Multi-year applications: Phase 3b increases the funding pot for multi-year applications spending in both 2023/24 and 2024/25 and makes up to £233m in FY 2024/25 available.
- Planning year: Applicants can also apply for funding for projects with spend in 2024/25 only, using 2023/24 as a planning year. This is to allow applicants to have longer to plan their projects with the certainty of committed funding.
- Applicant contribution: Applicants are expected to contribute funding equivalent to the like-for-like costs of replacing their fossil fuel heating system. For Phase 3b, this contribution must be at least 12% of total project costs.
- ‘Whole building’ approach: energy efficiency measures will only be funded if they are in the same part of the building as the proposed low-carbon heating installation. For example, a hospital building will not be eligible to apply for insulation in Block ‘A’ where the low carbon heating measure is only heating Block ‘B’.
- Energy efficiency cap: To sharpen the scheme’s focus on heat decarbonisation, there is a maximum proportion of the grant value that can be claimed for energy efficiency. This maximum proportion will be set at 58% of total grant costs within each application.
- Hybrid heating systems: Phase 3b will not support hybrid heating systems where new fossil fuel boilers are being installed as part of the project. In addition, new boilers funded by the contribution from the Applicant will specifically exclude a project from being eligible. The project is expected to meet the heat demand provided by the end-of-life system being replaced.
- Grant start date: Recipients will be able to start work on their project as soon as they have signed and returned their grant offer letter. This includes works in FY 22/23. No grant funding can be claimed for work undertaken before the grant offer letter is accepted by the grant recipient.
Key dates and deadlines
Phase 3b of the Public Sector Decarbonisation Scheme opens for applications in September 2022 (exact date tbc). It will close when sufficient applications have been submitted to meet the budget available for Phase 3b.
All applicants awarded funding for single year projects must complete all projects by Sunday 31 March 2024. Applicants successful for multi-year projects must complete by Monday 31 March 2025.
You can access the application form from the Salix website.
How Concept can help
At Concept we have successfully supported many organisations with Salix-funded projects. Get in touch for advice, or if you’d like to learn more.