Phase 4 Public Sector Decarbonisation Scheme

Autumn Budget and Phase 4 Public Sector Decarbonisation Scheme

Following the announcement of over £1bn for public sector decarbonisation in the Autumn Budget 2024, the Department for Energy Security and Net Zero has confirmed funding for Phase 4 of the Public Sector Decarbonisation Scheme. Funding is heavily weighted towards the second and third financial years. 

• 2025/26 Financial Year: £86million
• 2026/27 Financial Year: £427million
• 2027/28 Financial Year: £427million

Funding up to these values will be allocated in Phase 4.

More than £300million has already been committed to Phase 3c projects for financial year 2025/26. 

Welcome to Phase 4

Welcome to Phase 4 of the Public Sector Decarbonisation Scheme. This is where you will find all the information and documents regarding the latest phase of this programme.

The Public Sector Decarbonisation Scheme provides grant funding to public sector organisations in England, as well as those with reserved functions operating in the devolved administrations, to install heat decarbonisation and energy efficiency measures in their buildings. 

The main strategic objective of the scheme, delivered by our teams at Salix, is to reduce direct carbon emissions from public sector buildings.

Through Phase 4 of the Public Sector Decarbonisation Scheme, the Department for Energy Security and Net Zero will make capital funding available from 2025/26 to 2027/28.  The value of available funding and the profile split across the three financial years will be confirmed in due course.  

Applicants should apply for funding across financial years which best fit the delivery of their project.

In this section, we highlight the key features of the scheme. However, please refer to the Phase 4 Public Sector Decarbonisation Scheme Guidance Notes below for full details and explanation. We also have a series of Phase 4 documents, tools and resources available to guide you.

Building eligibility: Applicants will be a public sector organisation in England or have reserved functions operating in the devolved administrations.  Applicants must either own the relevant building or have a lease arrangement where the tenancy agreement places the responsibility for operation and maintenance of the building services on the applicant. Buildings with a Private Finance Initiative (PFI) arrangement where operation and maintenance are funded from Private Finance Initiative unitary charges paid by the applicant, are also eligible. 

Existing heating system requirements: Each building within the application must be served by a fossil fuel heating plant at the end of its useful life. This is generally 10 years or older.

Minimum recipient contribution: 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.

Additionality: 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.

Whole building approach: 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.

We have developed the Salix Heating Load Tool V2 which you can use to calculate the building's heat load and size your low carbon heating system.

Proposed heating system requirements: Applications must propose low-carbon heating for all buildings. No technologies reliant on the use of fossil fuels are eligible.  

Here we highlight the key changes that have been made for Phase 4 Public Sector Decarbonisation Scheme. It’s important you become familiar with these changes should you wish to apply for funding. Please also refer to the documents below in the key downloads area.

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. 

Funding for Phase 4 Public Sector Decarbonisation Scheme was confirmed in December 2023 by UK government with details published in February 2024.

The scheme was launched on 23 September 2024 with the Phase 4 Guidance Notes published on the same day. The portal opened for applications on Wednesday 9 October 2024 at 2pm and will close on Monday 25 November 2024 at 2pm.

Applications will be assessed once the application portal closes, and all successful applications will be awarded funding by approximately the end of May 2025.

Projects must be delivered by 31 March 2028.

We are confident that our website provides you will all the details you require to help you prepare a Phase 4 Public Sector Decarbonisation Scheme application. However, should you have any questions please contact our expert team; [email protected]. 

Following the launch of these Phase 4 Guidance Notes and application form, we hosted a series of webinars, and we have made the webinar slides available for download.

Alongside the Department for Energy Security and Net Zero we have produced a series of Phase 4 Public Sector Decarbonisation Scheme videos. These are designed to help you navigate the new scheme. 

• Introduction and guidance video
• Frequently asked questions video
• Calculating carbon cost explanatory video
• Targeted allocation explanatory video

Please download an application form suitable for your Phase 4 Public Sector Decarbonisation Scheme application. We attach two forms. The first, is for those applying for up to 30 sites and the second, extended application form, is for those applying for more 30 sites.

*Formatting errors have been fixed on this latest version of the form v1.4.

Heat Network compatibility guidance for Public Sector Decarbonisation Scheme Phase 4 applicants 2024: 

This document provides guidance for Phase 4 Public Sector Decarbonisation Scheme applicants on the steps they should consider taking to ensure their buildings are heat network compatible. The document has been created by the Department for Energy Security and Net Zero.