Salix vs PSDS Phase 4 — Which Route Should Your College Choose?
Decision framework for FE college estates teams choosing between Salix Decarbonisation Loan and PSDS Phase 4 capital grant for solar projects.
The short answer
For a standalone solar PV project under £600,000, Salix Decarbonisation Loan is almost always the right route. For a bundled project pairing solar with heat decarbonisation (air-source heat pump, heat network connection) above £100,000, PSDS Phase 4 typically wins more capital and improves the overall project NPV. Many FE corporations end up using both — Salix for the foundational solar work, PSDS Phase 4 for the larger bundled programme — across different campuses or different phases of a multi-year Climate Action Plan rollout.
The long answer
The choice between Salix and PSDS Phase 4 isn’t a binary either/or. Both are administered by Salix Finance Ltd on behalf of DESNZ, both are open to every FE corporation in scope since the November 2022 ONS reclassification, and both can fund solar PV. The differences sit in three places: the type of funding (interest-free loan vs capital grant), the scale and bid threshold, and the strategic fit with the corporation’s wider Climate Action Plan.
Funding type
Salix Decarbonisation Loan is interest-free debt — the corporation borrows the project capital, repays from energy savings over 8 years, and after repayment ends keeps 100% of ongoing savings. PSDS Phase 4 is a 100% capital grant — once awarded, the corporation never pays it back.
For pure cash position: PSDS wins every time (free money beats interest-free debt). For ease of access: Salix wins (loans are easier to get than grants in any competitive funding programme).
Scale and bid threshold
Salix loans are typically capped at £600,000 per project. PSDS Phase 4 has no formal cap — single FE awards have exceeded £8m for integrated multi-campus heat-and-PV programmes. But PSDS Phase 4 has a scoring threshold (tCO2e saved per pound of grant) that pure-PV bids rarely hit. Salix has no equivalent threshold — if the energy savings calculation supports the loan, the loan is approved.
So: for projects below £600k that are PV-only or PV-plus-battery, Salix is the path of least resistance. For projects above £600k or bundled with heat decarbonisation, PSDS Phase 4 is worth the bid effort.
Strategic fit with Climate Action Plan
Year-one of a corporation’s AoC Climate Action Plan rollout is typically Salix-funded solar — single-site or portfolio, delivered fast (6-9 months), evidence-able for the first reporting cycle. Year two onwards typically introduces PSDS Phase 4 bundled bids — combining solar with heat pump replacement of end-of-life gas boilers, building fabric improvements, and EV charging infrastructure.
The sequencing matters: a Year-1 Salix solar install demonstrates corporation board commitment, generates the energy-data baseline needed for a strong Year-2 PSDS bid, and gives the Sustainability Lead operational experience before tackling the more complex PSDS application process.
A worked decision matrix
| Project type | Best route |
|---|---|
| Standalone solar 50-300 kW, single site | Salix |
| Standalone solar 300-600 kW, single site | Salix (or split Salix + MCA grant) |
| Standalone solar above £600k single project | Multiple sequential Salix or PSDS attempt |
| Solar + battery, single site | Salix |
| Solar + heat pump bundled bid | PSDS Phase 4 |
| Solar + heat pump + building fabric | PSDS Phase 4 (high-scoring bundle) |
| Multi-site portfolio across group corp | Single portfolio Salix bid + PSDS Phase 4 on largest campuses |
| Solar inside T-Level workshop new-build | T-Level Capital Fund for the build, Salix for incremental PV cost |
| Solar inside FE Capital Transformation refurb | FE CTF for the building, Salix or PSDS for the PV element |
How we recommend approaching the choice
The simplest framework: ask your Sustainability Lead three questions.
- Is the project above £600,000 total capital cost? If no, Salix is almost certainly right. If yes, continue.
- Does the project bundle solar with heat decarbonisation or significant building fabric work? If yes, PSDS Phase 4 is worth the bid effort. If no, split into multiple Salix bids or scope down.
- Is the Climate Action Plan still in Year 1 or 2 of rollout? If yes, lean towards Salix for operational simplicity. If the corporation has Year-3+ experience and an established bid-writing capacity, PSDS Phase 4 is worth the effort.
The wrong answer is to not apply at all. Both routes are now fully open to every FE corporation in the UK; both routes deliver net cash-flow positive year one; both routes are explicitly designed to support AoC Climate Action Plan delivery.