Funding options for NHS carbon reduction interventions

As NHS trusts are charged with reducing carbon emissions to 'net zero' by 2050, we look at how they can fund ambitious energy-saving equipment without breaking the bank

Both public and private finance initiatives can be used to fund the energy-saving equipment NHS trusts need to meet tough government targets

Following the announcement by former Prime Minister, Theresa May, that the Government is committed to reducing carbon emissions among public-sector organisations to ‘net zero’ by 2050; the race is on to improve the environmental performance of NHS trusts.

But, with dwindling capital, how can trusts finance the measures needed to ensure they meet these tough new targets?

Funded by the Department for Business, Energy and Industrial Strategy, Salix Finance has been working with NHS trusts and foundation trusts in England since 2007.

Simple measures, such as upgrading inefficient heating, lighting and ventilation equipment, can provide significant long-term financial and maintenance savings for organisations and help to mitigate against the effects of climate change

And recently it celebrated a significant milestone after achieving £100m worth of committed funding within health trusts to enable savings of over £24m annually.

The organisation provides interest-free loans to the public sector to improve energy efficiency and has now contributed more than £100.8m for more than 600 energy reduction projects across 70 English NHS trusts.

And it predicts future savings of up to £391m.

An example of where this input has proved successful is at Northampton General Hospital NHS Trust, which used Salix funding to develop its estate and support its carbon management plans.

Clare Topping, the trust’s energy and sustainability manager, said: “The loans from Salix have allowed us to access energy efficiency measures sooner than would otherwise be the case.

“Not only has this helped to keep us on track to achieving our 2020 carbon target, but we have also improved the environment for staff.”

Sameen Khan, NHS programme manager at Salix Finance, added: “We’re very pleased to have helped the NHS to achieve these remarkable energy and carbon savings.

There a number of different options available to NHS trusts who need to finance new energy projects

“The £100m we have funded in the sector to date has reached a third of the NHS trusts, and there is still considerable potential.

“Simple measures, such as upgrading inefficient heating, lighting and ventilation equipment, can provide significant long-term financial and maintenance savings for organisations and help to mitigate against the effects of climate change.

“The opportunities in the NHS are expansive and we’re very excited to be able to play our part in taking action towards the reduction of the NHS’s carbon footprint.”

But how do trusts know what is the right option for them?

Speaking to BBH, Tony Orton, head of business development (Healthcare) at Centrica Business Solutions, said: “Financing an energy project shouldn’t be a constraint for any NHS trust.

“There are several financing options available, ranging from using a trust’s capital budget or a loan from their current bank, to government-backed loan financing or a funding arrangement with an energy supplier.

“A trust needs to decide whether it would prefer to organise its funding separately or as part of the arrangement with the energy services provider who will deliver the project.

The loans from Salix have allowed us to access energy efficiency measures sooner than would otherwise be the case

“If funding separately, Salix offers interest-free, government-backed loans for energy projects, and is certainly the lowest-cost option.

“But very-specific qualifying criteria, such as carbon saving targets and a five-year payback period, mean this isn’t a realistic option for everyone.

“As a private energy efficiency supplier, we offer a number of contract structures that enable NHS trusts to begin new energy projects without any upfront investment.

“For example, with an Energy Services Agreement (ESA), the required investments are funded by Centrica and the trust makes periodic, manageable repayments.

“The ESA is designed so we can raise the required financing from third-party banks to ensure the cost is competitive.

“It also transfers asset performance risk, maintenance, and servicing obligations to us so the NHS trust can concentrate on its core purpose – looking after the nation.

A trust needs to decide whether it would prefer to organise its funding separately or as part of the arrangement with the energy services provider who will deliver the project

“We also offer a discount energy purchase for trusts who buy combined heat and power units from us, and a power purchase agreement for solar power.

“Like the ESA, these transfer the responsibility for financing and asset performance away from the trust to ourselves.”

And he added: “There are also a number of funding pots that have been set up to support trusts finance new projects – including energy.

“For example, NHS Commercial Solutions has set up a framework to support organisations in delivering against the recommendations of the Naylor Review into NHS property investment.

“Another example is the Mayor of London’s £500m Energy Efficiency Fund, which is managed by Amber Infrastructure and supported by the European Regional Development Fund.

“This was set up specifically to help organisations in the capital to install new energy-efficiency measures.

“There a number of different options available to NHS trusts who need to finance new energy projects.

“It’s key for them to evaluate which one is right for them and not let money be a barrier to better energy efficiency.”

Companies