What is Phase 3c of the Public Sector Decarbonisation Scheme?
The Public Sector Decarbonisation Scheme (PSDS) is a multi-phase government initiative is designed to support the public sector in taking a ‘whole building’ approach when decarbonising their estates, supporting 30,000 jobs in the low carbon and energy efficiency sectors and reduce carbon emissions from the public sector. Phase 3c of the PSDS is a £230 million pot that opened for applications on Tuesday 10th October at 2pm, with a further budget announced in autumn for 2025/26.
The Decarbonisation Fund explained
“The Public Sector Decarbonisation Scheme supports delivery of the UK’s ambitious goal to become net zero by 2050 and the Net Zero Strategy goal to reduce direct emissions from public sector buildings by at least 50 percent by 2032, and by 75 percent by 2037, compared to a 2017 baseline.
Phase 3 of the PSDS was launched in 2021 to allocate £1.425 billion of funding over the financial years 2022/23 to 2024/25.
£230 million of available funding has been allocated to Phase 3c in 2024–2025, which will also see an additional budget for 2025/26, the value of which will be announced in the autumn. This will allow Phase 3c projects to be completed over the course of two fiscal years. The overall cost of Phase 3 of the project is £1.425 billion, and Phase 3c will get funding of up to £230 million in 2024–2025.”
This scheme continues its task to reduce fossil fuels upon which most public sector buildings rely for heating, hot water and catering. Applicants can include energy efficiency measures and other enabling works, that are additional to the replacement of the fossil fuel heating system, where they support a whole building approach to decarbonisation.
Who can apply for the PSDS?
Any public sector body is invited to apply. This excludes charities.
Challenges with the fund
The issue with the PSDS is that it requires upfront expertise for those public sector bodies that do not have previous experience of managing projects of this type. This exercise is a potentially time, money and resource-intensive one- and that’s just the application to the fund.
In addition, applications must include a grant spending profile which applicants intend to deliver. This is also an external cost that the public sector body must bear before application. There is limited flexibility in terms of changing the scope of the grant spending profile once the Grant Offer Letter has been awarded.
“Applications are to include a grant spending profile which applicants intend to deliver. Following application, there will not be scope to move funding across financial years and it will be at Salix’s discretion to approve any changes to this profile during the application assessment period. As with previous phases, funding will be allocated for each financial year based on the agreed grant spending profile. There is no opportunity to change these annual funding amounts and they cannot be amended once the Grant Offer Letter has been signed.”
Changes to the new phase- and potential opportunities for smaller contractors to support public sector bodies.
However, Phase 3c of the PSDS have made some provision to support smaller public sector bodies:
Two different application types
Applications can now be made with the first year allocated as a planning year to develop and design their projects, thus allowing smaller bodies to utilise some budget to engage external experts.
There are two application types:
• Applications for projects which start spending in financial year 2024/25 that must complete by 31 March 2026
• Planning Year applications for projects with spend in 2025/26 only, using 2024/25 as a Planning Year to develop and design their projects. These must also be completed by 31 March 2026.
Multi-year applications
Multi-year applications: Similar to earlier phases of the PSDS, Phase 3c allowed projects to deploy carbon reduction measures over two financial years, allowing applicants more flexibility.
“The scheme, delivered by Salix Finance, gives applicants the opportunity to submit separate applications for different projects or combine several projects into a single application for projects delivering across one or two financial years.”
Sector soft caps
Sector soft caps are not new but remain in place for Phase 3c, to ensure funding is allocated fairly across the public sector. Divided into Health, Education and Other (including but not limited to: emergency services, clubs and community centres, museums and theatres, leisure centres, prisons, Ministry of Defence buildings and law courts.)
The maximum funding a sector can be allocated is as high as 35% of the total Phase 3c funding, and this should be no lower than 30%.
Applications will be allocated on a first-come-first-served basis until a sector cap is reached, at which point further funding will only be allocated to that sector if other sectors are under-subscribed.
The Public Sector Low Carbon Skills Fund
The Public Sector Low Carbon Skills Fund provides grants for public sector bodies to put in place a heat decarbonisation plan, providing them with information they need to develop future applications to the Public Sector Decarbonisation Scheme.
“Both the Public Sector Decarbonisation Scheme and the Public Sector Low Carbon Skills Fund are open to public sector bodies in England and areas of reserved public services across the UK.”
What this means for businesses that want to access the PSDS
This phase of the PSDS has had some additional flexibility introduced to support smaller public sector bodies but we can’t help but wonder if there is still a greater skew towards those bodies that have the time, money and resource to make a robust application.
Granted, the big players are the ones that a) can potentially make a more positive impact on decarbonisation and b) represent the essential services such as the NHS and universities. However, a lot of these bigger players preclude SME’s working with them – meaning the same companies get access to funding time and time again.
A lot of NHS trusts have created limited companies to deliver their support services (e.g. facilities management) which won’t be eligible and in some instances this is where buildings sit.
Looking at applications for the Low Carbon Skills Fund, there are a lot of schools and Multi-Academy Trusts that have applied for additional funding to support their application, does this then represent a lack of understanding or support for smaller organisations?
We suggest a greater focus should be on driving the awareness between public funding for commercial buildings within the SME marketplace, to ensure that there is breadth and depth of applications, supporting the SME market.
It remains to be seen if things such as theatres, museums and community groups are properly represented in these next phases.
Whilst one size will never fit all, there is some additional flexibility in this new phase that hopefully allow smaller bodies to get the support they need ahead of application, with additional time to design and deliver projects ahead of the delivery schedule.
Measures such as PAS2038 will certainly help SME’s to access the supply chain of bigger players and support smaller public bodies to apply for and carry out retrofit across the UK.
Here at Brighter Compliance we can support installers to understand the opportunity and are in a position to support the delivery of these contracts. We have already supported companies that are PAS2038 certified to work with public bodies with the design elements of the PSDS funding. If you would like an informal chat about how we can help you access the funding pots and supply chain available in this or upcoming phases, please contact us.
