Applications opening for Phase 3 of the Public Sector Heat Decarbonisation Fund

Public sector organisations across Scotland will soon be able to apply for the next round of funding under Scotland’s Public Sector Heat Decarbonisation Fund (SPSHDF), designed to speed up the transition to low-carbon heating across publicly owned estates.

Delivered by Salix Finance on behalf of the Scottish Government, the programme provides capital funding for projects looking to replace ageing heating systems that are powered by fossil fuels with clean alternatives, all the while improving the overall energy performance of public buildings.

The fund supports Scotland’s wider ambition to reach Net Zero greenhouse gas emissions by 2045.

Funding for whole-building retrofit projects

The scheme is taking a “whole-building” approach to decarbonisation, encouraging organisations to combine low-carbon heating installations with wider energy efficiency measures.

Eligible improvements can include (but are not exhausted) to:

• Replacing fossil-fuel heating systems with technologies such as heat pumps
• Connecting to heat networks
• Building ‘fabric first’ improvements such as insulation
• Building energy management systems
• Integrating renewable energy technologies

These improvements help public sector organisations reduce emissions whilst improving long-term operational efficiency and resilience across their estates.

Who can apply for the SPSHDF?

The funding is available to a range of public sector organisations in Scotland, including:

• Local authorities and their estates (including schools within local authority ownership)
• Local authority arm’s-length external organisations (ALEOs)
• Universities
• Further education colleges
• Scottish Government departments and executive agencies
• Executive non-departmental public bodies
• Non-ministerial offices
• Scottish health bodies

Organisations are encouraged to approach their decarbonisation projects strategically across their estates when developing proposals, i.e., understanding the big picture, identifying priorities and thinking ahead to future uses.

Funding available and application timeline

Each organisation can only submit one application for up to £2.5 million, with the total award depending on the carbon impact and value of the proposed project.

Funding supports eligible capital costs such as the purchase, implementation and maintenance of low-carbon heating systems and energy efficiency upgrades.

Projects must be delivered during the 2026/27 financial year, with funding required to be spent by 31 March 2027.

The key dates for this upcoming SPSHDF funding round are:

• Tuesday 24 March 2026 – Application window opens
• Wednesday 29 April 2026 – Application window closes
• May–July 2026 – Assessment period
• August 2026 – Grant offers expected to be issued

Preparing your funding application

With a relatively short application window and significant competition expected, early preparation will be essential.

BTG Eddisons has extensive experience supporting public sector organisations with funding strategies, decarbonisation planning and bid preparation. Our dedicated specialists help organisations identify suitable projects, develop robust technical and financial business cases and ensure applications align with scheme priorities.

We also support clients beyond the application stage, providing project management and delivery support to ensure funded projects are completed successfully and compliantly.

Organisations interested in applying for the next round of funding are encouraged to begin preparing now to maximise their chances of securing investment for estate decarbonisation.