The recently announced Public Sector Decarbonisation Scheme provides grant funding to public sector organisations in England and those with reserved functions in the devolved administrations to install heat decarbonisation and energy efficiency measures in their buildings.
The scheme's primary objective, managed by Salix Finance, is to significantly reduce carbon emissions from public sector buildings, contributing to the broader goal of achieving net zero emissions.
The Department for Energy Security and Net Zero (DESNZ) will allocate funding for this scheme from 2025/26 to 2027/28, with specific financial details to be announced later.
At SSE Energy Solutions, we pride ourselves on the support that we provide to our customers in accessing funding through Phase 4 of the Public Sector Decarbonisation Scheme. We have a proven track record with many public sector organisations in helping them realise their zero carbon ambitions.
Timeline
The timeline for applications is very short.
Reasons to apply
The introduction of this scheme presents a host of opportunities for public sector organisations. Here are some compelling reasons to apply.
Financial Support
The scheme offers substantial grant funding, which will be allocated by the DESNZ from 2025/26 to 2027/28. This financial support alleviates the burden of upfront costs, making it feasible for organisations to invest in sustainable energy solutions.
Private Finance Initiative (PFI) Buildings
Buildings with PFI arrangements are also eligible. This inclusion broadens the scope of buildings that can be upgraded to modern, efficient, heating and cooling systems.
Focus on Outdated Heating Systems
The scheme targets buildings with fossil fuel heating plants that are at the end of their useful life, typically 10 years or older. This focus ensures that the most inefficient systems are replaced first, yielding significant carbon savings.
Increased carbon per tonne
The increase in the value of carbon per tonne is a welcome change. This adjustment not only incentivises the adoption of cutting-edge decarbonisation technologies but also provides more opportunities for businesses and public sector organisations to invest in a range of innovative solutions. From advanced heating systems and energy-efficient lighting to renewable energy installations, the increased carbon value supports a diverse array of technologies that can help us achieve our collective climate goals.
Who is eligible to apply?
- Public sector organisations in England or those with reserved functions in devolved administrations. This includes local authorities, NHS Trusts, schools, universities, police forces, and more.
- Applicants must either own the building or have a lease arrangement placing operational and maintenance responsibilities on them. Buildings with a Private Finance Initiative (PFI) arrangement are also eligible.
- Each building must have a fossil fuel heating plant at the end of its useful life, typically 10 years or older.
- 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.
- 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.
- 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.
- 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
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. Instead, a targeted allocation approach has been introduced. The order in which grants are awarded will 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.
The grant carbon cost for an application will be a key factor in deciding which applications will be funded.
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.
SSE Energy Solutions: Your Partner in Accessing Funding
At SSE Energy Solutions, we stand ready to support our customers in navigating the application process for this funding. Our team of experts is equipped to guide you through every step, ensuring your projects meet the scheme’s requirements and deliver sustainable, cost-effective energy solutions.
The launch of Phase 4 of the Public Sector Decarbonisation Scheme is a significant milestone in our journey towards a sustainable future. By leveraging the available funding and embracing the latest technologies, public sector organisations can lead the way in reducing carbon emissions and enhancing energy efficiency.
Contact us now, before the portal opens, for guidance on how to apply for this transformative funding. Let’s work together to create a greener, more sustainable future for all.
Case Study
SSE leads energy partnership to slash carbon emissions by 90% across London school trust
SSE Energy Solutions, has embarked on an ambitious project to reduce carbon emissions by 90% across 11 Harris Federation academies in South East England. Funded through the UK Government's Public Sector Decarbonisation Scheme (PSDS), the £14.3 million project will overhaul heating systems, building controls, and electrical infrastructure across buildings in South London and Kent. The initiative is forecast to reduce Harris Federation’s collective emissions by over 38,000 tonnes of CO2 - the equivalent of planting 1.73 million trees.
Upgrades will include replacing gas boilers with energy-efficient air source heat pumps, installing advanced building energy management systems, and upgrading ageing electrical infrastructure. Renewable energy technologies will also be incorporated where feasible.
In addition to the environmental benefits, the project is expected to significantly reduce energy costs for the academies over its 20-year course and exemplifies SSE Energy Solutions’ capabilities in orchestrating large-scale decarbonisation initiatives.
From initial project development and design through long-term monitoring and verification, SSE leverages its experience across energy project planning, engineering design, project management, building controls and renewable technology integration.
