Background: 

• The Estates Return Information Collection (ERIC) data for 2022/23 indicates that NHS Trusts in England spent £1.2bn on energy and water out of a total cost of £12.4bn for running the estate. It also highlights £11.6bn of backlog maintenance – the estimated cost of restoring the estate to expected standards.

• In October 2020, the Delivering a ‘Net Zero’ National Health Service report identified the opportunity for £250m of annual energy savings over the next 5-10 years (see page 20).

• Given financial constraints, many Trusts have identified Energy Performance Contracts as an attractive ‘one-stop-shop’ for identifying, designing, implementing, operating and maintaining energy efficiency upgrades.

• Multi-million pound projects are often focussed around major Combined Heat & Power (CHP) and Heat Pump installations, complemented by HVAC and building fabric improvements, LED lighting replacements, on-site renewables and water abstraction boreholes.

Energy Performance Contracts: 

• Structured Energy Performance Contracts are attractive to many NHS Trusts as they typically offer a ‘guaranteed’ return and access to the third-party finance needed to tackle rising energy costs and backlog maintenance.

• The business case is often founded on cost neutrality; that any repayment costs should be exceeded by the savings generated by the scheme.

• Investment risk can also be transferred in part to the supplier. Risk transfer typically takes the form of an energy savings guarantee and any supplier-reported shortfall in savings is to be reimbursed.

• The crucial performance measurement and contractual terms governing the above mechanisms can, however, be complex and this means technical due diligence is essential. On this basis, a wide range of NHS Trusts have engaged EEVS as their expert adviser and performance verifier. 

EEVS Services:

Since 2013, EEVS has been working with NHS Trusts to support multi-million-pound Energy Performance Contracting projects through the following services:

• Set up and Contractual Advice – focussing on critical performance-related contractual terms, measurement (M&V) methodologies, baselines and technical plans, EEVS typically undertakes a risk-based analysis and advises on the extent to which a scheme meets key success criteria and appetite for risk. We work with all parties to make improvements as required.

• Savings Verification – during service delivery EEVS scrutinises supplier savings performance reports to ensure they have followed the agreed methodologies, that calculations are accurate and based on robust data, and any unrelated events taken into account. As well as building trust in a supplier’s savings claims, it gives NHS Trusts the information needed to hold suppliers to account, especially in relation to any verified under-performance versus a guarantee.

• Other services – EEVS also provides performance measurement (M&V) planning and reporting services for internally delivered projects as well as carbon footprint auditing. We also provided research support to the SDU’s Securing Healthy Returns publication.

Key Benefits:

• EEVS expertise has played a central role helping NHS organisations become informed buyers in relation to complex Energy Performance Contracting services.

• During project procurement, EEVS due diligence has helped NHS organisations ensure the commercial offer meets their expectations, as well as providing the technical know-how needed to build the business case and win investment sign-off.

• During project delivery, EEVS performance verification services provide crucial insight to improve the accuracy of supplier reporting and the identification of under-performance. This has enabled NHS organisations to demand performance improvements, remedial works and, in one case, a substantial six-figure rebate.

• In many cases, Trusts simply do not have the resource to scrutinise these projects in sufficient detail. EEVS has filled these gaps, summarising findings into concise management reports, as well as bringing in experience gained from working across a broad range of energy-related projects.