Public Sector Solar Funding: PSDS Status, Eligibility and What Comes Next

Public sector solar in 2026: where the funding stands

Public sector solar — rooftop and ground-mount PV on council, NHS, school, college, university and blue-light estates — grew on the back of PSDS grants from 2020. The scheme's position today matters more than its history. Phase 4 opened in mid-October 2024, closed in November 2024, published its grant recipients between May and September 2025 and its summary report on 4 December 2025; DESNZ's delivery data of 16 June 2026 describes Phase 4 as the final phase of the scheme, now in delivery. There is no open PSDS application window and none has been announced.

That changes the practical question. A public body planning solar in 2026 is not writing a PSDS bid; it is choosing between capital budget, borrowing, third-party ownership and — in Scotland and Wales only — a Salix interest-free loan. The table sets out the routes, what each does to the balance sheet and who ends up owning the array.

Two rules still catch public bodies out when they look at PSDS in hindsight or plan for any successor. First, PSDS was a heat decarbonisation scheme at heart: solar PV was fundable as part of a package that cut heat-related emissions, not as a standalone rooftop grant. Second, funding was competitive and phase-based rather than continuously open, so the binding constraint was always the application window and the phase criteria, not the eligibility test.

Sources: GOV.UK Public Sector Decarbonisation Scheme collection (phase statements); DESNZ delivery data, 16 June 2026; Salix Finance England, Scotland and Wales scheme pages. All checked 10 September 2026.

In detail

PSDS was the most significant grant route for public-sector solar in England from 2020 to 2024, administered by Salix Finance on behalf of DESNZ. Across Phases 1–3 it committed over £2.5bn (Phase 1 £1bn, Phase 2 £75m, Phase 3 over £1.425bn), and Phase 4 — confirmed in September 2024 for financial years 2025–26 to 2027–28 — is the final phase. The scheme rewarded integrated decarbonisation: applications that bundled solar PV with heat pumps, fabric improvements and lighting scored better than solar-only proposals because the per-tonne-of-CO2 cost-effectiveness is higher. Multi-academy trusts and NHS trusts that bundled several sites into one application were among the largest recipients. Application work was intensive — a portfolio submission ran to weeks of estates and finance time — which is why the pre-application groundwork (energy data, surveys, DNO pre-application) is worth keeping current if a successor scheme opens.

Worked example

Tax treatment / process

1. Pre-engagement with Salix and Carbon Trust to confirm eligibility and approach
2. Develop detailed business case including carbon savings, energy savings, total project cost, and delivery plan
3. Submit full application via the Salix portal during an open funding round
4. Award decisions typically 8–16 weeks after round closure
5. Delivery within tight grant timescales (often 12–18 months from award)
6. Submit completion evidence and claim grant against actual spend

Pitfalls to watch

• Highly competitive — application quality matters enormously
• Solar-only projects rarely score well; bundling with heat decarbonisation is almost essential
• Tight delivery deadlines — projects need to be procurement-ready at application stage
• Procurement compliance (PCR 2015) for any spend above thresholds
• Grant clawback risk if performance significantly under-delivers vs application
• Funding rounds can pause or change scope between announcements

Best paired with these finance structures

Public Sector Decarbonisation Scheme — comprehensive guide (updated September 2026)

The Public Sector Decarbonisation Scheme (PSDS) is the UK government's primary capital grant programme for decarbonising public sector buildings. Administered by DESNZ (Department for Energy Security and Net Zero), PSDS committed over £2.5bn across its first three phases (Phase 1 £1bn, Phase 2 £75m, Phase 3 over £1.425bn); Phase 4, which closed to applications in November 2024, is the final phase.

PSDS grant calculation: how awards are sized

PSDS does not operate a standard percentage grant — award levels depend on project carbon cost-effectiveness, building category, and available budget in each round.

Application process and timeline

PSDS phases 2020–2028: what each phase funded and where Phase 4 stands

PSDS ran in four phases. Each had its own eligibility list, scoring rules and window, and every Phase 3 and Phase 4 window closed within weeks of opening. The record below is taken from the GOV.UK scheme collection.

Why solar-only applications were at a disadvantage

PSDS scored applications primarily on the cost per tonne of CO2 saved over the project lifetime. A solar-only project on a gas-heated building cuts electricity-related emissions but leaves the larger heating footprint untouched. A combined solar, heat pump and fabric project saves several times more CO2 for a similar grant, so estates that bundled measures into a single application consistently achieved higher grant shares and better success rates.

Multi-academy trusts and NHS portfolios

Trusts with eight or more schools faced fundamentally different economics from single-school applicants. A portfolio spread across a county, each site carrying 30–80kWp of roof solar, often totalled 500kWp–2MWp — large enough to negotiate a programme-level installer contract and to present a portfolio application. The published Phase 4 project summaries show the same pattern for NHS trusts: multi-site bundles with heat measures at the core and solar alongside.

The balance a grant did not cover

Where a grant covered part of eligible cost, English bodies funded the rest from their capital programme or borrowing. Salix's interest-free loans fund that balance in Scotland and Wales, not in England — see the split below.

PSDS grant vs Salix loan: the England, Scotland and Wales split

“PSDS plus a Salix 0% loan” is widely repeated as the standard public-sector structure. In 2026 it is only available outside England. Salix delivers grants in England (PSDS, the Low Carbon Skills Fund and social housing funding) and loans in Scotland and Wales. PSDS closed to new applications in November 2024 and Phase 4 is its final phase.

For an English council or NHS trust the live choice is therefore between its own capital, a power purchase agreement and a lease. Scottish and Welsh bodies can add a Salix loan to that list, and solar-only projects qualify there on a savings-cover-repayments test rather than a competitive carbon score. Northern Ireland has separate arrangements through the Department for the Economy.

PSDS eligibility: which public bodies qualified for solar grants

The Public Sector Decarbonisation Scheme (PSDS) is open to a specific list of non-domestic public sector organisations in England. PSDS closed to new applications in November 2024 and Phase 4 is its final phase. Eligibility is not automatic — applicants must be on the approved list and must demonstrate that the project reduces the building's carbon emissions. The table below shows the main eligible categories under the Phase 3 and Phase 4 rules. The grant-share column is indicative of past phases and was never a fixed entitlement.

How a PSDS application ran, step by step (reference for any successor scheme)

Funding the balance a grant did not cover

Where a PSDS grant covered part of eligible cost, the balance came from the body's own capital programme or borrowing; in Scotland and Wales a Salix loan can fund it. PSDS closed to new applications in November 2024 and Phase 4 is its final phase. The model below is an illustrative worked example, not a client engagement.

Salix Finance: what it runs in each nation (September 2026)

Salix Finance Ltd is the government's delivery partner for PSDS and runs separate programmes in each nation. The distinction matters because the loan products that public bodies often assume come with PSDS exist only in Scotland and Wales.

• England: Public Sector Decarbonisation Scheme (grant; Phase 4 in delivery, final phase), Low Carbon Skills Fund (grant for heat decarbonisation plans) and social housing decarbonisation funding. No public-sector loan scheme.
• Scotland: Scottish Public Sector Energy Efficiency Loan Scheme (zero-interest, open) and the Scotland Recycling Fund (open).
• Wales: Wales Funding Programme (loans, open), Digarbon (£20m loan scheme for tertiary education) and the Wales Recycling Fund (closed).

Common reasons PSDS solar applications failed in past phases

(1) The building was leased from a private landlord — the scheme required public-sector ownership or a qualifying long-term interest. (2) Work had started before the grant offer. (3) The energy audit did not meet the required standard. (4) Carbon savings were too small — small systems on low-consumption buildings scored poorly. (5) The application arrived after the window closed; Phase 3b and 3c windows lasted about a month. (6) The round was oversubscribed and only the highest-scoring applications were funded. (7) The building was primarily residential, which belongs to the social housing programmes instead. Points 1–5 were within the applicant's control; point 6 never was.

Could battery storage be included alongside solar?

Storage could be included where it increased the carbon saving of the package rather than standing alone; the phase guidance set the eligible-cost rules. For a public body funding solar itself in 2026, the question is commercial rather than eligibility-driven: see our guide to financing battery storage with solar.

Does PSDS apply in Scotland, Wales and Northern Ireland?

PSDS covered public bodies in England and central government bodies. Scotland's public sector uses Salix's zero-interest loan scheme and recycling fund; Wales has the Wales Funding Programme and Digarbon; Northern Ireland runs separate arrangements through the Department for the Economy. See our Scotland and Wales grant guides.

What happens if a PSDS-funded solar system underperforms?

Grant offers carried monitoring and verification conditions so that actual carbon reductions could be reported. Persistent underperformance against the modelled output could trigger remedial-works requirements, and clawback provisions existed, but delivery monitoring focused on systemic shortfalls rather than year-one weather variation.

See the full funding stack in our public sector solar funding hub — PSDS, Salix and the devolved schemes.