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The UK Government launches Phase 2 of the Public Sector Decarbonisation Scheme

05 May 2021

Phase 2 of the Public Sector Decarbonisation Scheme ("Phase 2 PSDS") aims to support "the public sector in taking a ‘whole building’ approach when decarbonising their estates." The £75 million grant funding builds on Phase 1 of the Public Sector Decarbonisation Scheme with a "stronger focus on heat decarbonisation."

The launch of Phase 2 PSDS forms part of a wider range of measures to help make residential and public buildings "less carbon intensive" including the Green Homes Grant Scheme and the Clean Growth Strategy. These initiatives form part of the UK Government's wider strategy and commitment to achieving net zero greenhouse gas emissions across the UK economy by 2050.

The Department for Business, Energy and Industrial Strategy ("DBEIS") initiated the £75 million funding programme and Salix Finance will oversee its delivery. Phase 2 PSDS opened to all local authorities, central government departments, higher education institutions and NHS Trusts (among other selected public bodies) on 7 April 2021 and closed on 13 April 2021.

What are the aims of Phase 2 of the Public Sector Decarbonisation Scheme?

Phase 2 PSDS aims "to enable the public sector to be at the forefront of decarbonising buildings in the UK." The grant funding focuses on delivering heat decarbonisation in public buildings to reduce 'non-traded' carbon emissions with an emphasis on "heating within buildings, making systems more energy efficient and less damaging to the environment." 

The fund will prioritise capital works projects that can achieve completion by 31 March 2022 and which require up to £5 million in funding, though Salix Finance has confirmed that applicants were permitted to submit multiple applications. Funding awards may be used by public bodies to invest in:

  • low carbon heating measures that save non-traded carbon emissions (such as air to water source heat pumps, water source heat pumps, ground source heat pumps and electric heating); 
  • other measures that save non-traded carbon emissions (such as solar thermal, building  fabric  upgrades,  piping  insulation  and  mechanical ventilation heat recovery); or
  • measures that save traded carbon emissions (such as solar PV, LED lighting and energy efficient ventilation).

Further information about the fund can be found here.


Phase 2 PSDS has the potential to make a meaningful difference to those public bodies looking to decarbonise their estates. However, it will be necessary for all awards to be compliant with the new Subsidy Control rules and failure to do so may result in the funding being recovered following a legal challenge. 

On Thursday 20 May 2021, Lee Pickett and Julie Simms will be delivering a webinar on decarbonising public sector led regeneration projects. Those interested in attending this webinar can register here.

DWF Law LLP has exceptional experience in public funding issues, including setting up programmes of support which satisfy government guidance, advising upon how to compliantly procure services and satisfy the Subsidy Control rules. Members of our Public Sector team having worked within the Central Government, Local Government, the European Commission and with private sector bodies on high profile public funding initiatives.  This means that we are a safe pair of hands when it comes to managing issues such as this. Feel free to get in touch, if it would be useful to discuss any of the issues raised in this article or other matters related to public funding.

Further Reading