Policy Matters

Hospitals and other residential centres will have been particularly impacted by the heat requirement over the past few months. Both the severity and length of the cold weather will have driven up energy bills. Now there is no certainty that next year will be as bad, but energy managers will have to factor the possibility into their calculations. We have had several cold winters recently. While that may be ‘natural variation’ rather than anything to do with climate change, it should make managers focus much more closely on ways to reduce those bills.

For larger units, the case for on-site Combined Heat & Power (CHP) may be well worth revisiting. Traditionally, the case for such technology has been made according to heat requirement – this is the basis for sizing the boilers. The rationale is that excess electricity can be sold to the grid but there is nowhere for waste heat to go except into the local environment. So the heat load forms the baseline.

Changing economics
While that is still true, the economics are changing slightly. Most major NHS units – and a number in the private sector – are required to take part in the CRC Energy Efficiency Scheme. That means that they have to pay a penalty for all the fossil fuels they use. Investment in CHP can mitigate the exposure in several ways. First, if one therm of gas or one kilogram of solid fuel produces a certain amount of heat, in a CHP unit there is also a specific amount of power produced as well. That reduces the amount of grid electricity that must be purchased. So there is a reduction in the overall cost but also a saving on the number of emissions allowance that have to be purchased.

Furthermore, if the CHP unit can run alternative fuels then there is the possibility of introducing some combustible wastestreams in the co-firing mix.

There are a number of Energy Services Companies (ESCOs) and Contract Energy Management (CEM) providers who will be prepared to help determine the business plan and, if viable, install and operate the system for you. Large public sector organisations like hospitals have a very good credit rating and these providers will generally regard the health service as a good credit risk. So you may not have to find upfront funds in order to upgrade.

These ESCOs can help much more widely too. Take a look at the CRC league table to see where health service providers came. The NHS Blood and Transplant service came sixth overall, but they don’t have residential sites using a great deal of heat. The next health service entry is at number 33 – Nottinghamshire Healthcare NHS Trust. At 46 comes Bradford Teaching Hospitals NHS Trust. With the University Hospital of South Manchester NHS Foundation Trust at 79, that concludes the Health Service’s presence in the top 100. And with Mid-Yorkshire NHS Trust at 190 and the NHS Business Services Authority at 199, that makes a total of six NHS organisations in the top 200 of the CRC league table for energy efficiency. It is a striking statistic.

One of the ways of achieving a good position in the league table was to take ‘early action’. The relevant actions were to install automatic Monitoring & Targeting (aM&T) or to become a member of the Carbon Trust Standard (originally an ESTA scheme before being taken over by the Trust). In the first league table – and almost certainly the last under new Government plans – it is instructive to look at who adopted one or both of these measures. The top 100 entries on the table installed one or both of these. Then the figures start tailing off although it is not until position 427 that the first entry comes which has no allowance for either technology. That having been said there are almost 2,100 organisations included in the table and a large number of them had done nothing about aM&T or the Carbon Standard when the list was compiled.

A cost effective investment
Yet aM&T is one of the most cost-effective investments a Trust can make. It automatically collects and analyses the metered data. Current products can also automatically produce the Display Energy Certificates (DECs) required for many health service premises. The early action metrics provided an ‘easy win’ for health service Trusts.. The installation of aM&T really ought to be high on the list of energy efficiency initiatives being considered by senior managers.

The original vision of the CRC never made it to the start line of course. It was supposed to be a scheme that was largely revenue neutral and those high in the league table could have expected to receive more money back than they had laid out on the purchase of emissions allowances.

But that was before the Financial Crash and the CRC has effectively become a carbon tax. Funds are not recycled to participants: they go straight to the Exchequer. With the architecture and philosophy changed, there was some criticism that the scheme was now over-complicated for what it was (now) designed to achieve.

In its review of the CRC, the Government acknowledged the scheme’s role in focusing attention on energy saving technologies such as aM&T and energy-efficient lighting systems. However, it did also propose a significant simplification of the CRC and its conclusions were published last December. The ‘new style’ CRC will no longer be a ‘cap-and-trade’ scheme where participants can buy and sell allowances on the market. In future there will be two fixed price sales of allowances per year. Only gas and electricity consumption will be included (electricity only through settled half-hourly metering). The revised scheme will also incentivise CHP through the way it treats input fuels, so that is another reason for hospitals to reconsider their options on this technology (oh, and the league table is to be abolished!).

So, ‘CRC-lite’ will still require organisations bear down on energy consumption if they are not to find themselves open to a significant penalty in terms of the cost of emissions allowances they have to buy each year. But it is worth putting these costs in context.

An allowance to emit one tonne of carbon dioxide currently costs £12 under the scheme. But to emit one tonne of carbon dioxide, you need to consume 1,850 kWh of grid electricity, using official Government carbon conversion factors. For gas, the figure is 5,450 kWh.    

The savings to be made just from cutting consumption dwarf any reduction in emissions allowances costs. The real challenge for Health Service organisations is to focus on cutting consumption while maintaining services.

Further information
Richard Hipkiss is chairman of the Energy Services and Technology Association (ESTA), which represents over 100 major providers of energy management equipment and services across the UK. For more details visit the website at www.esta.org.uk