Getting to Net Zero is all about Programme Delivery and Managing Risk

Most NHS Trusts have an identified roadmap to net zero. The most commonly quoted blocker to achieving net zero is the perceived lack of resource, most notably funding? Experience would suggest that this is not the case, or at least not true in the way people interpret the reason.

The actual blockers are the risks associated with new technologies and when managed effectively, the resource follows.

The net zero routes immediately available are few and in essence include:

1. Geothermal energy
2. Hydrogen
3. Electricity
4. Burning a low carbon fuel
5. District energy

This list excludes demand side reduction measures and fabric improvements that are usually desirable and to be encouraged regardless of primary energy source in order to promote efficient use. All of these options may be carbon compromised (eg, electricity is not green now, there is no clean hydrogen, and biomass or waste burning is inherently carbon emitting). However if we can leave the greening of the grid (electricity and hydrogen) with the related market stakeholders to solve, we can use any of the methods above to get NHS sites to net Zero. The perceived blocker in funding can reliably use long term revenue streams to fund the transition and the remaining risks associated with the technology requires focused management.

How do we manage risks and therefore solve the funding issue?
The first most common way to solve the funding constraint is to seek some form of governmental funding. That means hoping that the government will fund the conversion and if it doesn’t work… well that is then considered to be the governments problem.

There are several grants currently available, and many projects running under just that premise. Consider the case of heat pumps; in the NHS there are few heat pumps of size that are not funded by grants. Many projects have not addressed the recurrent costs of running the technology and the impact to the annual revenue budgets. Market indicators suggest that a steady state is a number of years away and no-one knows what is going to happen to electricity prices. There is a strong risk that most heat pumps will not be used in line with their grant applications.

The second way of managing risks is to pass them to the body best able to manage them. This is common with performance contracts, where it is possible to pass most of the risks associated with performance to a contractor, and most complex energy projects in the NHS are carried out this way. With nearly £1bn deployed or in deployment across the NHS, huge carbon reductions are being delivered and in many cases, financial savings too.

Unfortunately, this route alone will not get the NHS to net zero in time to meet its obligations, because most of the current net zero technologies are too risky for the established performance contractors to guarantee. In addition, the providers of the new technologies, are themselves small and in no position to take significant risk on their own technologies. In fact, current installations indicate that the task of developing and proving the technology alone is normally all the risk they can manage.

The NHS can learn from other industries that manage the equivalent risk, on a larger scale. Outside the NHS, large risks are managed by insurance, risk sharing and diversity of risks. The pension industry, insurances and energy industries all use these techniques, which coupled with good engineering design for resilience, offers the NHS a way forward that bypasses the funding issue, and allow many Trusts to realistically aim for net zero.

Whilst the NHS is considering insurance management for certain risks, it has long managed a risk pooling scheme for larger risks. We are in a time of change and whilst the NHS risk pool is not yet being offered for net zero projects there is an affiliated NHS collaboration alternative, called project NHPower, which is available to Trusts wishing to share risks and benefits across member Trusts to avoid the need and expense of project or contractor private finance.

NHPower members will have the opportunity to work with grant and centralised funding, introduce security in the source of energy provision without carrying an asset on balance sheet and instead pay a p/KwH for energy, that in many cases is decoupled from the volatility of the open energy market.

The top 211 NHS sites, using more than 10mKwH each are all being categorised as to the available and optimal routes to net zero, under the six categories above. Piloting the way forward 5 Trusts have commenced a 4 year collaborative procurement for geothermal energy. In Q2 2023 the second wave of geothermal collaboration will go to market, and it is hoped that where geothermal energy is not a viable option, the 1^st wave of a 5 year Hydrogen collaboration will start with a workshop of Trusts that have the opportunity to work together. Having the top energy users on the road to net zero should meet the NHS 2032 targets. In 2024 the masterplan will widen to include planning for the next 1600 NHS buildings using significant energy, benefiting collective knowledge share and delivery principals from the model program.

NHS Trusts that do not wish to wait until contacted to participate in the NHS collaboration are welcome to contact NHPower at enquiries@nhpower.net.

About the Author
Clive Nattrass is the programme manager of NHPower, appointed by a taskforce of governmental, Iheem, and NHS representatives to design and implement a programme to get the NHS to net zero in fossil fuels. Clive has a pedigree in this field having founded the Carbon and Energy Fund, which is the main route to energy infrastructure improvement in the NHS.