Phase 4 Public Sector Decarbonisation Scheme

Grant Offer Letters

Thank you to all those organisations that have applied to Phase 4 of the Public Sector Decarbonisation Scheme.

We will start distributing Grant Offer Letters to successful applicants shortly, and we will continue to do so over the next two months.

In the meantime, our teams continue to work through applications which are undergoing technical and quality assessment checks.  Grants will be awarded as explained in the Phase 4 Public Sector Decarbonisation Scheme Guidance Notes. 

The media

Once Grant Offer Letters have been signed and agreed, grant recipients are encouraged to reach out to the local media within their community to showcase their planned decarbonisation journey which has been supported by this round of Public Sector Decarbonisation Scheme funding. Before actively engaging with the media, please share your draft releases with us at Salix, we’re happy to support you. 

The government will announce the final funding figure for this round of the Public Sector Decarbonisation Scheme once all Grant Offers Letters have been signed and returned. The Department for Energy Security and Net Zero with the support of Salix, may approach recipients to support its national communications in anticipation of this moment. 

Once again,we would like to thank all those across the public sector who have taken the time to apply for this scheme.

Should you have any questions please contact our Phase 4 team at [email protected]

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. 

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 closed 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.