Public Sector Decarbonisation Scheme
Grants help eligible public bodies replace ageing fossil-fuel heating and improve the energy efficiency of their buildings.
The scheme funds low-carbon heating, including heat pumps, alongside work that reduces a building’s heat and electricity demand. Insulation and improved glazing can reduce the heating system needed. Each building must include low-carbon heating; an application with few or no efficiency measures must explain why a whole-building approach is unsuitable.
The terms below apply to Phase 4, whose application intake has closed. The Department for Energy Security and Net Zero provides the capital funding and Salix Finance administers it; funded projects must finish by 31 March 2028.
You must contribute at least 12% of total project costs, or the cost of replacing the old heating with an equivalent fossil-fuel system if that is higher. The maximum grant request is the project cost minus this contribution. The requested grant divided by the lifetime direct carbon savings from grant-funded measures must not exceed £510 per tonne of CO2 equivalent saved. This is a carbon-saving test, rather than a cash limit per project.
Non-reclaimable VAT can be included; VAT you can recover from HMRC cannot. Other funding must be declared and must not pay for the same measures. Other public-sector or European funding for the project requires Salix’s prior written consent.
Payments reimburse evidenced eligible costs incurred in the claimed financial year. Signed payment requests are due at least 21 business days before the proposed payment date. You must evidence your own contribution before the final request unless Salix gives a written waiver; at least 10% of the final year’s award is held for the final payment unless Salix agrees otherwise. Significant changes need prior written approval through a grant amendment letter. Unapproved changes may not be paid.
During the grant period, reports are due by the 15th of each month, with a forecast as at the 10th and cost evidence. A final report must show compliance and commissioning; energy and carbon-saving reports are required in each of the first three years after practical completion. Keep grant accounts separate and retain project records, including subcontractor and consortium records, for at least six years after the grant end date. Salix can withhold or recover funding for misuse, unexplained failure to start within six weeks of the project start date, inadequate progress, or duplicate or unapproved third-party funding.
You cover cost overruns unless Salix agrees to reduce the funded measures, and must return unspent grant unless it agrees otherwise. Commitments entered before the grant start date need written approval to be funded. Expenditure after the grant end date is excluded except agreed final commissioning, electricity-network operator works and contractor retention costs.
Eligibility
- Eligible applicants are public-sector organisations in England, or organisations with sites in Scotland, Wales or Northern Ireland carrying out reserved functions. For this intake, a public authority must be wholly or mainly publicly funded, or subject to public-authority oversight, and must not operate commercially. Applicants had to declare that they met the Procurement Act 2023 definition.
- Eligible categories include central government and arm’s-length bodies, emergency services, local councils, state schools, further-education providers, council-maintained nurseries and NHS trusts. Higher-education institutions must evidence public funding through a Procurement Act assessment, procurement or financial statement, or a signed finance/procurement officer letter; evidence of public-authority oversight can alternatively establish eligibility. Public corporations, private organisations and social housing are excluded. Charities qualify only if they are also Cabinet Office-defined non-departmental public bodies. GPs qualify only as contracting authorities of an eligible body owning or leasing the premises with maintenance responsibility; NHS Property Services is excluded.
- Within Greater Manchester and West Midlands combined-authority areas, local authorities (including town and parish councils), emergency services, non-acute community and mental-health NHS trusts, state schools and further-education institutions are excluded from Phase 4. Organisations crossing those boundaries can apply only for buildings outside them, assessed by postcode. Central government and arm’s-length bodies, acute and cancer NHS trusts, and qualifying higher-education institutions remain eligible inside the areas.
- You must own the building or lease it with responsibility for operating and maintaining its building services. Private Finance Initiative (PFI) buildings also qualify where you pay the unitary charges covering operation and maintenance. In privately owned leased buildings, counted carbon savings are normally limited to the remaining lease. Salix can assess an evidenced, highly certain renewal individually. Early loss of public occupation can trigger proportional subsidy recovery. PFI buildings transferring freehold to the public applicant at no extra cost when the contract ends avoid this carbon-saving cap; other PFI buildings are capped to the remaining contract.
- Fossil-fuel heating being replaced must normally be at least ten years old when removed. Earlier failure can qualify with a reasoned explanation and third-party service report. Temporary replacement heating can qualify case by case, with evidence that the original plant met the end-of-life test and all temporary units will be removed. When disconnecting a campus heat network, ten-year-old heat interfaces can count if the options appraisal shows this is the best long-term route to decarbonise the site.
- The work must need the grant to proceed: installation cannot already have begun, and other funding must be exhausted or unsuitable. Work required by law is excluded, but the extra cost of going beyond the legal requirement may qualify. Technologies needing research and development are excluded; unlisted technologies need prior discussion with Salix and must already be proven in operation, at technology readiness level 9.
- New fossil-fuel technologies are not funded. Existing fossil heating may be retained alongside new low-carbon heating in a bivalent system, subject to Salix’s case-by-case assessment of sizing, end-of-life treatment, operation and proportional carbon savings. Mandatory alternative-fuel backup can remain for NHS, prisons and other sites legally or contractually required to have it; the primary end-of-life plant still must be decommissioned. New backup capacity and new extra resilience capacity are outside grant support.
- If grant-funded work affects your sales of goods or services on a market, declare that economic activity and cooperate with Salix on subsidy control. Phase 4 excludes subsidies of particular interest under section 3 of the Subsidy Control Regulations 2022. Where an enterprise tenant pays energy bills, savings benefiting it must not take its minimal financial assistance above £315,000 over the current and two preceding financial years; recover savings exceeding that threshold. Transparency requirements apply unless the subsidy is no more than £100,000, and applicant and tenant must declare compliance.
- The design must be at least at RIBA Stage 2: provide a feasibility study and options appraisal explaining viable heating and efficiency solutions and how they can be implemented, alongside drawings, site energy data and heat-loss calculations.
- Under the 2022 definition used for this historical intake, “subsidies of particular interest” include an individual subsidy above £1 million where it and related subsidies to the same enterprise exceed £10 million, or exceed £5 million in a sensitive sector. The calculation includes the elapsed current financial year and the two preceding years. Related subsidies generally concern the same or substantially the same project, costs or activities and policy objective; tax-measure subsidies are related within the same tax measure, and statutory section 64(1)–(2) exemptions are excluded. A subsidy concerns a sensitive sector when it goes to an enterprise carrying out scheduled activities or supplying their inputs, and directly or indirectly benefits an enterprise’s scheduled activity. These activities cover specified iron and steel, aluminium, copper, vehicle, ship, motorcycle and aerospace manufacturing, and electricity production; a scheme using objective criteria that do not favour these activities is excluded from the sensitive-sector test. Subsidies above £1 million for legally defined relocation, and subsidies for restructuring, are also included. The threshold and relocation tests exclude the legally defined rescuing, bank/insurer liquidation and liquidity-provision categories. These are subsidy classification rules, not a universal project grant ceiling.
How to apply
- Status
- closed
- Opens
- Closes
- Round restrictions
- Phase 4 application intake is closed. Projects must finish by 31 March 2028.[^c13][^c14]
Phase 4 applications closed on 25 November 2024 at 2pm. Read Salix Finance’s scheme page and Phase 4 guidance for the closed intake and project-delivery information.
For that intake, a member of the eligible organisation had to submit through Salix’s portal; external consultants or contractors could help prepare the application but could not submit it. Mandatory evidence included the application form, heating-plant age, energy-consumption and heat-loss data, energy-saving calculations, a feasibility study and options appraisal, system drawings and manufacturer data sheets, itemised costs, a risk register, delivery programme, execution plan and a counter-fraud declaration signed by the authorising official. Higher-education procurement status and lease-renewal evidence were required where applicable.
Assessment was ordered by carbon-saving cost, with education, health or other-sector allocation and the annual spending profile also affecting priority; submitting first did not determine the award order.