£230m boost for carbon and energy savings in the public sector

Public sector organisations can now benefit from a £230m funding pot to install low carbon heating and energy efficiency measures.

The Public Sector Decarbonisation Scheme is part of the Net Zero and Heat and Buildings strategies which in part aim to reduce emissions from public sector buildings by 75% by 2037, compared to a 2017 baseline.

The latest allocation of £230m in Phase 3c will be available in the autumn, so it’s important to make a move now and fully prepare for when the application portal opens.

The scheme is complex and SaveMoneyCutCarbon can help organisations navigate their way through the maze. Our energy Demand Reduction team has worked with clients in the public sector, including schools, hospitals and local councils to reduce carbon emissions through energy and water reductions.

Take the first step with PSDS and book a free call with one of our Energy & Carbon Mentors. During the 30-minute Zoom consultation they will assess main operational/business drivers, answer questions and share recommendations to help save money and cut carbon.

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In total Phase 3 of the Public Sector Decarbonisation Scheme will provide £1.425 billion of grant funding through to 2025. The grants will finance up to 100% of the costs of capital energy-saving projects that meet the scheme criteria.

Schools, hospitals, leisure centres and historic town halls should be among hundreds of public buildings across England to benefit from energy efficiency upgrades, that will slash energy bills and save taxpayers millions of pounds each year.

The scheme, managed by Salix Finance, is open to the widest range of organisations in the public sector. Those eligible:

  • Local authorities
  • Maintained schools within the state education system, including academies, Multi-Academy Trusts and free schools
  • Institutions of further and higher education
  • Nursery schools maintained by a local authority
  • NHS Trusts and Foundation Trusts
  • Emergency services
  • Central government departments and their arm’s length bodies
  • For central government departments where their roles are reserved (i.e. not devolved to Scottish or Welsh Governments or the Northern Ireland Executive), funding may be used for estates located anywhere within the UK
  • Non-departmental public bodies.

Heat pumps

Low-carbon heating systems, powered by cleaner, cheaper, renewable energy, will ensure that organisations reduce their dependence on increasingly costly fossil fuels, as prices in global markets continue to rise.

The government funds will enable public sector organisations to install low carbon heating, such as heat pumps, and other energy efficiency measures. NHS Trusts, schools and local authorities will be among those able to apply for grants.

While cutting emissions, the sector should save an average of £650 million per year on energy bills over the next 15 years. With the era of cheap energy well and truly ended, the need to optimise energy efficiency is now central to both the national net zero strategy and the sustainable control of costs.

The scheme is part of the Plan for Jobs 2020 commitment to support the UK’s economic recovery and will reduce non-traded carbon emissions from the public sector by up to 0.1 MtCO2e/year and up to 0.5 MtCO2e over the next two Carbon Budgets. According to the Department for Business, Energy and Industrial Strategy (BEIS) this equates to taking nearly 45,000 cars off the road.

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Energy efficiency

Upgrades in public sector organisations are already under way, funded by earlier rounds of the scheme, with 734 grants awarded to across England so far and Phase 1 alone supporting up to 30,000 jobs in the clean heating and energy efficiency sectors, according to government data.

Projects include Nottingham University Hospitals NHS Trust, which received more than £70 million to install water source heat pumps at Queens Medical Centre. At Nottingham City Hospital, they installed air source heat pumps and fitted energy efficiency measures such as draught proofing and double glazing, while Leeds City Council received £4.3 million to decarbonise primary schools and child day care centres.

Birmingham Women’s and Children’s NHS Foundation Trust was awarded more than £50 million to install clean heating and energy efficiency measures in their hospitals and the Royal Botanic Gardens, Kew was awarded over £4.4 million to decarbonise the Grade II listed Nash Conservatory and Jodrell Laboratory.


For Phase 3c of the Public Sector Decarbonisation Scheme, an additional financial year of funding has been allocated, which increases the value of the overall funding to the scheme and will enable Phase 3c projects to deliver across two financial years.

The budget available in 2025/26 will be confirmed this autumn though it’s expected that there will be a similar amount broadly available for that year. Applicants will be able to submit separate applications for separate projects or combine several projects for delivery across one or two financial years.

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.

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