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Salix PSDS Phase 3b Announcement

On 02 August 2022, Salix announced Phase 3b of the Public Sector Decarbonisation Scheme (PSDS). This is the second phase of the PSDS Phase 3 scheme announced in September 2021 and follows a similar process.

The fund will focus primarily on the decarbonisation of heat. The application portal opens in September 2022 with an exact date still to be announced.

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.

Phase 3b will allocate up to £635m of funding to public sector organisations, to be spent in financial years 2023/24 and 2024/25. This is split by financial year, with up to £402m to be allocated for 2023/24 and up to £233m to be allocated for 2024/25.

Salix have confirmed that funding will be ringfenced for the education and healthcare sectors but have not yet confirmed the amounts.

What are the timescales?

The new application portal opens in September 2022. Exact date TBC.

Single year projects must be completed by 31 March 2024. Multi-year applications are for projects which will take more than one financial year to deliver and are required to complete by 31 March 2025.

What’s different from previous Phases?

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 Phases 2 & 3A 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. This now includes a minimum contribution of 12% of the total project value.

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.

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 Phases 1, 2 and 3A 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?
  • Do you have a developed feasibility, design or Heat Decarbonisation Plan?

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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