Lessening the 
impact of energy inflation

Hospitals face particular energy challenges unique to their environment. The list of high energy consuming functions is long, and goes well beyond the immediate and obvious needs of heating, lighting and a reliable hot water supply. The demands on ventilation, air quality and air conditioning, as well as process energy consumptions on tasks such as imaging, radiology and sterilisation, create an energy-intensive environment. Add to this the need for environmental control, catering, laundry, theatre, etc. and it becomes clear why energy efficiency is such a challenge.

The clinical benefits of good environmental service provision in combating airborne bacteria and infection are well known and understood. The challenge is to meet all these energy demands consistently and effectively within the financially constrained world of modern healthcare provision.

REVIEW AND AUDIT ENERGY USE
The starting point of any energy saving drive should be to get a clear picture of where you are now in terms of energy consumption. Good quality data analysis is fundamental in identifying the steps the trust / hospital will need to take to reach achievable project savings and performance outcomes. From our experience, we believe that most hospitals can realistically target savings of between 20-30 per cent by integrating all activities.

DEVELOP A ROBUST ENERGY MANAGEMENT STRATEGY
The key priority for any trust is to create a clear energy management strategy which addresses in detail how it will manage and mitigate rising energy costs. The strategy will need to address the varied and complex energy needs of a hospital, which typically include: heating, air conditioning and ventilation, hot water, lighting, imaging suites, office and admin (computing, photocopying, printing etc), catering, and specialist equipment such as X-Ray machines, mortuary and pharmacy cool rooms etc.

SET INVESTMENT LEVELS
Against a backdrop of public sector spending cuts, setting the capital investment levels the trust will need to reduce its energy cost, s is going to be hard. However, money spent now will provide increasing rates of return over the next ten years as energy costs escalate. If budgets are too tight to make any sort of capital investment, then the trust should look at alternative solutions such as an Energy Performance Contract.

LINK PROCUREMENT TO DEMAND-SIDE RESPONSE
Review how the trust currently procures its energy and establish what the basis is of its current energy supply contracts (fixed price or flexible) and, if the latter, look at robustness of the risk management strategy. Buying energy is a highly complex activity. The market is volatile, and purchasers must balance the desire to minimise the price paid with the appropriate level of risk. But poor energy procurement decisions can prove costly. The constant fluctuation of energy prices can significantly affect energy bills. Given that hospital trusts are public sector bodies and that government procurement policy will not give hospitals much room to manoeuvre in this area, it is important to understand where procurement sits in the overall energy management picture and how it needs to be integrated with demand-side management and the optimisation of on‑site generation through CHP and Biomass.

OPTIMISE OPERATIONS AND MAINTENANCE REGIME
Understanding the pros and cons of the various O&M programmes available to a hospital is critical to success. For example, reactive maintenance can be expensive, typically requiring approximately 10 per cent of the asset replacement cost each year to maintain performance and availability. The fixed schedules for Planned Preventative Maintenance (PPM) might not be cost-effective either, as they can treat all plant maintained under the plan the same with no allowance for the environment in which the plant operates, the length of time it operates per day or the criticality of the equipment under consideration. For a more flexible approach, it may be worth considering a Conditioned Based Maintenance (CBM) programme or a tailored Intelligent Asset Management (i-AM) programme. This will ensure that all statutory maintenance obligations are met and that critical assets are maintained to a higher standard ensuring continuity. The initial set up costs might be higher with CBM (typically 5-10 per cent higher than PPM), but over the lifetime of your asset CBM can deliver considerable ROI – as much as 30 per cent of asset cost – and can significantly reduce operational costs.

ESTABLISH MONITORING AND MEASUREMENT SYSTEMS
Cost and carbon reduction targets require on‑going vigilance throughout any organisation, triggering remedial action if progress falters. Until now, energy monitoring has been regarded as primarily a Corporate Social Responsibility (CSR) task that is linked to regulatory reporting. Yet carbon compliance represents a significant opportunity – and intelligent asset management will depend on dynamic reporting.

TURN COMPLIANCE INTO AN OPPORTUNITY
The installation of measurement and monitoring systems will all help with, and simplify, CRC reporting for the trust, helping to turn a ‘tick box’ obligation into something which can work to a real advantage for the organisation.

CONSIDER BIOMASS AND CHP
Biomass and Combined Heat & Power (CHP) plants on large hospital estates make sense. They can help in terms of security of supply and may be configured and sized to earn revenue by feeding excess power into the grid. However, we have seen many oversized Biomass and CHP plants installed, particularly in public sector premises, as the first step in an energy-efficiency drive. This can prove to be a bad investment and a false economy, resulting in plants which are underused and which therefore fail to provide a ROI for the trust. Power Efficiency’s advice is that Biomass and CHP should be a much later step in an energy-efficiency drive, installed after other energy reductions are delivered. A hospital which spends £1 million per annum on energy which installs a CHP to support that level of consumption will have a unit which invariably produces too much heat leading to a waste of consumed gas. If however, the unit is installed after the trust has reduced downstream electrical consumption by 20 per cent and gas consumption by 10 per cent (both eminently achievable), so its energy spend is now under £800,000 per annum, a Biomass or CHP plant can be installed with a much lower electrical capacity (relative to the heat demand), thus maximising performance efficiency and shortening the delivery of a real ROI for the trust. Additionally, a ‘good’ CHP is relatively simple to fund externally and maximises the potential for grant and subsidy support.

DEMAND MANAGEMENT ON THE AGENDA
Standby generation can create an additional income stream and/or reduce the cost of the energy procurement. It might not be obvious, but diesel generators designed originally for emergency use actually have a role to play in the UK’s low carbon future. There are currently six separate industry pricing mechanisms you can potentially exploit: 1. National Grid’s “Triad” mechanism; 2. National Grid’s “STOR” market;  3. National Grid’s “Frequency Response” market; 4.Supplier’s ‘time of day’ tariffs; 5. Distribution networks’ ‘red time band’ tariffs; 6. Distribution networks ‘Low Carbon Network’ schemes. A seventh mechanism is being introduced in the government’s Electricity Market Reforms.

LOOK AT NEW SOLUTIONS
Is energy management something the trust can outsource or risk transfer? There are new models for this market which provide such a solution. For example, look at the Energy Service Company (ESCO) model and establish if this model could work for your trust. The ESCO supplier will develop a tailored energy management strategy and plan specific to the client’s needs and which will work towards achieving set targets in energy savings and carbon reduction over an agreed timeframe. It will make its return by using its experience and knowledge to develop the best integrated energy solution, investing in new and upgraded technologies and by sharing further financial benefits accrued from savings. The guarantee is based upon achieving a minimum pre‑agreed percentage reduction in energy costs, but typically ESCOs will be looking to exceed energy‑saving targets of more than 20 per cent.

FURTHER INFORMATION
Power Efficiency is a leading UK energy procurement and carbon reduction consultancy – part of the multinational infrastructure group Balfour Beatty. For further information visit www.powerefficiency.co.uk