Public Sector Decarbonisation Scheme – PSDS

The Public Sector Decarbonisation Scheme gives central government and local authorities in England a major opportunity to decarbonise public sector non-domestic buildings by installing heat pumps.

Salix Finance

The PSDS Grant Scheme is run by Salix for BEIS. The overall size of Phase 3 PSDS is £1.45bn. Funding will be provided for costs over and above the like for like replacement costs of a fossil fuel heating system for successful applicants.

The purpose of the scheme is to help make eligible buildings more energy efficient and install low carbon heating systems like heat pumps, heating controls, glazing and insulation.

Eligible bodies can apply for funding for projects that meet one or more of these categories:

  • technologies contributing to heat decarbonisation – like heat pumps and connection to low carbon heat networks
  • technologies reducing overall energy demand – like insulation
  • technologies enabling future decarbonisation projects – like metering or electrical infrastructure

In applications for Phase 3b of PSDS (from September 2022) applicants must be using a fossil-fuelled heating system and the heating system must be coming to the end of its useful life. Funding will be provided for costs over and above the like-for-like replacement costs of a fossil fuel heating system.

Grants are only available to projects which have not yet started and projects that would not have taken place without the grant.

The cost of saving a tonne of carbon (/tCO₂) over the lifetime of the project must be no more than £500.

Rishi Sunak

Information on how to apply and the tight timescales are shown on the Salix PSDS webpage for Phase 3.

Government's intentions

The Public Sector Decarbonisation Scheme started as part of the Chancellor’s ‘Plan for Jobs 2020’ commitment to support the UK’s economic recovery from Covid-19, supporting up to 30,000 skilled jobs in the low carbon and energy efficiency.

The scheme supports the government’s Net Zero and Clean Growth goals and is designed to reduce carbon emissions from the public sector by up to 0.1 MtCO2e/year and up to 0.5 MtCO2e over each of Carbon Budget 4 and Carbon Budget 5. This would be equivalent to taking nearly 45,000 cars off the road.

Opportunity for heat pump installers

The Public Sector Decarbonisation Scheme is a great opportunity for heat pump installers.

Opportunity for Central Government and Local Government to decarbonise non domestic buildings

Remember that to provide effective and efficient heating, a heat pump must be installed by a contractor with experience in the design and installation of heat pump systems.

Public Sector Low Carbon Skills Fund

The PSDS scheme is also supported by the Public Sector Low Carbon Skills Fund, which provides grants to help organisations source specialist and expert advice to identify and develop heat decarbonisation projects.

The aim is to open the scheme up to public sector bodies without sufficient in-house expertise and help them to prepare a robust application for the grant funding.

Obtaining advice on PSDS

ICAX is in a strong position to advise on what practical steps can be taken in the limited time available to make good use of this grant: 020 7253 2240.

PSDS 3 now launched

ICAX is experienced in supporting PSDS programmes. We are currently delivering twelve PSDS projects. We are ready to help public sector bodies and contractors realise their projects through Salix.


See also Air Source Heat Pumps

See also Ground Source Heat Pumps

See also Water Source Heat Pumps

Ground Source Heat Pump Association

ICAX is a member of BSRIA