Phase 4 Public Sector Decarbonisation Scheme - Key changes for Phase 4

Targeted allocation

Phase 4 of the Public Sector Decarbonisation Scheme is no longer following the allocation of grant funding on a first-come first-served basis as used in previous schemes. Instead, applications will be assessed on prioritised on the applications’ grant carbon cost. This means that applications with higher grant carbon costs may be less likely to receive funding. 

We will be using a targeted allocation model, which will prioritise Public Sector Decarbonisation Scheme funding towards the most cost-effective applications first, whilst also considering the sector the application comes from.  Applications will be sorted into tiers based on their grant carbon cost, and will then be awarded funding in a randomised order. 

As with previous phases of the scheme, applications will continue to be assigned to one of three sector categories – ‘education’, ‘health’ or ‘other’. Between 30 and 35% of available funding will be assigned to each sector. This categorisation will take place after the targeted allocation and randomisation.

Finally, the allocation of funding will depend on the financial profile of applications prioritised by the targeted allocation model. If the funding in one of the three financial years is fully allocated, and funding still remains in one or both of the remaining financial years, any funding remaining will be allocated to applications that only have spend in the financial years with funding remaining. This will be based on the spending profile in their application form.   

To ensure that applicants run into minimal issues at the point of application, the application portal will now have a queuing system. This means applicants will have from 9 October to 25 November in which to submit their applications. If the portal is experiencing a high volume of users at any time, applicants will be placed in a queuing system before they can enter the portal. However, to avoid these issues, we encourage applicants to submit their application ahead of time. And they should be confident they have all the necessary information and documentation to complete the application.

Carbon cost tiers 

The targeted allocation model focuses on allocating funding to applications based on the grant carbon cost of their project. The grant carbon cost of an application is based on how much direct carbon is saved from Public Sector Decarbonisation Scheme grant funding only. To reflect this, the calculation method will be amended from previous phases of Public Sector Decarbonisation Scheme so that the grant carbon cost of an application reflects the direct carbon saved by the Public Sector Decarbonisation Scheme grant alone, rather than the entire project. Applicants will be able to identify the grant carbon cost of their application by entering project details into the application form which will automatically generate the grant carbon cost.

We will sort all applications into three ‘tiers’ based on their grant carbon cost.  The most cost-effective applications will be sorted into the top tier, followed by a middle tier and then a bottom tier containing the least cost-effective applications received. Funding will be prioritised towards the most cost-effective tiers first. As such, applications with a lower grant carbon cost are more likely to receive funding from Phase 4.

The maximum acceptable application grant carbon cost for Phase 4 is £510/tCO2e over the lifetime of the project for grant funded measures.  An application with this grant carbon cost would likely be in the bottom tier and least likely to be funded.  Applicants are therefore encouraged to submit an application with a competitive grant carbon cost while ensuring they have their own applicant contribution available to deliver the project. Applicants can influence the grant carbon cost of their application by adjusting the inputs into the calculator to come up with the most competitive and cost-effective method of delivering and funding their project.

Funding Profile 

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 the financial year which best fits the delivery of their project. 

Applications with only 2025/26 and 2027/28 funding will not be eligible for Phase 4. However, applications that take up to three years to complete but are not seeking funding for their first and/or second financial year are eligible. This ‘Planning Year’ option allows applicants to apply for funding for projects with spend in 2026/27 and 2027/28 financial years, using 2025/26 as a planning year to design and develop their projects with no grant spending. Similarly, applicants can apply for funding in 2026/27 only, or 2027/28 only, using previous year(s) as planning years. 

Please also note that the requested funding profiles are not able to be amended once an application is submitted. It will be at our discretion to approve any changes to this profile during assessment period.

Change to eligible organisations 

As per the Procurement Act 2023, organisations must now meet the definition of a ‘public authority’. 

To be a public authority under the Act, an organisation should meet at least one of the following tests, and not operate on a commercial basis: 

• The organisation is wholly or mainly funded out of public funds.
• The organisation is subject to public authority oversight.

This may impact the eligibility of a small number of applicants from previous phases. These will be predominantly higher education institutions whose revenue comes mostly from private funding and international student fees. These will be required to provide evidence of their eligibility at the point of application.

Subsidy Control Changes

Applicants that engage in any economic activity or are currently leasing their site to an enterprise may be eligible for Public Sector Decarbonisation Scheme Phase 4 funding. If the works funded by the grant directly impact any economic activity they are undertaking, the applicant must cooperate with our teams to ensure compliance with the Subsidy Control Act 2022. For further details on subsidy control, please see the guidance.