The school energy and carbon reduction funding situation

Schools, and the rest of the public sector, in England are currently left with no available funding to pay for energy efficiency and carbon reduction works. The closure of the Salix Energy Efficiency Loan Scheme (SEELS) after 16 years of successful operation, the closure of the second round of the Public Sector Decarbonisation Scheme (PSDS2) after just 3 days, due to being twice over subscribed, and the ending of the first round of PSDS funding, where schools were seemingly discriminated against in the funding award, means that for the first time since 2005 there is no Government supported public sector funding solution for schools to reduce their energy consumption and carbon emissions.

This situation appears to be a major retrograde step. At the same time that the UK Government is increasing its carbon reduction targets and the global community, through the leadership of the new US administration, is coming together to call for faster and tougher action on emissions, the door has been closed to schools to fund the action they want to take.

Inspired Efficiency are calling on schools, consultants and suppliers to write to their MP’s to request that BEIS urgently review the situation.

What Funding Has Been Available to Date?

Public Sector Decarbonisation Scheme – Round 1

The Government launched its flagship £1bn scheme for decarbonising public sector buildings in October 2020.
This focused on projects that were going to decarbonise their heating but also provided funding to install a complete set of energy efficiency measures including lighting, insulation, renewable energy and the like.
The scheme said that the works needed to be completed ideally by end of March 2021 and no later than 30th September 2021, although schemes run from Local Authorities seem to have been given greater funding and longer timescales for delivery.
Despite applications being required to be submitted during the second lockdown and works completed on site during the third lockdown, the scheme was massively oversubscribed with £2.4bn of applications, highlighting not only the appetite of individual public sector bodies to want to decarbonise but the level of support required to achieve Government net zero carbon targets.

Schools and academies put in 711 applications for a combined value of £429 million against the total applications of £2.4bn made to the scheme. Schools and academies therefore made up 17.9% of the value all applications received.
However, schools appear to have been actively discriminated against in the grant award process in favour of Local Authorities, as from the results of those awarded funding we can see that schools made up only 3.4% of the value of the successful grant applications totalling £31.63m.

PSDS1 is now closed and projects should have been completed at the end of March although many Local Authority projects are yet to have even started or defined what measures are to be installed at which sites.

Who got PSDS1 Funding:

Public Sector Decarbonisation Scheme – Round 2

A fundamentally different ‘second round’ of the PSDS scheme opened at 2pm on Wednesday 7th April 2021 to fund the increase in costs from replacing a life expired fossil fuel boiler with an electric heat pump. This scheme closed at 11am on Tuesday 13th April having received £150m of applications meaning that the scheme was in effect only open for 3 working days and in that time was twice over subscribed.

The assessment of application under this scheme are on-going.

SALIX Zero Interest Loan Funding for Schools and Public Sector Organisations

The SALIX Energy Efficiency Loan Scheme (SEELS) provided loan funding to public sector energy efficiency projects without the requirement for having to include a heat pump or similar. This loan funding provided the upfront capital to undertake projects that payback in under 5 years (or for schools this is extended to under 8 years) and then the loan was paid back from the energy savings it achieved. In this way is it ‘cashflow neutral’ to the public sector organisation. This was a Government scheme and therefore is pre-approved for schools and public authorities in line with their financial regulations. Schemes had to have a minimum capital value of £8,000 and there was no maximum. Academy schools could use SEELs.
DfE provided £10m of funds into this ‘revolving fund’ and since 2004 BEIS provided a total of £148m into this revolving fund. This was a popular scheme, with SALIX reporting that from 2004 to 31st March 2020 it had funded 18,700 projects with a value of £971m. These projects save over 867,000 tonnes of CO2 annually and represent £203m of annual financial savings to the public sector which will add up to £3.3bn of savings over the projects’ lifetime.

This scheme was closed on 1st April 2021 without warning or notification of an upcoming replacement loan scheme or otherwise.

SEEF Zero Interest Loan Funding for Academy Schools

Academy schools are deemed to be ineligible to access the SEELS funding. Therefore, the SEEF funding route was made available which allowed academy schools and MATs to access an interest free loan to pay for energy saving works. This worked in a similar way to SEELS but had a cap of £200,000 maximum project cost per school and had three rounds of funding applications, all of which were reported to have been highly competitive with only 1 in 4 applications being successful in the second round.

It is understood that alongside the closure of the SEELS scheme, no further rounds of SEEF will now be available.

Clear Demand for Energy Saving Projects

It is clear that there is huge demand for energy saving funding for schools and the wider public sector and in recent months Inspired Efficiency have seen around an eight fold increase in interest from schools to take positive and practical actions to reduce their energy use and carbon emissions.
From PSDS 1 it is evident that there are £397.37m of energy and carbon reduction projects in schools which are ready to be delivered today. Within the wider public sector there is over £1.4bn of projects ready to be delivered.

Is there likely to be more funding in future?

When asked what plans the Government had to provide funding to unsuccessful applications in PSDS1 Lord Callanan responded “My Rt hon Friend the Prime Minister’s ten point plan for a green industrial revolution, announced in November 2020, includes a commitment for further funding for the Public Sector Decarbonisation Scheme in the 2021/22 financial year. Further information will be announced in due course.”
The Government also recently tried to quietly remove over £1bn out of the Green Homes Grant scheme which has been widely reported to have struggled to deliver on its aims mainly as the scheme design is not fit for purpose.
In order that this funding remains in the decarbonisation arena, all interested parties should lobby for this to be re-directed to provide additional funding into this first round of PSDS so that more applications can be funded. They are mainly ready to go and could be delivered in 2021 so it would appear to be a very positive reallocation of funding that would be able to deliver results both in terms of decarbonisation and post-COVID job creation at pace.
In 2019/20 the UK government announced a 5 year plan to spend £27.4bn on road projects between 2020 and 2025, including works on 4,000 miles of new road infrastructure. Similar levels of funding and investment are required to be spent on public (and third) sector decarbonisation with 5 year spending plans such as this laid out. The spending review due in Autumn 2021 provides an opportunity for the Government to do this. If such funding were available then it would be feasible for many of the 2030 net zero carbon targets to be reached and many thousands of new green jobs to be created.

Schools need to make demands for more energy and carbon reduction funding

When asked directly about funding for energy saving in schools, the Government tends to respond that schools can use their condition improvement funds (SCA for MATs, CIF for academies of 5 or less, VASA for church schools etc.) to fund energy efficiency, but in reality the schools estate, when last assessed in 2017, had £6.7m of backlog maintenance so these funds need to be spent on fixing leaking roofs and the like.
The Government will also point to PSDS but these schemes have now closed, were over two times over subscribed and whilst overall 60% of applications were unsuccessful, with schools 92.6% of applications were unsuccessful.

It is therefore suggested that all schools who would be considering undertaking energy efficiency works in the next 5 years write to their MP requesting them to write to BEIS and DfE to ask what will be done to provide adequate funding to make the carbon reductions within the schools estate. A draft letter is below for you to copy and amend as you see necessary.

Inspired Efficiency is well placed to undertake the surveys and audits needed to identify the energy saving measures, advise on the most appropriate funding routes and make applications for public sector organisations as well as managing the implementation project. It has recently been successful in obtaining funding for many schools through PSDS.

Please contact Matt Fulford for further information on matt@inspiredefficiency.co.uk – 07971 787363.