The UK’s landmark Public Sector Decarbonisation Scheme (PSDS) – administered by Salix – has now closed to new applications. This leaves many local authorities, NHS Trusts, schools, and other public bodies questioning how they will continue their net zero plans without this vital funding.

But while the funding landscape is changing, your journey to decarbonisation doesn’t have to stop. In fact, it’s entering a new, more strategic phase.

Why is Salix PSDS Closing?

The closure follows the government’s recent Spending Review, which confirmed there would be no further investment for the PSDS beyond existing awards. Salix, the government-owned organisation that manages the scheme, said:

“The government has taken the difficult decision to commit no further investment for the public sector decarbonisation scheme beyond currently awarded projects.”

The reasons? A combination of shifting public spending priorities and a new policy drive to move away from blanket grant funding toward models that demand more strategic, value-led outcomes.

Importantly, all projects already awarded funding will still be fully supported – Salix is continuing to deliver phase 3c until March 2026 and phase 4 until March 2028, with more than £1 billion still to be invested across existing schemes.

Salix chief executive Kevin Holland recently reassured stakeholders:

“We remain committed to supporting our public sector decarbonisation scheme stakeholders as they pursue their phase three and phase four projects… We will continue to support these organisations, working with them to meet deadlines and to showcase the incredible work being achieved.”

But what happens next for organisations still striving to achieve ambitious 2030 net zero targets – especially when the work to decarbonise complex estates like schools, leisure centres, and hospitals often takes years of planning and investment?

Why This Isn’t the End of Your Net Zero Journey

While the closure of the public sector decarbonisation scheme Salix has understandably caused concern, it does not mean that funding opportunities or pathways to decarbonisation have disappeared altogether. Instead, we’re seeing a shift towards a new funding landscape; one that rewards strategic, value-driven approaches and robust business cases.

In the words of Isaac Beevor, partnerships director at Climate Emergency UK:

“The closure of the PSDS has left councils and the rest of the public sector high and dry… Lots of councils also have 2030 net zero targets for their estates and these targets will prove impossible without continued PSDS investment.”

Yet with the right strategy, private finance, and expert support, public sector bodies can still drive meaningful carbon reduction – protecting themselves from rising energy costs and delivering long-term value for local communities.

The Evolving Funding Landscape

There’s a clear policy pivot underway, moving:

• From broad, blanket grants to targeted, strategic interventions.
• Towards funding models that demand evidence of operational and whole-life cost savings.
• To a focus on regional and place-based initiatives, such as Levelling Up and Devolution Deals, which provide localised investment.

This means public sector organisations need to adapt. Fortunately, other funding avenues remain available or on the horizon, including:

• Social Housing Decarbonisation Fund (SHDF) Wave 3, expected in late 2025
• Home Upgrade Grant (HUG) Phase 3
• Local Net Zero Accelerator pilots
• HNDU and HNIP for developing heat networks
• Community Energy Fund (CEF) and upcoming Great British Energy initiatives

Preparing “shovel-ready” projects and robust carbon reduction strategies is more important than ever to capitalise on these opportunities.

Practical Options to Move Forward

Many councils have set ambitious 2030 deadlines for cutting emissions across their estates. Yet decarbonising complex buildings like schools, leisure centres, and hospitals takes years of planning, design, and funding.

The closure of the PSDS doesn’t signal the end of these vital efforts, it simply marks the beginning of a new phase. Success now hinges on robust planning, creative financing, and building a strong case for whole-life savings.

Leverage Private Finance

At C3 Group, we’ve partnered with specialist green finance providers to deliver bespoke funding solutions for the public sector. This includes:

• Below-market interest rates, often outperforming Public Works Loan Board (PWLB) borrowing
• Flexible repayment structures linked to actual energy savings
• Zero upfront capex through models like Energy-as-a-Service (EaaS) and Design–Build–Finance–Operate (DBFO)

As a quick win, many organisations are prioritising solar PV, which typically achieves a 3-5 year return on investment, generating savings that can be reinvested into wider heat decarbonisation programmes.

Build a Robust Business Case

With cash tight and scrutiny on public spending higher than ever, making decisions based on lifecycle costs is key. We support clients to:

• Bundle multiple smaller schemes into large, investable portfolios to achieve economies of scale
• Benchmark carbon and cost savings against national frameworks
• Build compelling cost-benefit analyses to secure sign-off, whether pursuing private finance or preparing for future grants

Stay Funding Ready

Our team ensures your projects comply with the latest standards – PAS 2038, CP1:2020 and Net Zero Building Standards – keeping you eligible for upcoming funding rounds. We also develop strategies that align decarbonisation goals with local economic growth and social value priorities.

Why Work with C3 Group?

C3 Group has already delivered over £9.5 million in PSDS-funded projects, helping public sector clients decarbonise estates across the UK. But our work goes beyond grants:

• We specialise in healthcare, local authority, and commercial decarbonisation, providing a complete service from carbon assessments to heat decarbonisation plans
• With offices in Hull and Leeds, we combine local insight with a nationwide reach
• And we embed social value into everything we do, from promoting green jobs to supporting community well-being

The closure of the Salix PSDS might feel like a setback – but with C3 Group, it doesn’t have to be. We’re ready to help you secure private finance, prepare future funding bids, and develop robust heat decarbonisation and carbon reduction strategies that protect your budgets and keep your climate commitments alive.

Get in touch to book a no-obligation estate review or funding strategy session with our team today.