The Carbon Reduction Commitment is a mandatory, auction-based emissions trading scheme, which came into effect on 1 April 2010.
All eligible organisations must register by September 2010, and trusts will qualify if they: use mandatory half hourly metered (HMM) electricity; and used over 6000MWh of HMM electricity in 2008 calendar year.
As most NHS trusts meet these criteria, they will be required to:
1. Forecast annual carbon emissions
2. Plan their carbon abatement strategy
3. Buy and sell carbon allowances throughout the year
4. At year end, calculate total emissions and surrender allowances
5. Receive recycle payment based on their performance and position in the league table, with significant financial bonuses or penalties for reducing carbon emissions, or failing to do so.
What follows is an overview of some of the actions already being taken by trusts, to ensure they benefit from the significant financial advantages to be gained from carbon efficiency.
Who’s doing what already: best practice case studies
Carbon saving is as much about individual and collective activities, as it is about capital investment and process improvement, so for significant reductions to be achieved, organisations will need to ensure that key stakeholders are engaged and planning extends across the whole health economy.
Five key energy saving approaches will help trusts to meet the CRC requirements, including:
- Estates management
- Culture change initiatives
- Carbon footprinting
- Sustainability business cases
- Investment in renewable power supplies
Examples of some of these approaches are outlined below.
Nottingham University Hospitals Trust: estates management and cultural change
One of the largest acute teaching hospitals in the country, with over 100 wards and 12,000 staff, Nottingham University Hospitals Trust emitted around 70,801 tonnes of CO2 in 2008/09, of which 18,603 tonnes will be eligible under CRC.
At a cost of £12 per tonne of carbon (totalling £223,260 in CRC purchase allowances), there is significant financial pressure on the trust to reduce these emissions in order to avoid financial penalties of up to £126,660 which could be accrued within just five years of trading.
To prepare for CRC, the trust has already taken significant steps, including: measuring its carbon footprint; identifying the emissions that fall within the CRC scheme; preparing a process for compiling ongoing emissions information; and reviewing the type of energy meters supplying its facilities to identify any upgrades needed for the purpose of complying with the CRC’s early action metrics.
It is now working on three further improvement areas:
- Process optimisation: NUH has identified several process-related energy saving opportunities, including installation of energy efficient luminaries (to save an estimated 275,000 kilowatt hours), and optimisation of building management systems to mechanically operate ventilation and heating equipment.
- User engagement: the trust has launched an environmental campaign, “Little Changes, Big Impact”, to raise environmental awareness amongst staff and engage them in the Trust’s efforts to increase its sustainability. This includes energy conservation. As part of the campaign, the trust has recruited a team of more than 140 Environmental Champions to raise awareness of environmental good practice in their areas of work, and conduct “ward walk arounds” to ensure actions are being taken.
- Energy Sub-Metering: the trust is taking its first steps towards installing energy sub-metering to understand energy consumption patterns, and identify high energy consumers and areas of energy wastage.
It is estimated that the financial savings NUH will generate through these energy efficiency measures (i.e. energy savings) will be ten times higher than the savings generated by selling excess carbon allowances on the CRC trading scheme.
West Middlesex University Hospital Trust: carbon reduction strategy
The West Middlesex University Hospital NHS Trust (WMUH) has developed an innovative carbon reduction strategy to reduce its carbon footprint by 10 per cent by 2015. This will generate significant savings in terms of energy efficiency and penalty avoidance, and direct costs will hopefully be recovered through the CRC trading scheme.
The trust’s current carbon footprint for gas and electricity is around 8,500 tonnes, which suggests an initial “energy” target of 850 tonnes per annum will be required by 2015. If no mitigating action is taken by the trust, it will need to buy carbon credits of just over £100,000 per annum (based on the £12 per tonne tariff). Recovering this is clearly a priority, as is reducing the trust’s current annual energy bill of £1.25m.
Led by the trust’s new carbon reduction strategy group, and overseen by the director of finance, the strategy is supported by a carbon reduction management plan, with SMART objectives for six key areas including energy, waste, travel, water, procurement and the built environment.
The Energy and Carbon Management section of the plan will ensure:
- Existing energy consumption reports are converted into carbon measurements
- Monthly monitoring and reporting of all utilities
- Introduction of energy efficiency and reduction measures
- Efficient operation and maintenance of building controls and BMS
- Increased awareness of energy efficiency measures and policy amongst staff
- Contracts for new build and refurbishment programmes specify energy efficiency requirements
- Investigation of automatic shut down on electronic and IT equipment
A five year capital investment and carbon reduction planning template has been developed to show the capital cost and carbon reduction potential of each measure. This template will be incorporated into the Trust’s annual and three to five year forward business planning, to ensure coordination with other demands on investment resources.
Early wins achieved through more effective housekeeping, have paved the way for more ambitious work, including the adoption of new LED lighting technologies, energy efficient equipment and an initiative receiving £0.5m under the Salix scheme to optimise the voltage supplied across the site. This scheme alone should produce a 10-12 per cent electricity saving for the trust and pay for itself within five years.
Avon and Wiltshire Mental Health Partnership Trust: business case for renewable energy
The Avon and Wiltshire Mental Health Partnership Trust (AWP) was one of the first mental health trusts to take part in the Carbon Trust NHS programme, and one of the first to appoint a sustainability manager, three years ago.
Whilst the trust’s current energy use is below the qualification threshold for Phase 1 of the CRC, long term planning is already underway to assess the future impact of the CRC in anticipation of thresholds reducing in the future.
The sustainability manager has played a leading role in developing a carbon reduction strategy (adopted March 2009), which outlines the trust’s commitment to carbon reduction; footprints the trust’s current impact; sets an ambitious 18 per cent carbon reduction target (2008/9 – 2013/14); and details a robust delivery and financing plan.
The strategy outlines how a lack of action to reduce carbon emissions from 2008/09 to 2013/14 could result in £1.4milllion additional costs for the trust; whereas delivering the five year reduction targets would mean significant cost and efficiency savings.
Activity to date has focussed on quick win measures such as insulation, high efficiency boilers and lighting improvements, together with a staff awareness programme which incorporates regular campaigns, surveys and a network of staff champions. Several measures to reduce the cost and carbon impact of travel are also under development, with the trust trialling the use of electric bikes, an electric vehicle and low emission pool vehicles in its community services.
Significant work has also been undertaken to appraise future options, including installation of an on-site wind turbine. Scoping work for a sample site to understand the possible positive impact where a viable wind supply is indicated, suggest a 37 metre turbine running at 95 per cent efficiency, could generate around 199,728kwh per annum, saving the trust 108 tonnes of carbon a year (or £1,301, based on £12 per tonne CRC tariff).
Based on the same assumptions, the turbine could generate an annual grid saving of around £19,500, while the potential Feed In Tariff received per annum is calculated at £35,950 (based on a FIT of 18p/kW). This means a turbine could potentially pay for itself in just over six years (with a life expectancy of 20 years).
The trust’s aim is to create business advantage by extracting the benefits of renewable energy sources. A robust business case and feasibility study is being developed to support this process, and to ensure commercial and financial structures are in place to deliver strong benefits to the trust.
Top tips for benefitting from CRC:
Finnamore is working closely with its health clients as they undergo preparations for a lower carbon, higher efficiency future.
The following tips from the field should help you to make the most of your assets, while investing in low carbon solutions that will give you a sound return on investment:
Develop a comprehensive carbon reduction strategy, using marginal abatement cost curves to prioritise long term carbon reduction projects. A sound business model and compelling financial case for change will help you to gain support for any capital investments you may need to make, and ensure buy-in from your director of finance.
- Data gathering is complex and time consuming, and needs to be prioritised. Data should be captured regularly, and realistic reduction targets set, in tonnes of CO2, with a performance management plan in place to ensure this process runs smoothly.
- Take immediate action on easy wins (e.g. low energy light bulbs and waste management) – the pay back is quick.
- Use carbon productivity as a lens for improving your organisation’s total performance – process improvements to increase carbon efficiency are almost always aligned to increasing financial productivity, and the real gains will come from adopting sustainability in the same way that leading corporations have done - as a way of redefining their whole organisation.
- Look to the private sector for inspiration – in aspiring to be a world class commissioner the NHS should benchmark itself against best practice in the private sector in the pursuit of sustainable solutions.
- Think about carbon gains in relation to changing models of care - healthcare systems that focus on prevention and management rather than late stage intervention should generate meaningful improvements in terms of carbon footprints.
- Manage your waste carefully - it makes huge economic and environmental sense. Landfill taxes are going up, and imminent changes to the EU Landfill Directive will see the Government measuring and charging for waste based on CO2 emissions.
- Make the best possible use of your assets – explore the avenues that are open to you, including new capital development plans and/ or use of surplus land and estates to promote sustainability.
- Get your staff involved - if their recommendations are implemented, you will create a real sense of momentum.
- ee the CRC as a positive opportunity for raising your trust’s public profile and reinvesting financial savings in critical front line services.
- Don’t pretend this isn’t happening! Carbon reduction is a legislative commitment, and cannot be ignored. Begin work early to measure your baseline and develop a reduction strategy. Even if you’re below the threshold, prepare for future tightening of legislation.
Dr Lucy Reynolds has published widely on the health and sustainability agenda, including chapters in the Health Practitioner’s Guide to Climate Change. She is a consultant with Finnamore.