Energy costs are rising and sustainability legislation is becoming more rigorous. This has led to a unique challenge – how can estate managers deliver critical services while reducing operational expenditure and emissions?
The question is pressing. NHS England spends £1.4bn on energy, and this figure has doubled since 2019. Exploring new strategies is key and solar photovoltaic technology has grown in popularity, allowing facilities to adhere to environmental legislation and insulate against volatile power pricing. However, its full potential remains untapped within the sector.
Under Pressure, Ready for Change
Healthcare estates are extremely energy intensive. Beyond lighting and HVAC demand, many host operations 24/7 and need power for specialised medical equipment. Demand is constant, and systems that can produce clean energy, affordably on-site are increasingly attractive.
The legislative landscape poses further food for thought. From 2027, non-domestic buildings that do not meet band C on their Energy Performance Certificate can no longer be let, with this expected to rise to band B by 2030. Plans have also been proposed to reduce the validity period of existing EPCs, further incentivising estate managers to look at clean energy generation technologies including solar PV.
Such reforms also ensure relevant stakeholders are equipped with accurate and up to date information and encourage them to more frequently consider measures to improve the energy efficiency of their properties. The proposed reforms create a strong case for the adoption of on-site renewable technologies such as photovoltaics as a measure for improving the EPC rating of buildings and ensuring compliance with the forthcoming legislation.
Overcoming Leasehold Barriers
Despite this appeal, barriers have traditionally remained around adopting greener technologies. Foremost among these is the complexity of leasehold agreements. NHS and private healthcare estates often include leased buildings, and installing solar panels requires landlord permission, followed by negotiations around asset ownership and maintenance responsibilities.
This, combined with concerns over high upfront costs, underlines the need for more flexible financial models to allow for solar installation in hospitals and healthcare facilities. Yet more ownership models are becoming available that suit individual leasehold agreements from both a financial and legal standpoint.
For example, tenants can take on all responsibility, installing, maintaining and benefitting from the solar array directly by selling additional energy back to the grid. This revenue generation would likely outweigh the potential costs of maintenance that may initially disincentivise relevant decision makers from investing in the technology.
Alternatively, landlords can own and maintain the panels. As well as exporting energy back to the grid, they may also sell it at below-market rates to the tenant via a Power Purchase Agreement (PPA). A PPA may appeal to healthcare providers operating on a tight budget and without the capex budget to meet the upfront costs of such installations.
A third option could be that a third party, also known as a ‘solar tenant’, develops the solar array on the roof of the building by leasing the roof space from the landlord, before selling the energy it produces to the occupant at below-market cost. As well as removing potential obligation for both the landlord and the tenant – as neither is responsible for the array’s maintenance or eventual removal – these arrangements often provide an option for either party to purchase and take ownership of the system at a later date.
Looking at the Ongoing Cost
All this must be considered within the UK’s wider decarbonisation plans. The country’s Clean Power 2030 Action Plan aims to unlock the solar generating capacity of the UK and achieve 45GW of installed solar PV by 2030. As acknowledged by the previous government, a significant proportion of this capacity could come from the untapped potential of roof space of non-domestic properties, including healthcare
estates.
However, as the governmental taskforce also acknowledges, there must be an equal opportunity for the development of on-site solar PV systems across the non-domestic building footprint. While there is still much to be done to achieve this ambitious goal, policies are already in place that can aid the transition to greener energy sources.
For instance, the Climate Change Levy (CCL). As an environmental tax applied to non-domestic energy consumers to encourage more sustainable operations, it can markedly affect financial bottom lines and by association, the ability to provide best possible care. But by entering into voluntary agreements in line with the Climate Change Act, more energy-intensive organisations can reduce the amount their liability to the CCL. Through reducing their carbon emissions, these organisations can receive significant financial relief against their previous obligations. Given this, the strategic case for investing in solar PV technologies is further underlined for healthcare estate managers.
Indeed, the financial case for solar is exceptionally strong. According to the International Renewable Energy Agency, the price of silicon modules used in photovoltaics has plummeted by up to 98% between 2009 and 2023, depending on the type of panel. It is important to note that these improved efficiencies in the technology have occurred at a time where grid-based energy prices remain volatile.
Meeting Sustainability Requirements
But beyond cost and compliance, the domino effect of embedding sustainable technologies offers another reason to explore the use of solar arrays at healthcare facilities. Implementing solar PV allows healthcare estate managers to confidently demonstrate their commitment to lowering their carbon footprint in line with net zero goals.
Indeed, a renewable energy source is one of the quickest and easiest ways to improve the sustainability of a business, and on-site solar panels are a particularly conspicuous display of sustainable operations. This is further emphasised in the new Procurement Act 2023, which changed public procurement by changing the consideration criteria.
Namely, it moved from judging bids on the Most Economically Attractive Tender (MEAT) approach to Most Attractive Tender (MAT) instead. The loss of this ‘E’ represents a wider political sea-change in the decision-making process – renewable energy is evidently strengthening, and further sustainability-minded legislation should be expected in the near future.
Narrowing the focus, healthcare estate managers are well-positioned to drive change within the sector. By exploring solar PV technologies and their ensuing lease options, they can realise significant financial, operational and environment benefits.
Operating in a level playing field for leaseholders, these decisionmakers can benefit on the micro and macro level, helping make hospitals and healthcare facilities are cornerstone of the UK’s clean energy future while futureproofing their own estates.
To learn more about solar PV solutions for healthcare facilities, visit www.renenergy.co.uk.