Phase 2 PSDS FAQs
Updated Wednesday 7th April 2021.
Q1. Are there any plans for Low Carbon Skills Fund (LCSF) to support bid development and project delivery or is it simply capital grants for this phase?
A: There will be no LCSF funding available alongside Phase 2 Public Sector Decarbonisation Scheme (PSDS). Phase 2 PSDS is primarily for capital works, however external consultancy and management fees may be included. Existing employee costs or any costs previously incurred may not be included. For further information on the scheme, please go to the Salix website.
Q2. If an application was unsuccessful in Phase 1 PSDS can a client submit the same projects for Phase 2 funding?
A: Clients can submit the same projects as they did for Phase 1 but should strongly consider the new criteria for Phase 2 with key examples being:
- 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
- The applicant must install a low carbon heating system
- Successful Applicants will be funded the marginal costs of installing a low carbon heating system
- The Carbon Cost Threshold for Phase 2 PSDS is set at a maximum of £325
- Review the updated technology list
Q3. Who has the appropriate level of authority to be the Authorising Official?
A: The Authorising Official should be someone who can authorise capital projects of this sort. For e.g., a Director/Head of Estates, Director of Finance, Director of Capital Projects, etc. For NHS Trusts/FTs a Director would be required, whereas for a school the Headteacher or the Business Manager would likely be the Authorising Official.
Q4. Why has the Carbon Cost Threshold (CCT) decreased to £325/t and why traded carbon savings will not be counted towards it?
A: For those familiar with the £500 CCT used in Phase 1 PSDS, it is important to note that the basis of £325 CCT for Phase 2 is formed around a number of different factors:
- Firstly, the grant funding to be awarded for the low carbon heating system itself will be the marginal cost only. This means that the ‘like for like’ costs for replacing the existing boilers cannot be included as part of the grant.
- Secondly, the calculation for the CCT for Phase 2 will use a ‘lifetime’ metric instead of ‘persistence factor’ for the low carbon heating system. This means the measure will be saving carbon for a longer time. For example, air-source heat pumps will increase from 12.5 years to 20 years, a 60% increase in lifetime carbon saved. A full list of all low carbon heating solutions is set out in Appendix 1 of the Phase 2 Guidance Notes
- Thirdly, the CCT only counts non-traded carbon. This means that only fossil fuel savings are counted and the increased electrical consumption from heat pumps will not be counted in the CCT. So, heat pumps will save more carbon compared to Phase 1.
- Finally, it should be noted that while all heat reducing measures such as insulation and airtightness will provide further substantial lifetime carbon savings for Phase 2, (while) measures reducing electrical usage such as lighting and lighting controls, will not.
Q5. What is meant by a ‘Whole Building’ approach?
A: Applicants are encouraged to take a ‘whole building’ approach to decarbonising their heating. This is where all the factors that contribute to a building’s energy consumption are considered together to identify the most cost-effective way to achieve the objective. For example, investment in improving the insulation levels of the building fabric will help reduce the overall size of the low carbon heating plant required, as well as save on fuel bills. Also, investment in reducing the peak electricity consumption, such as through installation of more energy-efficient lighting, (See Appendix 1) may negate the need to upgrade a building’s electrical infrastructure in order to supply the additional electrical demand for the installation of a heat pump.
Q6. Do I need to install a low carbon heating system for each of my buildings that I wish to undertake other carbon reduction measures in?
A: Providing a low carbon heating system is installed on one of the buildings on the same site, then the applicant has the opportunity to implement similar carbon reduction measures such as insulation improvements on a number of adjacent buildings. The Salix definition of a ‘site’ is dependent on the postcode of an organisation’s building(s). For example, a university campus may have several buildings clustered together which share a postcode and would be treated as one site. However, another campus building from the same organisation but located at a separate postcode would be treated as a separate site. Where an application consists of several sites, then each site noted in the application must have a low carbon heating system included within an organisation’s application. Clients are not able to apply for efficiency at one site and low heating at another.
Q7. What evidence should be provided to support the end-of-life checks on the existing heating system?
Our assessors will be looking for manufacturers data on lifetime or running hours as a good source of evidence.
Also, we will be looking at:
- Industry benchmarks from CIBSE Guide M or SFG20.
- Where M&E building surveyors have assigned a condition rating, that could be used. In this case it is always useful to ask to see more than simply a single condition rating “D2” type figure on a spreadsheet, so will be looking for an accompanying report, photos, etc that will help us to understand the context of the report.
- Service records which show either a genuine drop off in efficiency, or a history of regular unscheduled maintenance calls.
We will require that the new heating system will replace an existing end of life heating system and the system being replaced cannot be kept in service for resilience purposes.
Any resilience requirements will need to be covered by other existing systems.
Where Applicants wish to purchase a new resilience boiler themselves, they cannot use any PSDS funding, and they will only be eligible for the marginal cost of the low carbon heating plant.
Q9. If I am currently in the EU emissions trading system (EU ETS) can I apply?
If Applicants are currently in the EU-ETS they are not eligible for Phase 2 PSDS funding, even if the use of the funding will take the Applicant out.
The only exception to this position is if an organisation is in the ‘hospital and small emitter opt out’ for the EU-ETS and then they are not part of the trading component of the EU-ETS and do not receive a free allocation of traded carbon, so the carbon they emit is ‘non-traded’. Therefore, they are eligible for the Phase 2 PSDS.
Q10. Can you clarify the definitions of traded / non-traded carbon?
The majority of clients non-traded carbon is carbon emissions associated with your fossil fuelled heating system.
Traded carbon is carbon emissions associated with the carbon from the electricity you receiving from the electricity grid.
The main exception to this is if you are in the EU-ETS and this is covered in the previous FAQ.
Q11. Please explain the basis of a low carbon heat solution being installed in one building with other measures and then when other measures can be installed in adjacent buildings?
Where a single application covers multiple buildings on the same site, the requirement is for one building at least to have a low carbon heating solution installed and this can be combined with other measures. Other heat reducing measures such as insulation can be installed on adjacent buildings.
A single site can include scenarios where a school, for example, has buildings on both sides of a road, such as when a new teaching block is built after the main site.
Please note that for Multi Academy Trusts, where each academy is its own site, there must be a heat decarbonisation measure installed at each academy that funding is applied for.
Q12. Can we apply for Phase 2 PSDS funding if the relevant building which we want to decarbonise is not fully owned by the public sector?
As with Phase 1 PSDS, the building must be either owned by the eligible organisation or the have a long-term lease arrangement that allows the savings to be passed back to the eligible body.
Q13. What are marginal costs and how can I show this on the Application Form?
Marginal Costs are those in addition to the business-as-usual costs for replacing the existing fossil fuel heating system on a like-for-like basis.
The cost of a low carbon heating source should be calculated on the marginal capital cost of installing a low carbon heating source versus a fossil fuel heating replacement.
The business-as-usual costs for the like-for-like replacement of the existing fossil fuel plant do not have to be based on actual quotes for the replacement work and can be based on costs obtained from other similar projects, or from reasonable cost estimates from sources such as a quantity surveyor.
Q14. Can you provide some detailed guidance on Biomass boiler criteria/ eligibility?
Before considering biomass boilers, we want to be really sure that Applicants have genuinely ruled out all other options. We want to understand that no other options are suitable. Our technical team will check factors such as:
- Can the building fabric be upgraded to suit a low temperature heating system?
- Are there options to upgrade the electrical infrastructure that will allow a heat pump instead?
- Is there the potential for a district heating system to be installed in the local area in the near future?
And where it does appear to be the most suitable technology, our technical team will need to see evidence that Applicants have undertaken an assessment on the impact on local air quality. We will be looking to see appropriate performance data from the boiler in question, along with appropriate calculations which show information such as chimney stack height that meets any planning and air quality regulations.
Our assessors will also expect to see evidence of a sustainable supply chain for the fuel stock. The Biomass Suppliers List is a good minimum standard, and it’s good to details of the actual supply contract and if specific sustainability guarantees can be built in.