What does PSDS’s closure mean for decarbonising buildings? What does PSDS’s closure mean for decarbonising buildings?

What does PSDS’s closure mean for decarbonising buildings?

What does PSDS’s closure mean for decarbonising buildings?

Following last week’s Spending Review, Salix has announced there is no future funding for the Public Sector Decarbonisation Scheme (PSDS).

Public bodies that had assumed an autumn funding round was coming will now be taking stock and working through the implications for their decarbonisation programmes.

Here are a couple of aspects to consider…

Shift (back) towards energy efficiency and renewable generation?

PSDS has been important for decarbonising heat, where projects typically do not have a financial return. With budgets already under long term pressure, the appetite for heat decarbonisation is at risk of fading. This could mean energy efficiency and renewable generation return as the focus, where the high cost of electricity means the financial benefit can be enough to underpin borrowing.

However, as UK electricity has become increasingly low carbon, the carbon savings from reducing electricity consumption are not what they use to be.

In 2010, saving a kWh saved you 485g CO2e; the recently released 2025 value is 177g (-64%) and if the Clean Power Plan target is achieved, it will be <50g from 2030 (though let’s not get into whether we will achieve that here!).

Shifting focus onto energy efficiency and renewables is likely to be the affordable step to take and is still good for the climate, but without decarbonising heat, net zero targets are likely to go unachieved.

Heat Networks Risks

The other, less obvious, risk is for heat networks and the intentions of the zoning policy. PSDS has been used to help connect public buildings to heat networks, and these are often key anchor loads, providing the demand certainty a heat network needs to initially develop.

The withdrawal of PSDS may therefore place greater pressure on the financial case for connecting (regardless of who bears the cost in practice), and may move more buildings towards zoning exemption criteria on cost grounds. This could undermine the availability of these anchor loads, which are needed to get projects off the ground (or should that be ‘in the ground’ in this case?).

With the response to the 2023 heat network zoning consultation eagerly awaited, we need to wait to see how the regulations take shape. However, a central aim of the zoning policy is to provide greater certainty on heat demand, and the removal of PSDS means that this will now be harder.

If you are concerned about the impacts of PSDS being removed, please get in touch and Local Partnerships can work with you to find a way forward.

Related Articles

See how councils and communities are working together

Insights
Read in – 5 minutes
Contract Management Lunchables 2026
Do you want to improve your contract management and procurement knowledge? Contract management Lunchables are short lunchtime webinars, running from 12pm to 12.30pm each weekday from 2 to 13 November. They are designed to help local government colleagues build their contract management knowledge. Supported by Government Commercial Agency, the programme brings together experts from across […]
Read more
Public Sector Delivery Body
Insights, Awards
Read in – 1 minute
Double award success for PBH!
Local Partnerships is delighted to celebrate Sophie Baker’s double success at the Inspiring Women in Property Awards. Sophie was named Innovator of the Year and received the Social Mobility Initiative of the Year award for her work leading Prisoners Building Homes (PBH). From its beginnings in the South West, PBH has grown into a national […]
Read more
Local Government
Insights, Case studies
Read in – 3 minutes
Protecting essential public services through a complex PPP contract transition – Isle of Wight Council
Overview When Isle of Wight Council faced the early termination of its long-term waste PPP contract, the priority was to protect an essential public service and ensure residents experienced no disruption. With independent specialist support from Local Partnerships, alongside DEFRA and NISTA, the Council successfully transitioned waste services to a new operator within an exceptionally […]
Read more

Contact Local Partnerships

Do you have a project you would like help with, or could we answer a question about our services? Please message us here.

Name(Required)
Local Partnerships Logo Talk to Us
Hi there! Let us know if there’s anything we can help you with

Ready to start a conversation

We work best when we understand what matters most to you. Get in touch and let’s explore how we can help.
Talk to us
Local Partnerships Logo

Ready to find out more?

Keep up with the latest updates!

© Local Partnerships 2026 | Local Partnerships LLP is a limited liability partnership registered in England and Wales no. OC346845. The registered address is 18 Smith Square, London SW1P 3HZ.