PSDS solar funding: Phase 4 was the final phase — what public bodies can do in 2026

What PSDS actually funded

PSDS was a heat-decarbonisation grant. Its primary outcome was replacing fossil-fuel heating (gas and oil boilers) with heat pumps and other low-carbon heat, and its cost-effectiveness test was measured in £ per tonne of CO₂ abated. Solar PV, battery storage, building-fabric measures, controls and LED lighting were funded as supporting infrastructure where they enabled the electrified heating — not as standalone projects. That is why most solar-only applications were rejected even when the scheme was open.

• Eligible bodies: local authorities, NHS trusts and foundation trusts, state schools and academies, universities and FE colleges, emergency services, national museums, central government and arm's-length bodies, public-sector leisure trusts.
• Grant intensity in later phases was tied to the counterfactual cost of a like-for-like fossil replacement, with the applicant funding the remainder.
• Delivery windows were tight (typically completion within two financial years of award), which is why late applications in Phase 3c and Phase 4 favoured shovel-ready projects.

Routes that exist for public-sector solar in 2026

1. Capital budget

Schools have devolved formula capital and, for academy trusts, School Condition Allocations; NHS trusts have capital departmental expenditure limits; councils have capital programmes. A rooftop system at £700–£900 per kWp with a 4–7 year payback is a defensible use of capital where the building has a long expected life — the business case is the same arithmetic as any commercial site, without the corporation-tax relief.

2. PWLB borrowing (councils)

Local authorities can borrow from the Public Works Loan Board for capital investment that generates savings. Where the energy saving comfortably exceeds the debt service, solar is a candidate — treasury management rules and the prudential code apply.

3. Power Purchase Agreement (zero capital)

Under a PPA an installer or fund pays for, owns and maintains the system and sells the electricity to the site at a fixed rate below grid for 15–25 years. The public body carries no capital cost; it commits to buying the generated power. Because the provider is a taxpaying company, it benefits from the Annual Investment Allowance the public body cannot use — which is part of why PPA rates can sit well below grid. See how a commercial solar PPA works.

4. Operating lease or asset finance

The public sector adopted IFRS 16 between 2022 and 2024, so leases now sit on the balance sheet. A lease still spreads the cost against the savings, but do not expect the old off-balance-sheet treatment.

5. Devolved loan schemes (Scotland and Wales only)

Scotland's Public Sector Energy Efficiency Loan Scheme offers zero-interest loans and the Scotland Recycling Fund is open. Wales's Salix Wales Funding Programme lends at a low fixed rate — 2.45% as of September 2026 — and is not interest-free. There is no equivalent public-sector loan in England.

What "Phase 4 was final" means in practice

• Do not hold a solar project waiting for a "next round" — the scheme is closed and no further round is scheduled.
• Heat-led projects that would once have gone to PSDS now compete for internal capital with everything else, so pair solar with the heating strategy rather than treating it as a bolt-on.
• If a consultant or installer tells you there is PSDS money for your solar project, ask for the scheme document and the window dates — the scheme is closed.
• Keep an eye on the Salix and GOV.UK pages — this page is reviewed when a successor scheme is announced.

Worked examples (modelled)

Two of this site's illustrative scenarios were written around Phase-4-era PSDS grants and are kept as worked arithmetic — they are modelled, not real projects, and a new project could not access that grant today:

• Multi-academy trust — four schools, 450 kWp, 70% grant assumed. Read the worked example.
• NHS acute trust — 380 kWp, 75% grant assumed. Read the worked example.

Frequently asked questions

Is there a PSDS Phase 5?

No. There is no Phase 5. Phase 4 of the Public Sector Decarbonisation Scheme ran from mid-October to November 2024, has been closed since, and was confirmed by DESNZ as the final phase. Recipients were published through 2025. Any page that describes a Phase 5 window running to 2027 is out of date.

Did PSDS fund solar-only projects?

Rarely. PSDS was heat-led: it funded the replacement of fossil-fuel heating, with solar PV, batteries and fabric measures as supporting infrastructure where they enabled electrified heating. Standalone solar applications were generally not funded.

What can a school or NHS trust use for solar now?

Capital budget (including devolved formula capital for schools), PWLB borrowing for councils, a Power Purchase Agreement where an installer funds and owns the system and sells the power below grid, or an operating lease. In Scotland the Scottish Public Sector Energy Efficiency Loan Scheme offers zero-interest loans; in Wales the Salix Wales Funding Programme lends at a low fixed rate (2.45% as of September 2026), not interest-free.

Does the Annual Investment Allowance help public bodies?

No. AIA is a corporation-tax relief, so it only helps bodies that pay corporation tax. It is irrelevant to maintained schools, NHS trusts and councils — but it does apply to a private-sector PPA provider, which is one reason PPAs can be priced below grid.

Is Salix still relevant in England?

In England Salix administers grants only — historically PSDS, the Public Sector Low Carbon Skills Fund and social-housing funding. There is no public-sector interest-free loan in England. Check salixfinance.co.uk for any live round before you plan around it.

Related guides

• Commercial solar grants and funding routes
• Commercial solar PPA explained
• Solar panels for schools
• Solar for NHS and healthcare estates