Phase 4 Public Sector Decarbonisation Scheme
Autumn Budget and Phase 4 Public Sector Decarbonisation Scheme
In September 2024, the Department for Energy Security and Net Zero (DESNZ) announced the launch of Phase 4 of the Public Sector Decarbonisation Scheme (PSDS), with applications set to open in mid-October 2024. This latest phase continues the government’s commitment to decarbonising the public sector by providing capital grants to support the installation of low-carbon heating systems and energy efficiency measures in public buildings.
The scheme is targeted at a wide range of public institutions including schools, hospitals, leisure centres, council buildings, and more helping them reduce their reliance on fossil fuels, cut emissions, and play an active role in supporting the UK’s net-zero by 2050 ambition.
Phase 4 will prioritise projects that deliver measurable carbon savings, cost-effectiveness, and long-term impact, while supporting the public sector’s leadership in climate action
Phase 4 decarbonisation scheme Duration: 2025/26 – 2027/28
Key Announcements: UK Budget Over £1 billion confirmed in the Autumn Budget 2024
Autumn Budget:
Delivered on 30 October 2024, the Chancellor confirmed funding for PSDS over the next three financial years.
Funding Profile:
Likely weighted heavily towards the second (2026/27) and third (2027/28) years, with a smaller allocation in 2025/26.
About Public sector decarbonisation Phase 4
The Public Sector Decarbonisation Scheme (PSDS) offers government-funded grants to public sector organisations across England, as well as to reserved functions within devolved administrations. The scheme is designed to accelerate the UK’s net zero goals by supporting the installation of heat decarbonisation technologies such as low-carbon heating systems and energy efficiency upgrades in public buildings.
Its primary objective is to reduce direct carbon emissions from the public estate, particularly those linked to fossil-fuel-based heating, while also lowering long-term energy costs and improving building performance.
Key Features:
Building Eligibility: Applicants must:
✅ Be public sector organisations in England or with reserved functions in devolved administrations.
✅ Own or lease buildings (including those under Private Finance Initiative arrangements) with responsibility for operation and maintenance.
Heating System Requirements:
Buildings must currently use fossil fuel heating systems at the end of their useful life (10+ years old).
Minimum Recipient Contribution:
Applicants must contribute at least 12% of total project costs, covering a like-for-like replacement of the existing fossil fuel system.
Additionality:
Projects must be additional, meaning they wouldn’t proceed without the grant, have not already started, and aren’t legally required.
Whole Building Approach:
Applicants should include energy efficiency improvements and building fabric upgrades to reduce heat/electric demand alongside proposed low-carbon heating.
Heating System Requirements:
Only low-carbon heating systems are eligible. Fossil-fuel-based systems are excluded.
Key Changes In Phase 4 decarbonisation Grant Scheme
1. Targeted Allocation:
Funding will no longer be on a first-come-first-served basis. Grants will be prioritized by:
✅ Grant Carbon Cost: Calculated by dividing the requested grant value by the direct carbon savings over the lifetime of the measures. The cost must not exceed £510 per tonne of CO₂ saved.
✅ Sector Soft Caps: Funding distributed across education, health, and other sectors proportional to carbon emissions.
2. Application Prioritisation
Applications with lower grant carbon costs are more likely to be approved.
Application Timeline
✅ Guidance Published: 23 September 2024
✅ Portal Open: 9 October 2024 (2 PM)
✅ Portal Close: 25 November 2024 (2 PM)
✅ Funding Decisions: By May 2025
✅ Project Deadline: 31 March 2028
3. Updated Public Sector Definition:
Aligns with the Procurement Act 2023, potentially impacting eligibility (e.g. higher education institutions).
Public Sector Decarbonisation Fund Tools and Resources
To support applications, Salix Finance, a non-departmental public body wholly owned by the UK government, administers funds on behalf of the Department for Energy Security and Net Zero Salix has developed the Heating Load Tool V2 for calculating heat load and sizing low-carbon heating systems.
Applicants are encouraged to review the public sector decarbonisation fund Phase 4 Guidance Notes and additional resources for comprehensive details.
Key Downloads
✅ Phase 4 Guidance Notes
✅ Heating Load Tool V2
✅ Eligibility Checklist
For further Grants and Funding updates and application support, visit the Public Sector Decarbonisation Scheme Phase 4 Portal or contact the Salix Finance team.
Let’s work together to accelerate the UK’s journey to net zero!
