PSDS Funding for Hospital Solar
The Public Sector Decarbonisation Scheme is how most NHS solar gets paid for. Here is how the scheme works in 2026, what wins funding, and where the other money sits when PSDS is oversubscribed.
What PSDS Phase 4 provides
The Public Sector Decarbonisation Scheme, run by Salix Finance on behalf of DESNZ, provides capital grants for low-carbon heating, building fabric, and on-site renewables across the public estate. All NHS Trusts, foundation trusts, and NHS-owned facilities are eligible. Awards typically run from £500,000 to £10m+ per Trust application, and eligible measures can be funded at 100% of capital cost. Phase 4 carries a dedicated NHS allocation, reflecting the scale of the health estate's decarbonisation task.
The strategic detail that matters: PSDS is heat-led. The scheme exists primarily to replace fossil fuel heating, which is why combined applications — heat pumps for the heat decarbonisation, solar PV to supply the new electrical load — have been particularly well received. A PV-only application can succeed, but PV attached to a heat decarbonisation scheme scores better and unlocks larger awards. Combined schemes typically sit in the £2–10m range per Trust site at 80–100% grant funding.
What a winning application looks like
PSDS is highly competitive and the energy savings calculation has to be auditable. Applications stand or fall on evidence quality: SBEM modelling for the building energy baseline, PVSyst yield modelling for the solar contribution, half-hourly consumption data underpinning both, and a delivery programme that demonstrates the Trust can spend the grant within the scheme's window. We write the application as part of our fee — the energy calculations, the measure costings, the carbon arithmetic — so the Trust's input reduces to governance sign-off. Typical application-to-grant timeline is 4–6 months, which is why application timing belongs in the project plan from the start; our blog covers when to apply and why early movers win.
When PSDS isn't the answer
Three other routes carry NHS solar projects that fall outside a PSDS window. The Salix Decarbonisation Loan provides interest-free finance, typically £100k–£1m per project, repaid from energy savings — usually cash-flow positive in year one, and well suited to community hospital and mental health unit scale projects. NHS estates operational capital funds solar at Trust level where the business case supports it, most often for smaller schemes or to cover the Trust contribution on a PSDS co-funded project. And the Greener NHS programme, while not a funding stream, provides regional teams who co-develop business cases with Trusts — a useful first contact for any Trust at the start of its decarbonisation planning.
A note on tax
NHS Trusts are not corporation tax payers, so the Annual Investment Allowance and First Year Allowances that drive private sector solar economics do not apply directly. Trust trading subsidiaries can sometimes benefit, and suppliers or PFI partners may capture allowances indirectly, but for the core NHS estate the funding question is grants and loans, not tax relief. Private hospital groups are the mirror image — no grants, full allowances — covered on our private hospitals page.