PSDS Phase 4: what we're seeing in the application pipeline

PSDS Phase 4 opened to applications in early 2026. We're seeing the same three patterns separate winning applications from losing ones that we saw in Phase 3 — and they have less to do with technology choice than with how the business case is framed.

The cost-per-tonne metric is everything

PSDS scoring is dominated by cost-per-tonne-of-CO₂-saved over the project lifetime. Solar-only applications struggle here because, on a per-tonne basis, solar is one of the more expensive decarbonisation options for an organisation already operating on partly-decarbonised grid electricity. A 2026 marginal grid carbon factor of 0.18 kg CO₂/kWh means that even a high-yielding solar project saves only ~180 tonnes per MWp per year — and against £700–£900/kWp capex, that puts cost-per-tonne in the £400–£500/tonne range.

Bundled applications win. A solar + heat pump + fabric efficiency package on the same site delivers materially better cost-per-tonne because heat pumps replace direct gas use (CO₂ factor ~0.21 kg/kWh), where the savings per pound spent are stronger. We're consistently seeing scores 30–50% better on bundled applications versus solar-only.

What works in Phase 4

Bundle structure. Successful applications generally include solar PV + air-source heat pumps + LED relighting + BMS + roof insulation as a single package, with the heat pump driving the cost-per-tonne metric and solar offsetting the heat pump's grid load. Solar standalone applications win only on sites where the heat is already decarbonised (electric heating in a school, for instance).

Real demand modelling. Applications that reference half-hourly demand profiles, not annualised consumption, score better because the grant assessor can verify self-consumption assumptions. Applications using annualised consumption with a 60% self-consumption assumption are increasingly being challenged — the assessor wants to see the half-hourly evidence.

Specific carbon counterfactual. The strongest applications nominate a specific grid emissions factor with a year-by-year decarbonisation trajectory drawn from the National Grid FES Net Zero scenario, rather than a flat assumption. This shifts the lifetime CO₂ savings calculation noticeably and is now treated as best-practice methodology.

Maintenance and end-of-life. Phase 4 weights post-installation operational support more heavily than Phase 3. Applications with a clearly costed 25-year O&M plan — not just installation — are being scored higher.

What's causing rejections

Cost-per-tonne over £350. Phase 4 has effectively imposed a soft cap around £350/tonne. Solar-only projects struggle to clear this without unusual local circumstances (e.g. very high tariffs, very large sites with constrained grid alternatives).

Insufficient client-side capability. Applications where the recipient body has no clear delivery resource are being deferred. The assessor wants to see named project sponsors, internal capacity for procurement, and a credible engagement-to-completion plan.

Generic technical specification. Boilerplate solar specs without site-specific structural and DNO assessment are being rejected at first-pass review. Even at application stage, Phase 4 expects evidence of site survey work.

Implications for public-sector planning

For schools, NHS trusts, and local authorities planning Phase 4 applications, the pattern is clear: lead with heat decarbonisation, anchor on cost-per-tonne, and treat solar as the complementary measure rather than the headline. Where heat is already electric (smaller schools on storage heaters, some clinics), solar can lead — but in any building with significant gas heat use, the heat pump is what wins the application. Solar is what makes the heat pump's grid load tolerable and fundable.

Phase 4 also rewards portfolio applications. Multi-academy trusts applying with 8–12 schools in a single bid score better on overhead-amortised metrics than single-school applications. Local authorities applying with operational estate plus delegated school estate plus housing stock as one package are seeing the strongest results.

Timeline and resource planning

Phase 4 application windows have been roughly 8 weeks open with grant decisions 12–16 weeks after window close. Awarded projects then need to be installed and commissioned within 24 months of award — though Phase 4 has tightened on this and is increasingly enforcing 18-month delivery. Lead times for typical school or NHS solar projects are 6–9 months from award to commissioning, so the 18-month window is workable but tight if heat pumps and fabric works are bundled.

Resource-intensity is real: typical Phase 4 application requires 200–300 hours of internal/external time across technical specification, financial modelling, and procurement preparation. Recipient bodies that under-resource the application stage almost always under-deliver if they win.