SKSouth Kesteven District Council Framing 2 of 3 · Officer's business case
Cabinet Briefing · Climate & Property · Item Reference TBC

Should the Council apply for PSDS Phase 4 funding to decarbonise Grantham Meres Leisure Centre?

Officer's business case prepared in support of a Cabinet decision on whether to commit £282,000 of match-funding and submit a Phase 4 Public Sector Decarbonisation Scheme application.
Site: Grantham Meres Leisure Centre · NG31 7XQ Asset owner: SKDC freehold Operator: 1Life Management Solutions Prepared by: Property Services · with technical input from Leisure Energy (LCSF-funded) Date: 19 May 2026
Officer recommendation to Cabinet
Cabinet is recommended to approve submission of a Phase 4 PSDS application for Grantham Meres Leisure Centre, with capital allocation of £282,140 as the 12% recipient contribution. Eligibility tests are met (§1), the application is forecast to fall in the top tier of grant carbon cost effectiveness (§2), and the council's net contribution recovers in 2.4 years against energy savings (§3).
§1 · Eligibility

Phase 4 eligibility assessment

All six mandatory criteria from the Phase 4 PSDS Guidance Notes (Salix Finance, July 2024) are met for Grantham Meres. Supporting evidence is held in the engagement folder; references provided below for officer due diligence.
CriterionEvidence heldStatus
Public sector applicantProcurement Act 2023, §1
SKDC Statement of Accounts 2024/25 + S151 declaration
Pass
Building owned or leased with M&E responsibilityPhase 4 Guidance §4.1.1
Land Registry title LL213842 — SKDC freehold
Pass
End-of-life fossil-fuel heating plantPhase 4 Guidance §4.2.1 · ≥10 years old at decommission
2× Hoval UltraGas 575D (2009, 2011) + Andrews MAXXflo (2011). Nameplate photos & service records held.
Pass
AdditionalityPhase 4 Guidance §4.1.2 · works not legally required and not yet started
Counter-fraud declaration to be signed by S151 officer prior to submission
Pass
Whole-building approachPhase 4 Guidance §4.2.2 · fabric / EE measures bundled appropriately
Pool covers, LED relighting, AHU controls, pool pump VSDs included in proposal
Pass
Subsidy control complianceSubsidy Control Act 2022 · indirect-subsidy rules
Building energy bills paid directly by SKDC; 1Life does not pay utilities. No MFA trigger.
Pass
§2 · Competitiveness

Likelihood of grant award

Phase 4 uses targeted allocation: applications are ranked by grant carbon cost (£ requested ÷ direct lifetime carbon saved), placed into three tiers, and funded in random order within each tier until sector soft caps are met. Grantham Meres is projected to fall in the top tier.
Grant carbon cost calculation
£2,802,360 grant requested ÷ 8,660 tCO₂e direct lifetime saving = £323 / tCO₂e LT
Phase 4 cap: £510 / tCO₂e LT. Application is 37% below the cap — competitive.
Top tier · top 30% Funded first in random order Grantham Meres · £323
Middle tier · 40% Funded after top tier
Bottom tier · 30% Funded only if budget remains
Award probability assessment
Based on the Phase 3c award spread (where ~78% of top-tier applications were funded vs ~22% of bottom-tier), and assuming the "Other" sector soft cap (under which leisure centres fall) absorbs 30-35% of available funding, officers assess the award probability as favourable. This is not a guarantee — applications are randomised within tiers and final allocation depends on the full Phase 4 application pool. The risk register at §6 covers the rejection scenario.
§3 · Financial case

Council-level financial analysis

The financial test for the council is not the gross capital cost — it is the council's own contribution against the annual revenue saving on energy bills.
Capital case
Total project costInclusive of design, install, commissioning
£2,340,000
PSDS Phase 4 grant requested88% of total · within scheme rules
−£2,059,200
Council net contribution12% match · drawn from 2026/27 capital programme
£280,800
Available within 2026/27 capital headroom?
Yes · earmarked
Revenue case
Current annual utility spend2024 baseline
£245,622
Forecast annual utility spend post-installAll-electric · including S24-1467 PV offset
£128,300
Annual revenue savingRecurring, before tariff inflation
−£117,322
Payback on council's £280,800 contribution
2.4 years
Counterfactual cost
If the Council does not pursue PSDS funding, the existing twin Hoval boilers (commissioned 2009 and 2011) will require like-for-like replacement at an estimated £385,000 from the council's own capital within the next 24–36 months. That counterfactual locks in a further 15–18 years of gas dependency, exposes the Council to escalating gas tariffs, and forfeits the 2030 carbon target trajectory. Doing nothing is therefore approximately £100k more expensive in cash terms than the PSDS-funded full transformation.
§4 · Strategic alignment

Contribution to SKDC's published carbon targets

SKDC's Climate Strategy (adopted 2023) commits to a 75% reduction in direct emissions from operational buildings by 2037 against a 2017 baseline. Grantham Meres is one of the council's three highest-emitting operational assets.
Current emissions
562.7 tCO₂
~5.2% of SKDC building portfolio
Post-project emissions
108.3 tCO₂
−81% reduction on this site alone
Contribution to 2037 target
~5.0%
Of council's published reduction
The reduction of 454 tCO₂/year delivered by this single project would, on its own, advance the council's 75% target by approximately 0.18 percentage points per year for the lifetime of the asset (20 years). Equivalent reductions from elsewhere in the building portfolio would cost the council significantly more — typically £700–£2,500 per tCO₂e on standalone capital projects, vs the £323/tCO₂e achieved here via PSDS leverage.
§5 · Fallback options

If the PSDS application is unsuccessful

PSDS Phase 4 closed to new applications in November 2024 and is now in assessment. If Grantham Meres falls below the funding line, four alternative routes have been identified.
Fallback optionCapital required from SKDCCarbon outcomeTimingOfficer assessment
1. Wait for PSDS Phase 5 (anticipated 2027/28 window) £280,800 deferred −454 tCO₂/yr · delayed 18–24 months ~2030 install Amber Boilers reach 21 years · increased failure risk
2. UK Infrastructure Bank loan (minimum £5M aggregated) Repayable loan · TBC rates Same as Option D 2027 deliverable Amber Only viable if aggregated across multiple SKDC sites
3. Full SKDC capital funding (no grant) £2,340,000 Same as Option D 2027–28 Red Materially impacts other capital programme priorities
4. Defer decarbonisation · like-for-like boiler replacement £385,000 0 reduction · locks in 15+ yrs of gas 2027 Red Misses 2030 target · stranded asset risk by 2035
§6 · Risk register

Project risks & council exposure

RiskImpact on councilMitigationOwnerRAG
DNO capacity insufficient at 525 kVA Reduced pod sizing · carbon savings cut by ~6% · capex broadly unchanged DNO surgery booked Apr 2026; fallback design at 425 kW + thermal store pre-approved SKDC Property Red
Grant application unsuccessful £280,800 match-funding released back to capital programme; project paused Fallback options §5 · re-apply Phase 5 with refined application SKDC Finance Amber
Construction delay past 31 Mar 2028 deadline Grant withdrawal · full project cost falls on SKDC Direct appointment via UK Leisure Framework · monthly programme review at SRO level SKDC Property Amber
Pool closure during commissioning 7 days revenue loss · ~£18,200 to 1Life Contract variation with 1Life · scheduled in lowest-revenue week of the year (Sep 2027) Joint SKDC / 1Life Green
Energy tariff volatility post-commissioning Reduces forecast revenue savings if electricity tariff outpaces gas 10-year PPA tendered · S24-1467 PV offsets ~15% of post-install elec demand SKDC Energy team Green
§7 · Decision pathway

How officers arrived at this recommendation

A reproducible decision trail showing the officer logic, for audit purposes and to support the Cabinet's scrutiny role.
Grantham Meres has end-of-life gas boilers (2009, 2011)
↓
Site meets Phase 4 §4.2.1 (plant >10 yrs)
↓
Officers commissioned an LCSF-funded Heat Decarbonisation Plan (Mar 2026)
↓
HDP options-appraisal: heat network ✗ · GSHP ✗ · biomass ✗ · electric boilers ✗ · heat pump ✓
↓
Technical recommendation from LE: packaged R744 heat-pump system (Net Zero Pod)
↓
Grant carbon cost calculated · £323 / tCO₂e · top tier
↓
Financial test passed: 2.4-yr payback on council match-funding
↓
→ Recommendation: submit Phase 4 application
Recommendation to Cabinet

Approve submission of a Phase 4 PSDS application for Grantham Meres Leisure Centre and allocate £282,140 from the 2026/27 capital programme as match-funding.

Decision required by Cabinet meeting 02 Jun 2026 (in time for Phase 5 backup option if needed)
Officer contact T. Halliwell · Head of Property · halliwell@southkesteven.gov.uk
Supporting documents HDP · Phase 4 application bundle · risk register · LCSF engagement contract