Energy procurement in the NHS

NHS Operating Theatre with bright electric lights


Energy procurement within the NHS is complex, with many different risk strategies. The majority of NHS sites in England will be covered by the requirements of the Public Contracts Regulations, meaning they have to conduct an open tender or become part of a procurement framework – the latter being the more likely.

The relatively low wholesale cost over the last 4-5 years (with the occasional blip) hit multi-year lows in the spring of 2020 and from the autumn of 2020 wholesale costs began to rise.

From the start of April 2021 to today the wholesale cost of gas has increased by 241% and power 184% (year ahead prices) so regardless of the procurement strategy employed by each NHS Trust in England the impact will be felt, either now as they forward hedge or as they look to renew a fixed-term contract.

The majority of the invoiced cost of gas is the gas itself, whilst power has many other non-energy charges applied. At the beginning of 2021, the non-energy charges equated to about 60% of the overall cost (environmental levies, transmission, distribution charges etc.) but that balance has now swung the other way.

Carbon Costs – whether EU ETS or since last year UK ETS has also seen the carbon cost rocket, and this cost will be passed on to the end-user.

Weather can play a big part in the energy requirements and the long cold winter of 2020/21 will have seen an increase in comfort heating requirements. A long hot summer switches that demand to comfort cooling.

With an estimated spend of over £630 million for the 2020/21 financial year, it’s easy to see how much of an impact even a small change to the wholesale cost will have.

However, the increased invoice price of power now makes the cost-benefit analysis of installing renewable generation much more attractive. Power Purchase Agreements are becoming more commonplace across sites within NHS England, and it is likely we will see this accelerating over the next few years.

NHS has committed to being Net-Zero by 2040 and has spent over £50 million installing LED lighting, which when expanded over the entire NHS would save over £3 billion over the next 30 years.”

5 ways to help your business achieve net-zero

With climate change hot on the agenda and businesses becoming increasingly aware of their social and environmental responsibilities, net-zero status is a goal that many are working towards in 2022.

Being net-zero means the amount of greenhouse gas emissions produced through your business and related supply chain are not greater than those taken away from the earth’s atmosphere.

Some of the world’s leading brand names have pledged to meet this target by a certain date in the coming years. But it does not always need a large decarbonisation budget to achieve net-zero.

Some of the measures below will all contribute to businesses, whatever the size, making progress in the journey.

1) Green energy procurement

Business energy suppliers will offer green energy tariffs where either some or all of the energy supplied to your business will be generated from renewable sources as opposed to fossil fuel or other carbon-heavy sources.

2) Become more energy efficient

Nearly half of all business energy consumption happens outside of normal working hours. How so? Equipment that is left on standby or not turned off at all still uses energy. Ensure all your staff follow guidelines that encourage them to get into the habit of shutting down their equipment properly and become more energy efficient.

Smart heating controls and LED lighting are also two obvious and affordable measures that can easily be implemented.

3) Set up a ‘green team’

Establishing a net-zero culture is key to getting everyone on board and bringing about behavioural changes. Consider appointing a member of staff to lead this initiative and make sure standards are upheld.

4) EV charging point installation

The more access staff have to EV charging points the more likely they are to use this mode of transport for their daily commute. With the sale of new petrol and diesel cars being banned in the UK from 2030, the need will only get greater.

5) Remote working

Business transport is a major contributor to carbon emissions so, where viable, arrange for meetings to be held online instead of in-person, particularly if flights are involved. Striking the right balance between home and office working could improve productivity as well as your carbon footprint.

ESOS Phase 3 – everything you need to know

Energy Procurement and Management

With the closing date for the consultation process for ESOS Phase 3 now expired, here’s a reminder about the scheme and who is eligible.

What is ESOS?

ESOS stands for the Energy Savings Opportunity Scheme and was introduced by the UK government’s Department of Energy and Climate Change (DECC) on 17 July 2014 to help promote business energy efficiency.

It is a mandatory energy assessment scheme for organisations in the UK that meet the qualification criteria and is administered in the UK by the Environment Agency.

Eligible companies must undergo an assessment of energy use and energy efficiency opportunities and submit an energy report to the Environment Agency every four years.

Who is eligible?

You must take part in ESOS if your organisation, or any UK undertakings in your group, qualifies as a large undertaking on the qualification date.

The ESOS definition of a ‘large undertaking’ is:

  • You have over 250 members of staff, or
  • A turnover of over £44.1m, or
  • An annual balance sheet of over 43 million Euros (£37.9m), or
  • You are an overseas organisation with over 250 employees in the UK, or
  • Your company is part of a larger organisation, which falls into any of the above.

What are the benefits?

The scheme is estimated to lead to £1.6 billion net benefits to the UK (ESOS Impact Assessment DECC0142, 24 November 2014), with the majority of these being directly felt by businesses as a result of energy savings.

There are also many other business benefits to improving energy efficiency, such as improved working conditions for staff, improved customer experience, more efficient processes, reduced maintenance costs, and improved business image.

Energy efficiency is also a key measure for the UK in meeting interim carbon budget targets. BEIS’s head of business and industrial energy efficiency, tax and reporting, Gary Shanahan, noted that ESOS has helped UK businesses collectively save 3TWh of energy each year, on average, since Phase 1 commenced in 2014.

What was the aim of the recent consultation?

The Department for Business, Energy and Industrial Strategy (BEIS) ran a consultation process to seek views on government proposals to update and improve the Energy Savings Opportunities Scheme (ESOS).

Depending on the outcome, come net-zero targeting might be incorporated into the scheme, and the scheme might also apply to medium-sized businesses.

What are the penalties for failing to comply?

Fines for non-compliance can be up to £90,000. The Environment Agency has handed out hundreds of enforcement notices in the first two phases with the names of the companies falling foul of the deadline named on a list. So as well as a financial cost, there is reputational damage to consider as well.

When is the ESOS 3 deadline?

The 5 December 2023 deadline may seem distant but gathering energy consumption data can be time-consuming, especially for companies spread over a number of sites or those who have undergone a number of significant changes between phases.

If entering ESOS as a first-time company, it is also wise to start the process early.

How to make your business more energy efficient

With fears over an energy crisis making headline news and more people returning to the office, there has never been a more pressing time for businesses to implement an energy efficiency strategy.

Today energy is climbing up the corporate agenda, triggered by rising costs as well as sweeping environmental and social trends, including climate change and ambitious net-zero carbon targets

Business owners have no control over the price of gas or electricity, as these are dictated by market forces and geopolitical issues, but what they can do is manage consumption more effectively. As the old saying goes, ‘the cheapest unit of electricity is the one you never use’.

To be able to reduce consumption, first businesses need to understand when and where they are using energy. Energy Management, for example, has bespoke software that enables us to assess the energy performance of a business across its asset base.

Once the data has been gathered and analysed, informed decisions can then be made about where savings can be made.

This may result in equipment upgrades or relatively low-scale investment in timer switches for lights or the installation of longer-lasting LED lightbulbs.

Encouraging behavioural change amongst employees is key to the success of an energy efficiency strategy.

Most money-conscious employees wouldn’t leave lights on unnecessarily or not properly shut down their electrical devices but gentle reminders from an appointed, in-house ‘energy champion’ never do any harm.

Alternatively, you could turn to an external energy agency or energy managers to conduct an energy audit and determine how you can use less power without compromising business throughput, output or thermal comfort and wellbeing of staff.

Here’s a summary of the steps you can take:

  • Get an energy audit

Air leaks and issues around boilers and insulation will be identified along with any energy-saving opportunities.

  • Purchase energy-efficient equipment

Check the energy star rating of appliances and, where applicable, replace with more energy efficient models

  • Reduce peak demand

Try to stagger working hours to spread the load and bring energy consumption down during periods when it is typically at its highest.

  • Lighting

LED lightbulbs and timer switches that turn off the lights when not in use are simple measures that don’t have to break the budget

  • Heating

Check to see if the boiler that supplies heating to the building is serviced and well-maintained.

Install thermostats so that rooms are only being heated when they need to be.

  • Switch off idle devices

A great office energy-saving tip is to have your computer add-ons (printers, monitors, etc.) connected to power strips so that the flip of a single switch can shut down several devices at a time.

  • Office redesign

A simple redesign of the layout of your office may result in more natural sunlight entering the building and, therefore, reduce the need for artificial light. Greater exposure to natural sunlight is also known to improve the well-being of staff.

  • Natural protection

Planting trees in strategic places around the outside of the building will provide shade from the sun and act as windbreaks during the winter months and can help reduce demand for air conditioning and heating

  • Cultural change

Get buy-in from employees so that they personally invest in energy-saving measures.

Government brings forward plans to phase out coal

The UK government have brought forward their target to end coal-fired electricity generation by a year as it continues to try and set the agenda on climate change.

While the percentage of power generated by the carbon-emitting fossil fuel has steadily declined in recent years as green energy procurement becomes more valued, the plan is for the power network to not be reliant on coal at all by October 2024.

Prime Minister Boris Johnson hopes the move will serve to encourage other nations to step up their efforts before the United Nations’ Climate Change Conference (COP26) in November.

“Today we’re sending a clear signal around the world that the UK is leading the way in consigning coal power to the history books and that we’re serious about decarbonising our power system so we can meet our ambitious, world-leading climate targets,” said energy and climate change minister Anne-Marie Trevelyan

“The UK’s net zero future will be powered by renewables, and it is this technology that will drive the green industrial revolution and create new jobs across the country.”

Britain, home to the world’s first coal-fuelled power plant in the 1880s, was largely reliant on the fossil fuel for electricity for the next century.

But in 2020, coal only made up 2% of the overall energy mix as renewables became more popular.

Scope 3 carbon emissions dominate the carbon conversation

Driven by the Paris Agreement and the need to meet goals on climate change, environmentally-conscious companies across the world are stepping up their attempts to contribute towards a net zero carbon economy.

Understanding the emissions that they generate directly is only half the battle, though. On top of operational emissions, bracketed by the Greenhouse Gas Protocol as Scope 1 and 2, to fully understand their carbon footprint companies need to calculate, and then eliminate, emissions across the supply/value chain – Scope 3 emissions.

Emissions generated by a supplier’s activities may come about through the production of raw materials or components, or through smaller scale day-to-day activities such as business travel and the disposal of waste.

According to Deloitte, these Scope 3 emissions account for more than 70 per cent of their carbon footprint, which underlines how important it is for companies to obtain the necessary information from suppliers.

The detail is in the data

Suppliers that do not have to be compliant with the Streamlined Energy and Carbon Reporting (SECR) scheme may have taken a laissez-faire approach to evaluating their carbon footprint as a company, so the process of gathering this information is not always straightforward.

The willingness of suppliers to lend their support in this issue may depend on their own net zero culture, the relationship between the companies involved, and pressure from outside in terms of environmental transparency.

To sidestep this challenge and reach net zero, companies may decide to review their supply chain and set out to work only with like-minded ‘green’ companies, or even attempt to ‘de-scope’ emissions by outsourcing emissions-heavy activities like manufacturing.

At Energy Management, we understand that measuring your Scope 3 emissions can be complex, even down to simply deciding what should be included.

We can help your business to evaluate the impact of your Scope 3 emissions and your net-zero journey could start with a brief call with one of our energy consultants, who can be contacted on 01225 867722.

Report reveals record levels of carbon dioxide

Power station with cooling tower

The amount of carbon dioxide in the air is at its highest ever recorded level, according to US-based scientists.

The National Oceanic and Atmospheric Administration’s (NOAA) weather station in Hawaii recorded carbon dioxide at about 419 parts per million last month, more than at any time since measurements began in 1958.

Pieter Tans, a scientist with NOAA’s Global Monitoring Laboratory warned there would be catastrophic results if more action was not taken to combat carbon dioxide emissions – a key driver in climate change.

One way businesses can play their part is through green energy procurement and behavioural change in the workplace. A reduction in the use of energy sourced from fossil fuel is one of the key ways in tackling the problem.

“We are adding roughly 40 billion metric tons of CO2 pollution to the atmosphere per year,” Tans wrote in the report. “That is a mountain of carbon that we dig up out of the Earth, burn, and release into the atmosphere as CO2 – year after year.”

The amount of carbon in the air now is as much as it was about 4 million years ago, a time when sea level was 78 feet (24 metres) higher than it is today and the average temperature was 7 degrees Fahrenheit higher than it was before the Industrial Revolution, the report said.

Despite the pandemic lockdown resulting in a significant reduction in road use and energy consumption, scientists could not see a drop in the overall amount of carbon in the atmosphere. This was partly attributed to the prevalence of wildfires, which release carbon into the atmosphere.

International Energy Agency unveils Net Zero Roadmap

The International Energy Agency’s (IEA) has announced the world’s first comprehensive study on how to transition to a net-zero energy system by 2050.

And the message to governments around the world is that they need to up their game to achieve that target and slow down the rate of global warming.

With a focus on renewably sourced energy, the study – Net Zero by 2050: a Roadmap for the Global Energy Sector – sets out a cost-effective and economically productive pathway to get to a clean energy economy.

It examines the roles of bioenergy, carbon capture, and behavioural changes in reaching net zero in helping the world gets to where it needs to be.

By 2050, the aim is to have almost 90 per cent of electricity generation from renewable sources, with wind and solar PV together accounting for almost 70 per cent. Most of the remainder comes from nuclear power.

The greatest challenge

“Our Roadmap shows the priority actions that are needed today to ensure the opportunity of net-zero emissions by 2050 – narrow but still achievable – is not lost,” said IEA executive director Fatih Birol.

“The scale and speed of the efforts demanded by this critical and formidable goal – our best chance of tackling climate change and limiting global warming to 1.5 °C – make this perhaps the greatest challenge humankind has ever faced.

“The IEA’s pathway to this brighter future brings a historic surge in clean energy investment that creates millions of new jobs and lifts global economic growth. Moving the world onto that pathway requires strong and credible policy actions from governments, underpinned by much greater international cooperation”.

The roadmap includes a call for an immediate end to all investment in new fossil fuel supplies and states that further investment is needed in the research and development of new technologies.

Progress in the areas of advanced batteries, electrolysers for hydrogen, and direct air capture and storage could be particularly impactful, it outlines.

“The transition must be fair and inclusive, leaving nobody behind. We have to ensure that developing economies receive the financing and technological know-how they need to build out their energy systems to meet the needs of their expanding populations and economies sustainably”, Birol added.

New green energy record set as a strong wind blows

Wind accounted for 15% of all electricity generated in April and this form of renewable energy has also enjoyed a very strong start to the month of May.

Buoyed by blustery conditions, the UK’s wind farms helped the UK to establish a new clean energy record on Monday, May 3rd.

More than 17.6 gigawatts (GW) – was generated by onshore and offshore wind turbines, eclipsing the amount of electricity generated by nuclear, biomass and gas combined.

That represented nearly half (48.5%) of the electricity grid in England, Scotland and Wales, according to data from operator National Grid ESO, and beat the previous record of 17.5GW set on 13 February.

“The fact that wind is generating nearly half the country’s electricity shows how central it has become in our modern energy system,” acknowledged Industry body Renewable UK’s deputy chief executive Melanie Onn.

Landmark day

Last month, April showers may have been conspicuous by their absence but windy and sunny conditions combined to make Easter Monday a landmark day for green energy.

Over 80% of our electricity was produced by either wind, solar, nuclear or hydro, making the grid the greenest it’s ever been.

The carbon intensity – the measure of CO2 emissions per unit of electricity consumed – dropped to an all-time low of 39 gCO2/kWh.

While the rollout of green energy projects are being held back by an antiquated electricity network according to some industry experts, nature is at least playing its part in the drive towards achieving a net-zero future.

Graphic source: nationalgridESO

Network reform needed to help UK achieve net-zero targets

Renewable energy graphic

The UK’s drive towards net-zero carbon emissions is being hampered by an out-of-date and inflexible network, renewable energy developers and industry figures have said.

They argue that the energy grid was designed for fossil fuel generation and fails to embrace the planned rollout of green power.

Small-scale renewable energy projects are faced with high and sometimes prohibitive costs of connecting to the grid in certain parts of the country, due to the withdrawal of certain government subsidies.

Speaking to The Independent, Philip Dunne of the Environmental Audit Committee called for a reform to planning legislation to enable local renewable green projects to get off the ground and help in the drive towards net-zero emissions.

“Grid connection costs and access charges can be too high for small groups and do not account for the wider decarbonisation benefits – including education and social support – that the projects bring to their communities compared to commercial renewable projects,” said Mr Dunne.

Out of touch

Commercial energy developers also believe that the current system is out of sync with the needs of the UK whose growth in renewable energy output lags behind a number of other European countries.

They want to make it cheaper to connect green power to the grid which would make green energy tariffs more competitive.

Many wind and solar developers are tied to contracts that allow network operators to turn their supply down when there is excess energy being generated.

Typically this occurs when it is sunny and windy – conditions that are favourable from both a power generation and financial perspective.

Also, investors in new energy supply are sometimes disincentivised by the fact they have to pay companies that operate the network for upgrading local infrastructure because the existing capacity is taken up by fossil fuel suppliers.

Campaigners want older agreements, which typically date back to the 1990s when gas and coal-fire generation held sway, to be renegotiated and for more flexible arrangements around connectivity which allow for extra supply to be added more cheaply and faster.

Flexible connections make more efficient use of the existing network, meaning developers do not have to pay as much for infrastructure upgrades.