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Making the case now the funding has gone

Jonathan Aird · 8 August 2026

For five years, decarbonising a public building in England meant applying for a grant. The case was largely made by the funding itself: if somebody else was paying most of the capital, carbon was reason enough. That mechanism has gone, and a lot of estates teams are still writing business cases as though it hasn't.

Where things actually stand

The Public Sector Decarbonisation Scheme was cancelled at the June 2025 Spending Review. Phase 4 projects continue to delivery — all works must complete by 31 March 2028 — but there are no new applications in England.

The Low Carbon Skills Fund, which paid for the feasibility work and heat decarbonisation plans that underpinned those bids, has had no allocation since 2024/25. Phase 5 was the last round.

Nothing has replaced either. The Climate Change Committee's June 2026 progress report states the position plainly: with PSDS closed, there is now no dedicated funding for decarbonising the public estate.

That is worth absorbing rather than working around. It is not a gap between schemes. There is no announced successor.

What is still open

Less than there was, but not nothing:

• Scotland's Public Sector Heat Decarbonisation Fund, Phase 3. Live, with grant offers issued and a spend deadline of 31 March 2027. That is a very compressed delivery window — if you are a Scottish public body with an award, the programme risk is now the binding constraint.
• The Wales Funding Programme. Open, and Wales retains a 2030 public sector net zero target that is considerably more aggressive than England's.
• Great British Energy Solar. £255m across schools, colleges and NHS sites. Solar rather than heat, but it changes the arithmetic on a heat pump scheme by offsetting the electrical load.
• Green Heat Network Fund and HNES. Open, for the buildings where a network connection is realistic.
• The Condition Improvement Fund. For eligible academies, with the next round expected in autumn 2026. Note what it is: condition-led, not carbon-led. Sustainability alone will not justify a replacement, though low-carbon conversions score better within their priority tier.
• MEND, for eligible museums.

The pattern is worth noticing. What remains is either regional, or tied to a specific technology, or fundamentally about the condition of the asset. None of it will fund a carbon-reduction scheme on carbon grounds alone.

Why the old business case stops working

A grant-era case typically ran: here is the carbon saving, here is the cost per tonne, here is the grant that covers most of it, please approve the balance. The capital contribution was small enough that whole-life cost rarely got interrogated.

Take the grant away and the same paper asks a finance director to spend, say, £2m of the organisation's own capital on a scheme that reduces carbon and increases the annual running cost. That paper does not get approved, and it should not.

The uncomfortable arithmetic behind it is the price ratio between electricity and gas. UK electricity currently costs around 4.3 times as much as gas per kWh. A heat pump has to achieve a seasonal efficiency above roughly 4.3 simply to break even on running cost. Most retrofit schemes in existing buildings land somewhere between 2.5 and 3.5. The CCC noted in June 2026 that there is no plan to address this ratio for non-domestic users.

So on most schemes, honestly modelled, electrification does not reduce the energy bill. Pretending otherwise is the fastest way to lose the confidence of the person who signs it off — and it is usually discovered in the second winter, which is a bad time to be discovered.

The three cases that do still get approved

Condition

This is the strongest and most common route now. The plant is at the end of its life and has to be replaced regardless. The capital is going to be spent either way, so the question changes from "should we decarbonise?" to "what should we replace it with?" — and that is a much easier question to win.

It also changes the comparison. You are no longer measuring a heat pump against doing nothing. You are measuring it against a like-for-like boiler replacement, which has its own capital cost, and against the risk of running failing plant through another winter.

Whole-life cost, not payback

Payback is the wrong instrument here and it will always give the wrong answer. Whole-life cost — capital, running cost, maintenance, and the replacement liability at the end of each option's life — is the comparison that reflects reality. A gas boiler replaced now is a twenty-year commitment to a fuel with its own price risk and its own eventual removal cost.

It also captures the things a payback calculation ignores: maintenance regimes, refrigerant phase-down liabilities on older equipment, and the cost of doing the work twice because the first phase was not designed to be extended.

Obligation and risk

Statutory duties, member or board commitments, Green Plan requirements, and in Wales a 2030 target with real teeth. These are legitimate reasons to spend capital, and they are stronger when stated as obligations than when dressed up as savings.

What an honest paper looks like

On a recent school feasibility study we set out five options side by side, from doing the minimum at £0.1–0.2m to a central energy centre at £3.3–3.5m. The lowest-carbon option cut emissions by 82%. We recommended a hybrid that cuts them by 67%, at roughly half the capital, and the report says so explicitly and explains why: full electrification would have needed 240 to 280 kW of electrical demand against a supply whose spare capacity nobody had established.

The report also states that at current prices electrification does not reduce the energy bill, and that the benefit is carbon. It is better for a client to know that before committing than after.

That paper is harder to write than an optimistic one. It is also the only kind that survives a Section 151 officer, and the only kind that leaves your credibility intact when the first year's bills arrive.

What to do in the meantime

If capital is not available this year, there is still work worth doing — and most of it pays for itself regardless of what happens to funding.

Controls and optimisation. The cheapest carbon in almost every building. Weather compensation, scheduling, sequencing and setbacks are frequently left as commissioned. This costs little and reduces consumption whatever the heat source.

Solar. On the schemes we model, solar PV routinely shows a payback of six to nine years at current prices. It reduces electrical import, which improves the case for a heat pump later.

Fabric and load reduction. Every kilowatt of demand removed is a kilowatt of heat pump, electrical connection and capital you do not have to buy later.

Metering and data. Twelve months of half-hourly consumption data costs nothing and is the foundation of every credible case. If you have it, you can move quickly when a funding route opens. If you do not, you will spend the first two months of any window gathering it.

Establish your electrical position. Maximum demand, connection agreement, actual cable rating and a budget enquiry to the network operator. This is the item with the longest lead time and the one most likely to change what is possible.

The point

The end of grant funding has not made decarbonisation less necessary. It has made the paperwork harder and the honesty more important.

Estates that come out of this well will be the ones with a costed, sequenced plan sitting ready — so that when plant fails, or a funding route opens, or a board asks what it would take, the answer already exists with real numbers behind it.