Public sector property decarbonisation: how to secure the funding you need

Over the past decade, awareness of the potentially catastrophic impact of climate change and consequent threats to sustainability have become mainstream the world over; the role of ever-increasing energy consumption being of particular concern. The UK Government is prioritising this key issue, having announced a climate change emergency in May 2019 and committing to creating a carbon-neutral economy (with net zero carbon emissions) by 2030. 

Housing accounts for 40% of the UK’s carbon emissions, with our approximately 25 million homes releasing around 60 million tonnes of carbon dioxide every year. Retrofitting these properties to bring them in line with the carbon neutral target and ensure that environmental damage is minimised – as swiftly and as efficiently as possible – is imperative if the country is to meet its environmental goals.

To help local authorities become carbon neutral on target, various grant funding opportunities have been announced – such as the decarbonisation fund tranches. 

What funding support is available for local government decarbonisation plans?

The funding environment to aid the public sector’s role in decarbonisation is constantly evolving and shifting. At the time of writing, several initiatives have been launched to support the retrofitting of established properties and ensure compliance in new-build developments and programmes. Three phases of the decarbonisation fund have been launched in the past year. The small-scale gestures of the early 2000s, like ‘switch off the tap while you brush your teeth,’ have zoomed outwards to encompass the far wider scale impact of industries on the environment, and how a whole-building and whole-industry approach can pave the clearest path to carbon neutrality.

In December 2021 the government announced investment exceeding £116m to drive forward green innovation in the UK. Funding opportunities include:

• Public Sector Decarbonisation Scheme – now closed, this scheme provided grants to public sector bodies to fund heat decarbonisation and energy efficiency measures. The high demand for this three-phase fund shows appetite for investment and means that further tranches will likely be made available
• Industrial Energy Transformation Fund (IETF) – this fund supports feasibility and engineering studies to help set up industrial energy efficiency and decarbonisation projects
• Heat Networks Investment Project (HNIP) – this project provides funding to build more heat networks, reduce carbon emissions and deliver carbon savings
• Direct Air Capture and Greenhouse Gas Removal – this programme makes £64m available for small and medium enterprises (SMEs) to develop projects that will capture carbon emissions
• Energy Entrepreneurs Fund – a total of £30m has been awarded to 58 SMEs to develop new technologies that will drive energy efficiency, power and heat generation, and energy storage.

Five current government funding opportunities

1. Heat networks investment project fund
   Provides funding to build more heat networks, reduce carbon emissions and deliver carbon savings. 
2. Industrial energy transformation fund 
   Supports feasibility and engineering studies to help set up industrial energy efficiency and decarbonisation projects.
3. Direct air capture and greenhouse gas removal fund 
   Making £64m available for small and medium enterprises to develop projects that will capture carbon emissions.
4. Public sector decarbonisation fund
   Although now closed, this scheme provided grants to public sector bodies to fund heat decarbonisation and energy efficiency measures.
5. Energy entrepreneurs fund 
   A total of £30m awarded to 58 SMEs to develop new technologies that will drive energy efficiency, power and heat generation, and energy storage.

What are the challenges local government faces in accessing this funding?

Adequate financing is the key to progress in decarbonisation and zero carbon developments, yet lack of awareness of upcoming opportunities is the main obstacle preventing local authorities and other public institutions from accessing this funding. Put simply, many local authorities don’t know about the funding opportunities that are available, and so they don’t apply for them. 

When they do apply, local authorities must meet certain criteria for their bid to be successful, including:

• the quality of the bid application for funding
• adopting a whole-project approach
• a clear understanding of the current position, e.g., current carbon emissions and kilowatt hours.

Local authorities that demonstrate awareness of the importance of these interventions thus have a substantially better chance of their grant applications being approved.

How can councils overcome those challenges?

Early intervention is key – accessing funding can take time, and having a detailed and deliverable strategy in place will improve the success of any application. To ensure readiness to prepare a bid when opportunities arise, local authorities can:

• Keep up-to-date with government funding announcements
• Engage with specialists
• Develop local skills – train local contractors to retrofit properties and reduce the carbon footprint generated by hiring external teams, while improving the social value of delivery.

There’s no one-size-fits-all solution to decarbonisation, and the installations and adaptations needed will vary even within a single community. In anticipation of applying for funding, councils can conduct experiments and monitor the effects to predict which interventions will best suit their specific needs. These kinds of innovation and experimentation are key in establishing the most effective means of reaching a carbon-neutral economy. Data collection and analysis plays a key role in this, capturing current baselines, forecasting potential measures and assessing true impacts. 

How long can it take to secure funding?

Accessing public funding can be an arduous and lengthy process. Carrying out the preparations mentioned above will speed up authorities’ ability to submit applications as soon as opportunities become available. Some funding schemes report back within a month; others may take a financial quarter or longer before announcing which bids have been successful. 

Private financing measures such as climate bonds and sustainable eco-private placement deals can be faster, but these still depend on local authorities’ procurement processes. Engaging with an expert can reduce the wait and provide advice on the most appropriate and time-effective way to access funding

You’ve got the funding: now what?

Start small but aim big. Even relatively small-scale funding can facilitate a pilot programme that allows you to experiment and test the most effective means of decarbonisation while monitoring performance. Once you have a proven pilot scheme, enacting wider change will follow more easily as you have a sound starting point.

• Set net zero carbon targets
• Establish baselines and model trajectory going forward
• Create a business case justifying the need for intervention and why decarbonisation efforts would be impossible without additional aid.

Demonstrate that your ambitions are aligned with wider strategic policy, that your goals are achievable and deliverable and that you have sufficient management arrangements in place to continue to monitor the programme going forward. Collaboration across multiple sectors, industries and even councils are key to enacting as much change as possible.

How Capita can help

Our teams are currently engaged with several local authorities across Wales and England, supporting bid opportunities for local government monies and providing technical advice, data analysis and monitoring. We also develop business cases and decarbonisation strategies for both existing and new-build housing stock, as well as wider commercial properties.