Increasing hospital efficiencies is a pressing issue for trusts. In 2008, the Government passed the Climate Change Act, which aims to achieve an 80 per cent cut in CO2 emissions from 1990 levels by 2050.
In response, in January the NHS unveiled its carbon reduction strategy, which sets out actions and new timescales for achieving these targets.
This strategy dictates that trusts need to achieve a 10 per cent reduction in their 2007 carbon emissions by 2015. This in turn will require a return to 2007 levels by 2013, so the task ahead is challenging to say the least.
When you consider that the NHS has a carbon footprint of 18 million tonnes of CO2 per year and is responsible for 3.2 per cent of carbon emissions and 25 per cent of public sector emissions in England, it is an inescapable fact that NHS Trusts must reduce their carbon footprint.
Another initiative being rolled out under the Climate Change Act is the Carbon Reduction Commitment, which from April 2010 will start to have practical application. This will require further energy efficiency improvements, in that it will place a price on carbon emissions which, in turn, impact on trust budgets. The Government proposes that all trusts will have to participate in the scheme regardless of their energy consumption.
So each individual trust must decrease energy dependency, increase energy efficiency, reduce carbon emissions and deliver all of this with significant cost savings. Of course, the NHS must remain free to concentrate its efforts on patient care, and managing a major infrastructure project alongside budgetary cuts could appear overwhelming.
A number of trusts are looking to the private sector as a means of forming cost-saving partnerships and there are a variety of options available when it comes to improving estates and facilities infrastructure. Increasingly, trusts are looking towards Combined Heat and Power or similar technology providers to achieve this.
As a starting point trusts need to establish if CHP will improve the efficiency of the energy infrastructure on a site. Once this is confirmed, calculations can be made as to the potential savings CHP will make. With potential savings identified, a contractor can be employed to install the CHP equipment and any associated energy improvements.
The installation of CHP technology is generally achieved by an outsourcing arrangement, following a PPP project structure, under which (as well as bearing the capital cost) the contractor guarantees savings against existing energy costs. Such arrangements are contractually complex and involve elements not encountered in a normal PPP or PFI project.
Through our experience of providing energy service projects involving CHP technology to the NHS, we have seen each of these projects deliver energy facilities with significantly improved energy efficiency, generating a combined annual saving in excess of approximately £6 million, as well as reducing carbon emissions. Such upgrades can be financed in a way that they cost trusts very little as the capital cost of the equipment can be paid by the contractors (who in turn recoup their investment from a share of the savings).
The installation of CHP plant and equipment allows the generation of electricity, heat and cooling for the NHS in a carbon and cost-efficient way. However, CHP technology solutions can also permit the export of surplus generated electricity to the grid and heat to district heating schemes. As a result, further revenues can be derived from the plant and equipment, as well as operating costs being further reduced.
Making an investment like this means trusts can achieve a guaranteed pre-agreed level of savings against existing utilities and other expenditure. Alternatively, some energy services projects allow the Trusts simply to pay for the generated electricity, heat and cooling without the user making any capital investment.
The key element is to obtain the right advice so that these hurdles can be navigated successfully. In the few pioneering cases so far, a number of trusts have impacted on both their carbon footprint while making six-figure savings to their ongoing energy costs. In the majority of those cases, the public relations mileage is irrefutable and represents a beacon of hope amidst popular opinion still unsure that the climate change challenge is surmountable.
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Stephen Lansdown is a partner and head of commerce and technology at Hill Dickinson LLP