IAN SCATTERGOOD, BUSINESS DEVELOPMENT MANAGER – HEALTHCARE FOR THE ZENERGI GROUP, GIVES AN INSIGHT INTO THE ENERGY CRISIS AND THE IMPACT ON THE NHS
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.”