How to Apply for PSDS Funding: A Guide for Public Sector Bodies

The Public Sector Decarbonisation Scheme (PSDS), now open for applications, provides an essential opportunity for public sector bodies to accelerate their decarbonisation journeys. Managed by Salix, this government initiative offers PSDS funding for public sector organisations within the UK. The funding is provided to support the adoption of low-carbon technologies, enabling the replacement of outdated, carbon-intensive systems with more sustainable alternatives.

As the UK commits to achieving net-zero carbon emissions by 2050, the role of public sector organisations in leading the charge has never been more critical. Whether you're part of a school, council, or healthcare estate, PSDS funding can play a vital role in future-proofing public sector facilities, reducing both carbon emissions and operational costs. Understanding the application process and eligibility requirements is key to securing a grant and making meaningful progress in your decarbonisation efforts.

What Is PSDS Funding?

The Public Sector Decarbonisation Scheme (PSDS) is a government initiative designed to assist a wide array of public sector organisations, from local authorities to educational institutions, in moving away from carbon-heavy fuels like gas and oil. The scheme provides vital grants to cover the additional costs associated with switching to low-carbon heating systems, such as heat pumps, and other energy-efficient technologies.

With heating systems being a major source of energy consumption and CO₂ emissions, this funding is key for organisations looking to reduce their environmental impact and align with national decarbonisation targets. By addressing the financial barriers that often accompany these transitions, PSDS funding supports public sector bodies to start investing in a sustainable future without bearing the full financial burden.

Who Is Eligible?

Any public sector organisation that currently uses high-carbon heating systems, such as gas or oil boilers, and plans to replace them with low-carbon alternatives can apply for PSDS funding. Unlike previous years, this round focuses on carbon savings per pound spent rather than being awarded on a first-come, first-served basis. Therefore, it’s critical to demonstrate how your project will achieve meaningful carbon reductions.

To be eligible, public sector bodies must:

• Have a heating system powered by a high-carbon fossil fuel that is nearing the end of its service life (typically 10 years or older).

• Plan to replace it with a low-carbon alternative, aligning with the goals of the Public Sector Decarbonisation Scheme.

How to Apply

With the application window now open, public sector organisations have until November 25th 2024 to submit their proposals via the Salix website. Preparing a strong application requires careful planning and clear documentation, including:

• A comprehensive programme of works, outlining the scope of the project.

• Cost estimates for the proposed system and any necessary building upgrades (such as insulation or window improvements).

• Projected energy savings and carbon reductions for each intervention.

It’s important to note that PSDS funding will only cover the additional costs associated with decarbonisation. For example, if you're switching to a low-carbon system, the scheme covers the difference between the cost of a like-for-like replacement and the cost of the low-carbon solution. Additionally, the carbon cost limit for projects is set at £510 per tonne of CO₂ equivalent (tCO₂e), so projects exceeding this threshold will not be eligible for grants.

In past rounds, applications have required a RIBA Stage 3 level of detail, meaning that organisations should have a clear design and strategy in place before submitting their applications.

Avoiding Common Pitfalls in PSDS Applications

A frequent mistake organisations make when applying for decarbonisation grants for public sector projects is misunderstanding what the PSDS will fund. As stated above, the scheme only covers the extra costs of switching to low-carbon technologies and does not pay for standard system replacements.

The funding will also not cover any system which still includes a fossil fuel system, such as back-up boilers fired by gas.

Another potential pitfall is failing to stay under the £510/tCO₂e carbon cost limit. Public sector bodies should ensure that any building modifications, such as fabric improvements, stay within budget to avoid disqualification from funding.

The Application Timeline

Once the application portal closes, organisations will typically receive funding decisions by May 2025. If successful, they will have one to two years to complete their projects, with a requirement to update Salix regularly on the project’s progress.

After installing the low-carbon systems, public sector bodies must submit data such as meter readings to demonstrate the energy savings and carbon reductions achieved, ensuring that the funded project delivers on its sustainability promises.

Demonstrating the Impact of PSDS Funding

We’ve had the privilege of working with several institutions, with two of our most recent projects being New Cross Hospital and the Princess Royal Hospital Telford, helping them secure PSDS funding and begin their decarbonisation journeys.

For example, our work on Wrekin House for The Royal Wolverhampton NHS Trust, as part of New Cross Hospital, saw the decoupling of the building from the hospital’s existing gas-fed centralised steam system. This project, supported by approximately £5 million from Phase 2 of Salix funding, involved replacing the steam system with air source heat pumps. With a goal to fully decarbonise by 2040, the Trust aimed to de-steam the site and repurpose Wrekin House into a heavily serviced clinical space, alongside administrative departments, under a full refurbishment.

Budget constraints were a key challenge, so we worked closely with the Trust’s financial team to ensure that the most cost-effective solutions were implemented while maintaining the building’s clinical functionality. Our team regularly met with the Clinical, Estates, and Engineering teams to fully understand the project requirements from all perspectives. This enabled us to provide optimal building service solutions, aligning with our ‘whole building’ approach, which focuses on reducing energy consumption in heating and cooling while transitioning to low-carbon systems.

Such success stories showcase the tangible impact that PSDS support can have, not only in reducing carbon footprints but also in driving long-term cost savings. We hope these kinds of results inspire other public bodies—whether schools, councils, or healthcare estates—to pursue similar decarbonisation routes and to future-proof their services through sustainable upgrades.

How We Can Help

At CPW, we specialise in helping public sector organisations navigate the complexities of applying for PSDS funding (explore some of our public sector projects here).

Our experienced teams can guide you through every stage of the process, from creating a decarbonisation plan to estimating your project’s energy and carbon savings. By working with us, you can ensure that your application meets all requirements, maximising your chances of securing a decarbonisation grant.

Need advice and support? Get in touch with our experts here.