Our Insights from PSDS Funding so Far

Following the recent distribution of Phase 3b funding, we thought it would be interesting to look back at the two previous rounds of funding and highlight some of the standout patterns and points of interest.

Salix have introduced a key change from Phase 3a to 3b, with ‘soft caps’ of 30-35% of total funding for each of the 3 sectors, Education, Health, and Other. If there are a lack of suitable applications for a sector, this funding will be distributed to the other sectors, even if this would go beyond the 35% cap.

A maximum of 58% of the total grant cost that can be used for energy efficiency, showing the focus remains on heat decarbonisation, mainly through air source heat pumps. Here we compare Phase 2 and 3a in terms of grant value, sector distribution and technology implemented, and discuss initial Phase 3b data.

Figure 1 shows us that the majority of funding in Phase 3a, roughly 50%, was distributed in large individual grants, with bids of over £10m making up £277m of the total £555m in Phase 3a. This is a clear change from Phase 2, where funding was more evenly distributed across these categories. The fact that Phase 2 was a much smaller fund, at £74.6 Million, may have played a part in this distribution. However, it is clear that it is possible to fund large-scale projects using PSDS funding and does not seem a drawback to potential future bids.

Source for Figure 2 – BEIS, 2022: Public Sector Decarbonisation Scheme: Phase 2 Summary report (publishing.service.gov.uk)

Figures 2 and 3 show the change in funding distribution across sectors between Phase 2 and 3a. The NHS had the biggest jump in % of the funding, increasing to from 25% to 59%, whereas Further Education dropped from 33% to 9%. As of 22nd March 2023, £409m has been awarded in Phase 3b. Of this, the NHS received £152m, 37.5% of the total, which is a decrease of £178m compared to Phase 3a. Further Education and Schools received £104m, 25% of the total, an increase of around £16m compared to Phase 3a. This 25% is below the 30% soft lower limit set by Salix, which suggests there was possibly a lack of suitable applications from Further Education and Schools. However, other funded projects will likely be added to the list in the coming months, as was the case with Phase 3a.

To create figures 4 and 5, the total number of schemes that each technology was used in was totalled, and converted into a percentage. For example, 26% of all technologies implemented in Phase 3a were ASHPs. The percentage of the each of the main technologies remained very consistent across the two phases, with a maximum of only 2% changes across insulation. This are possibly boundaries used by Salix, and may continue into Phase 3b, and this will be known once funding data is released for this round. Almost all projects funded included an ASHP, around 90%, showing that heat decarbonisation is the main key focus of the PSDS, with LED and Solar also featuring in numerous projects. Insulation and double glazing were important in many projects to compensate for the lower temperature water created by the air source heat pumps compared to traditional boilers.

Phase 3b grants have now been awarded and recipients will be working hard to get projects fully planned, procured and installed. LASER has supported many organisations deliver PSDS projects , whether it be through our frameworks specifically designed for procurement of decarbonisation technologies, or end to end project management from initial surveys, specification, procurement, contract and project management, we are a public sector resource and here to help.

Reference Links

Phase 3a Public Sector Decarbonisation Scheme: project summaries – GOV.UK (www.gov.uk)

Phase 2 Public Sector Decarbonisation Scheme: project summaries – GOV.UK (www.gov.uk)

This blog was written by Freddie Williams, Zero Carbon Researcher.