Concept’s guide to Phase 3c 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 3c of the scheme has recently been announced – and it opens for applications in October 2023.
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. The scheme is administered by Salix, a non-departmental public body.
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 3c – will allocate up to £230m 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.
Key things to note about Phase 3c of the PSDS
Phase 3 of the PSDS was launched in 2021 to allocate £1.425 billion of funding over the financial years 2022/23 to 2024/25. £230 million of available funding has been allocated to Phase 3c in 2024–2025, which will also see an additional budget for 2025/26, the value of which will be announced in the autumn. This will allow Phase 3c projects to be completed over the course of two fiscal years. The overall cost of Phase 3 of the project is £1.425 billion, and Phase 3c will get funding of up to £230 million in 2024–2025.
Key specifics of the scheme:
- Sector soft caps: The sector soft caps will remain in place for Phase 3c, to be implemented as in Phase 3b. These were introduced to allocate the funding fairly across the public sector, under the categories of Health, Education, and Other (including but not limited to: emergency services, clubs and community centres, museums and theatres, leisure centres, prisons, Ministry of Defence buildings and law courts.) The maximum funding a sector can be allocated is as high as 35% of the total Phase 3c funding, and no sector’s funding should be lower than 30% of the total Phase 3c funding. 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: Similar to earlier phases of the PSDS, Phase 3c allows projects to deploy carbon reduction measures over two financial years, allowing applicants more flexibility.
- Planning year:Applicants can also apply for funding for projects with spend in 2025/26 only, using 2024/25 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. 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 building heated by 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 value within each application.
- Hybrid heating systems: Phase 3c 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 proposed low carbon heating system is expected to meet all of 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, even if this happens before the 31st of March 2024. 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 3c of the Public Sector Decarbonisation Scheme opens for applications in October 2023 (exact date tbc). The portal will remain open for 10 days or until a sufficient value of applications has been received for the budget available.
Applications can apply to receive funding in:
- financial year 2024/25 only,
- financial year 2025/26 only, treating 2024/25 as a ‘planning year’, or
- across both financial years.
Projects must be completed within the last financial year for which funding has been allocated.
The application form for Phase 3c is currently available for download from Salix’s 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.