Phase 2 Public Sector Decarbonisation Scheme

Announcement of Phase 2 Public Sector Decarbonisation Scheme (Phase 2 PSDS)

Welcome to the Phase 2 Public Sector Decarbonisation Scheme (Phase 2 PSDS). Salix would like to invite you to familiarise yourself with the statement here made by the Department for Business, Energy and Industrial Strategy (BEIS) on the Government website in relation to the policy behind the scheme.  As the delivery partner of Phase 2 PSDS we explain below how Salix will implement the new Phase 2 PSDS.

Keeping you informed

Our Application Portal for Phase 2 Public Sector Decarbonisation Scheme (PSDS) has now closed and we are currently assessing applications.


We closed it on Tuesday 13th April because at this time the value of applications reached more than £150 million* and £75 million of funds are available to allocate to this phase of the scheme. At this point, screening assessments confirmed that Salix had sufficient applications to be able to allocate the full funding available and Salix was able to create a reserve list of assessed projects in the event that projects withdraw or reduce in value for any reason. 


All Applicants who have submitted an application prior to the close of the Application Portal will shortly receive a letter from Salix explaining the status of their application. 


Applicants who were intending to submit an application in the next few weeks are invited to send the following information to [email protected]; contact details, name of organisation, brief description of project and value of project. This information will help Salix assess the scale of demand and which organisations are preparing projects for decarbonisation of heat.

*The final value of applications received and that have been confirmed by their authorised official was 222 at £254.5m. [Updated Thursday 6th May]

At Salix we have used our learning from delivering Phase 1 PSDS to design the model for delivering this next phase.  We have listened to feedback from our clients, our stakeholders, decision-makers, and other professionals.  We know how important it is to communicate fluently the purpose of the scheme, the criteria for funding and how the application process and allocation of funding will be delivered. Phase 2 Public Sector Decarbonisation Scheme (Phase 2 PSDS) will be delivered in 2021-22. Government have allocated £75 million of funding and this is available to eligible organisations as grants. 

Phase 2 PSDS has opened as the final funds are allocated for Phase 1 Public Sector Decarbonisation Scheme (Phase 1 PSDS). Salix is the delivery partner for this scheme.

Applications for Phase 2 PSDS opened at 2pm on Wednesday 7th April, 2021. The scheme has a set of conditions that are designed to ensure that the policy direction, required by Government, delivers on the agenda for the decarbonisation of heat. To meet the UK’s Net 2050 target, emissions from public sector estate will need to be near zero and the Clean Growth Strategy sets out that public sector emissions will be halved by 2032 compared to a 2017 baseline in order to meet the Fourth and Fifth Carbon Budgets.

There are some key differences for Phase 2 that reflect and support the increased focus on heat decarbonisation. 

Please see our Guidance Notes which includes sections on scheme criteria and examples of eligible technologies. This will give the public sector the technical information needed to plan and design a project that is consistent with the requirements of Phase 2 PSDS.

Below is a summary of the key elements of the scheme but please refer to the Guidance Notes for full details.

Purpose of scheme

Phase 2 PSDS is aimed at taking a ‘whole building’ approach to heat decarbonisation.

One of the greatest challenges today in meeting the UK’s 2050 Net Zero target is decarbonising the way buildings are heated. In fact, most of the buildings in the public sector still rely on fossil fuel based heating and as these heating systems approach the end of their working lives it is an ideal opportunity to transition to low carbon heating. 

Phase 2 PSDS has been launched to provide funding to those public sector organisations which are ready to take that step to a low carbon heating future. 

This scheme puts the public sector at the forefront of decarbonising buildings in the UK and in a leadership role to create exemplar projects in our communities that pave the way to help the UK meet its Carbon Budgets and Net Zero commitments.

Who can apply?

The organisations eligible to apply are the same as for Phase 1 PSDS. These include:

  • Central government departments and their arm’s length bodies (set out in the list of departments, agencies and public bodies as published on .GOV.UK). For central government departments where their roles are reserved (i.e. not devolved to Scottish or Welsh Governments or the Northern Ireland Executive), funding may be used for estates located anywhere within the UK
  • Emergency services
  • Institutions of further and higher education
  • Local authorities
  • Maintained schools within the state education system, including academies, Multi-Academy Trusts and free schools
  • Nursery schools maintained by a local authority
  • NHS Trusts and Foundation Trusts

Schools funded by charities, private schools, private colleges and private universities are not eligible to apply.

The Application Form will require all Applicants to state which public organisation they belong to.

What funds are available?

£75 million of grant funding is available. All projects that receive funding in Phase 2 PSDS must be fully installed and therefore completed before 31st March 2022.

Is there a maximum that any organisation can apply for?

Yes. The Phase 2 PSDS scheme, which is purposefully designed to achieve results through its specialist focus, will offer grants of up to a maximum of £5m per application for projects that reduce non-traded emissions. There is no minimum sum. Applicants can also use their own funds to top up a project which they wish to complete. A larger organisation may have a number of sites, in which case we would accept more than one application per organisation, although grant funding awards are limited to £5m per application to help ensure a fair spread of funding. We would not expect an organisation to submit separate applications for the same site.

If my organisation was funded in Phase 1 can I apply again?

There is no restriction in applying to Phase 2 PSDS if you were successfully funded in Phase 1. However, all funded Phase 1 projects must continue to meet their deadlines. Any slippage in those projects should act as an indicator that additional projects may not deliver to the required timescale of Phase 2 PSDS.

When do projects have to complete by in Phase 2 PSDS?

All projects in Phase 2 PSDS must be fully installed and therefore completed before 31st March 2022. Funding is not available for projects that cannot deliver to this timeframe, and projects which do not complete before 31st March 2022 will be liable for any project costs incurred after this date. 

If you have been successfully funded in Phase 1 and you know that you have challenges in meeting the commitments to Phase 1 delivery, Salix urges caution as these matters will be taken into consideration when Salix assesses delivery plans submitted in the Phase 2 PSDS Application Forms.

How will applications be managed fairly?  

BEIS require that applications be assessed by Salix in the order in which they are received on the Salix Application Portal. Phase 2 PSDS requires that applications contain all the information required at the point of submitting the application. If applications are incomplete, do not have the correct authorisation, required supporting documentation or are not submitted by the eligible organisation, they will be removed from the process. Salix will advise the Applicant if their application has been removed and why. Applicants can resubmit their application when they have completed the application fully.

What happens when the scheme becomes oversubscribed? 

As applications are collected Salix will indicate on its website each morning by 11am the value of the applications received. Salix will close the Application Portal when all funds can be allocated and an appropriate reserve list created. This ensures that the funds available will be fully allocated. Some projects submitted for assessment decrease in value, some are non-compliant, whilst some applications are withdrawn.

What are the Phase 2 PSDS main criteria and what is ‘new’ about this scheme?

The criteria for Phase 2 PSDS are carefully defined and every Applicant must study the criteria carefully and demonstrate and provide proof in their application that the project is tackling heat decarbonisation.  Phase 2 criteria are different from those for Phase 1. 

To be eligible for the scheme, two new key criteria must be met, in addition to the existing Phase 2 PSDS criteria listed here.

  • Applicants must be using a fossil-fuelled heating system; and
  • The heating system in question must be coming to the end of its useful life

If these criteria can be met, then an application can be built around applying for grant funding for a new low carbon heating solution. Applicants must include, as part of their application, at least one measure that decarbonises part or all, of the heating within a building. 

What is the Carbon Cost Threshold (CCT) of the criteria for funding?

The Carbon Cost Threshold for Phase 2 PSDS is set at a maximum of £325 per tonne of non-traded carbon saved (CO₂e) over the lifetime of a project. This has been set by BEIS to provide flexibility to Applicants in how they achieve carbon savings while ensuring decarbonisation of buildings is achieved in a cost-effective manner. 
The methodology and data set used to inform this threshold reflects the scheme’s sharpened focus on heat decarbonisation and is therefore not directly comparable to the cost to save a tonne of carbon set for Phase 1 PSDS. 

What technologies are included?

Please find examples of eligible technologies in this list provided by BEIS. Applicants can request funding for any technologies, apart from fossil fuel plants. Biomass boilers are included as an eligible technology, although all Applicants to the scheme are expected to fully consider the impact on local air quality, planning rules and the sustainability of the fuel source when proposing to decarbonise their heating through biomass. Onshore wind will also be specifically included as an eligible technology for the scheme. 

As Phase 2 PSDS is focused on heat decarbonisation, funding for fossil fuelled heating plant is specifically excluded from the scheme. This includes measures such as gas replacement boilers and combined heat and power technologies that run even partially on fossil fuels.  

Application verification process 

All applications must be fully completed using the relevant Application Forms. Incomplete applications will be withdrawn from the process.  Applications must be robust and fully comply with all fields.

Before applications enter the technical assessment process they will go through an initial verification process. This process means Applicants must supply certain documents to support their application. These are outlined in the Guidance Notes.

The verification process will satisfy Salix that the organisation applying is an eligible organisation, and that all parts of the Application Form have been completed. Those that are not completed or have not submitted the required documentation will be removed and returned to the Applicant explaining why their application has been removed from the process.

If the Applicant is funded under Phase 1 PSDS a check will be made that the projects funded in Phase 1 are all delivering to plan and to the agreed completion date.
Applications that then enter the technical process will be assessed against all the scheme criteria, carbon criteria, delivery plans and costings.

While Salix understands that delivery cost may change in the technical assessment process (but must not exceed the maximum of £5 million and the £325/tCO2eLT threshold), if projects do not meet the criteria for the fund they will be removed from the application process and returned to the Applicant explaining which criterion has not been met. 

These measures are to avoid delay and ensure that applications can be assessed within the timeframes given by Salix. Salix appreciates these projects need to have confirmation of funding quickly to enable the schemes to be delivered by 31st March 2022. 

If projects in the first batch for assessment fall out or reduce in value, a project from the contingency list will then enter the technical assessment process.
This method of dealing with applications will continue until all funds available for allocation have been allocated.  

Application Form and supporting documentation

It is important to note that the online Application Form, available on our site, is only one part of the application process. It is essential that Applicants submit comprehensive supporting documentation; please see our Guidance Notes for the information required. It will be imperative to provide a statement describing the project and what technologies will be used, as well as a delivery plan setting out a financial profile of how an Applicant thinks they will draw down funding over the lifetime of a project.

There will also be a requirement that Applicants provide all feedback requested by Salix. Please see Guidance Notes for full details. The Application Form must come from a member of staff of the eligible organisation and be submitted by the eligible organisation. Applications submitted by anyone else, including independent consultants, will be removed from the process. The application must be made by the eligible organisation.     

Key dates and deadlines

The Application Portal on the Salix website is now closed.

For successful applications, Salix will look to award a Grant Offer Letter within three weeks subject to a fully completed and authorised application.

When the scheme becomes oversubscribed with good quality and fully completed applications, the Application Portal will close. 

All projects awarded funding must be completed by Thursday 31st March, 2022.  

This requirement must be met. The funding for Phase 2 PSDS is only available in the financial year 2021/22.

There is no flexibility to agree funding beyond March 2022. If your project does not complete by 31st March 2022, there will be no funding available for the balance of the project.