Phase 4 of the Public Sector Decarbonisation Scheme

On 23^rd September 2024, the Department for Energy Security and Net Zero announced Phase 4 of the Public Sector Decarbonisation Scheme (PSDS) in the government’s continual effort to reduce carbon emissions and meet the 2050 Net Zero target.

Administered by Salix Finance, the next phase includes several key updates and modifications aimed at making the application process more efficient to try and ensure a more fair distribution of funding.

The funding will be spread across three financial years, from 2025/26 through to 2027/28 to allow applicants to better align their funding requests with their project timelines.

The use of sector-specific caps, including healthcare and education, will remain in place to ensure fair distribution of funds across public services.

What is the Public Sector Decarbonisation Scheme (PSDS)?

The Public Sector Decarbonisation Scheme (PSDS) is a government grant initiative that helps public sector organisations, such as schools, implement energy efficiency improvements and heat decarbonisation measures. Its primary goal is to reduce carbon emissions in public buildings while promoting long-term cost savings.

What’s new in Phase 4?

1. Moving away from first-come first-served

One of the most notable changes in Phase 4 is the departure from the first-come, first-served basis that was adopted in earlier phases. Instead, funding will now be allocated to applicants that can demonstrate the best value for money while delivering direct carbon savings.

To manage high demand, the application portal has been updated with a queuing system, ensuring that when a high number of users access the portal, applicants will be placed in a queue to reduce technical issues.

As a result, it is crucial applications are sent well in advance, with all the information and supporting documentation ready. Planning ahead and not leave the application to the last minute will help avoid any issues.

2. Introducing the grant carbon cost

A key focus of the new phase is “grant carbon cost,” calculated by dividing the grant request by the project’s direct carbon savings. Applications must keep this cost below £510 per tonne of CO2e (carbon dioxide equivalent), with priority given to those delivering the most carbon savings per pound.

3. Update to the definition of ‘public sector organisations’

In order to align with the latest changes in legislation, Phase 4 updates eligibility criteria, requiring public sector applicants to meet the ‘public authority’ definition under the Procurement Act 2023, which may affect some higher education institutions.

Key dates and deadlines

The Phase 4 scheme was officially launched on 23 September 2024. The application portal will open in mid-October 2024, and applications must be submitted by 25 November 2024.

All submissions will be reviewed once the portal closes, and successful applicants will be notified of funding awards by the end of May 2025. All projects must then be completed by 31 March 2028.

How to qualify for PSDS Phase 4

Applicants must either own the relevant building or have a lease arrangement that places responsibility for operation and maintenance on the applicant. This phase also opens eligibility to buildings operating under a Private Finance Initiative (PFI) to be eligible if the applicant covers operation and maintenance costs through unitary charges.

Each building applying for funding must have an existing fossil fuel heating system at the end of its useful life, which is generally 10 years or older.

Applicants are required to contribute at least 12% of the total project costs to cover the expense of a like-for-like replacement of the existing heating system.

The project must also be additional, where it would not proceed without the funding from the grant, meaning it also cannot have already started.

Additionally, the focus on a whole-building approach means applicants must consider implementing improvements to the building fabric, where appropriate, that can further reduce the overall energy demand of the project. All proposed heating systems must be low-carbon and technologies reliant on fossil fuels will not be eligible for funding.

How Eddisons can help

Through our specialist Education team, we have helped schools and multi-academy trusts secure millions of pounds in Salix-funded projects, including the PSDS scheme.

We offer comprehensive support throughout the entire process, from the initial application to project delivery, utilising the expertise of our Decarbonisation team.

Get in touch today to see how we can assist with your PSDS application and help you achieve your decarbonisation goals.