Comment by Matt Caville – Senior Advisor for the Decarbonisation of Complex Sites at Energy Systems Catapult.

The Department for Energy Security and Net Zero (DESNZ) and its delivery partner Salix has announced the launch of Phase 4 of the Public Sector Decarbonisation Scheme (PSDS). I’ve put together a brief breakdown of everything you need to know about the latest scheme and how you can unlock funding for your public sector Net Zero projects.

What funding can I access for my decarbonisation projects?

• The total amount of funding available has not yet been confirmed and is dependent on Spending Review outcomes.
• We’re expecting the application portal to open in mid-October, but – at the time of writing – no firm date has been announced. I’d urge you to make sure you register for updates from Salix. This will ensure that you’re notified when a date is announced.
• You don’t have long to apply once the portal opens. The application portal will close on 25 November 2024. Start gathering information you’ll need for the application now.
• The scheme will run from 2025/26 to 2027/28. This means that any projects funded by Phase 4 PSDS will need to be completed by 31 March 2028.
• If your application is successful, you should expect a grant offer letter by May 2025.

What are the key changes from previous funding rounds?

• Unlike previous phases, Phase 4 will no longer be first-come, first-served. Instead, funding will be based on the cost to save a tonne of direct* carbon (£/tCO2eLT) per application.
• Applications will be ranked in order of the cost of carbon and then bucketed into three tiers. The top 30% performing applications will be in the top tier, middle 40% in the second tier, and bottom 30% in the third tier. Applications will be randomised in each tier to determine the final funding allocation with the top tier prioritised.
• Applications must achieve a direct carbon cost below £510 per tCO2eLT. In previous phases, this has been £325 per tCO2e. This opens up opportunities for a broader range of decarbonisation projects.
• The definition of public sector organisations now aligns with the Procurement Act 2023**, potentially impacting the eligibility of higher education institutions. This will typically mean higher education institutions that are either wholly or mainly funded by public funds will be eligible.

What support is available?

We want to help ensure you’re successful in your application for funding. If you work in any area of the public sector, we’ve made a wide range of free Public Sector Decarbonisation Guidance available on our website to support you in developing high quality applications for the PSDS.

Check out the guidance, toolkits, and templates; I’ve listed some of those that might be of interest.

• Heat pumps guide: this guide covers the types of heat pumps suitable for non-domestic applications, feasibility considerations and complementary technologies to improve system efficiencies. Examples of alternative electric heating solutions are also provided.
• What the numbers mean: this guide provides a breakdown of the typical types of numbers that are considered best practice to generate as part of your decarbonisation programme and an easy guide on how to interpret them. This will help with getting business cases signed off and applying for Salix Public Sector Decarbonisation Scheme (PSDS) funding.
• Main guidance on Procurement: this guide aims to help you navigate your Net Zero procurement processes with your procurement team. It covers the basics of public sector procurement, why it is important to make the right procurement decisions and helps you to understand the available routes.

What should I do next?

• Download the free resources from the our Public Sector Decarbonisation Guidance website.
• Read the application Phase 4 PSDS guidance notes and check your eligibility. This is especially important if you are a higher education institution given the eligibility change to definitions of a public authority under the Procurement Act 2023.
• Download the Phase 4 PSDS application form to understand the level and quality of information and data points you will need to gather to make your application, and begin sourcing the information now. Information needed could come from across your origination so it’s advisable to start collating now.
• Register for an account on Salix’s website and attend Salix’s webinars when they are announced.

*Direct carbon emissions are the release of greenhouse gas emissions associated with fossil fuel use. This means that projects that reduce or replace the use of fossil fuels with lower carbon sources of fuel will have a better cost of carbon saved.

**In the Procurement Act 2023, a ‘public authority’ is an organisation that is:

1. Wholly or mainly funded by public funds or,
2. Subject to public authority oversight,
3. Does not operate on a commercial basis.

Higher education institutions are independently governed and therefore will not meet the public authority oversight test therefore to be eligible, a higher education institution must meet the wholly or mainly funded by public funds test.