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Salix PSDS Phase 3 Announcement

September 2021, Salix announced Phase 3 of the Public Sector Decarbonisation Scheme (PSDS). This is not a simple extension of the previous PSDS Phase 1 scheme and is more aligned to the PSDS Phase 2 scheme announced in April 2021. The fund will focus primarily on the decarbonisation of heat. The application portal opens on Wednesday 6th October, at 2pm.

What is it?

  • The fund offers the opportunity for public bodies to bid for grant funding to support replacement/upgrades to existing heating systems using low/zero carbon technologies such as air source, water source and ground source heat pumps.
  • The applicant will have to contribute funds to the equivalent value of a traditional fossil fuelled solution. Salix Finance will fund the “top up” costs to deliver the project using low/zero carbon technology.
  • The value of the fund has not been announced yet. This will be confirmed once the Spending Review has been completed by the Government.

What are the timescales?

  • The new application portal opens on 6th October 2021 for four weeks.
  • The application forms will be available on the Salix website from 15th September 2021.
  • Applicants will be advised of the outcome in 2022
  • Projects cannot start before 1st April 2022.
  • 85% of the fund will be allocated to projects that must be delivered by 31st March 2023. 15% of the fund will be used to fund multi-year projects.

What’s different from Phase 1 & 2?

  • The fund is significantly different from Phase 1. It will not be possible to simply resubmit bids from Phase1.
  • The fund is more similar to Phase 2 and is much more tethered towards decarbonisation of heat projects. Any new application must include a project that decarbonises part or all of the heating within a building
  • The grant will only fund the additional/marginal cost of implementing the low carbon solution. The academy/trust will be responsible for the “like for like” cost of replacement.
  • The existing system must be fossil fuel based
  • The existing heating system must be coming to the end of its useful life.
  • There is a no maximum grant value in this round and multi-year projects are now eligible.
  • Projects over £100,000 will require a Business Case submission in a format set out by Salix Finance.

What’s the same?

  • You can still bundle other technologies (such as insulation, BMS controls, Solar PV or LED lighting) as part of a “whole building” approach, where they are supporting the heat decarbonisation bit.
  • The fund is open to the whole public sector.
  • Applications will be assessed on a first come first served basis.
  • The additionality criteria are the same i.e. the project must not have already started. 

Can we bid for other energy saving measures? 

  • Yes. It is possible to append other technologies to the main heat decarbonisation project where it supports the delivery of the core scheme. For example, Solar PV to offset the additional electrical load from an air source heat pump.
  • However, the carbon savings from these technologies cannot be used to compensate for shortfalls in the carbon calculations of the core project as previously.

The results of the PSDS Phase 1 & 2 make interesting reading. Nearly 90% of the total fund was allocated to Local Authorities and NHS. We know that both funds were heavily oversubscribed so it will be important to make sure applications are submitted as soon as possible. once the portal opens. £31 million was allocated to the schools/academies sector. At Barker we supported our clients in securing over £10million of this.

What do we do next?

In summary, there appears to be an opportunity to leverage the information gathered during the LCSF/PSDS process to make some further targeted applications, however careful consideration will need to be given to identifying suitable projects and looking at the match-funding elements which significantly shift the commercial proposition.

  • Have you got a heating system at the end of its useful life?
  • Were you intending to replace the system in the next 1-3 years?
  • Do you have the funds to carry out a “like for like” replacement?

If so, we may be able to assist in building a new bid around this. It will be necessary to obtain costs for replacement as well as alternative low-carbon solutions and calculate the potential carbon savings. We will also look at the whole building/site to ascertain what complementary technologies could be bundled with the heating replacement scheme.

If you would like to discuss your project, please contact us.

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