NHS Estates: Cost Modelling for Operational Net Zero
The built environment contributes around 40% of the UK’s total carbon footprint. It is therefore recognised that significant and collaborative changes to the design and operation of buildings are required if the 2050 net zero carbon emissions target set by the UK Government is to be achieved.
The UK Green Building Council (UKGBC) recently published further guidance under its Advancing Net Zero Programme  addressing the challenges that lie ahead in the procurement of renewable energy and carbon offsetting. Both areas have the potential to be significant contributors when balancing the net zero equation in the built environment. As one of the UK’s largest estate owners (and accounting for 4-5% of the UK’s total carbon footprint), the NHS published a report in October 2020 called ‘Delivering a ‘net zero’ National Health Service’. In the report the NHS sets out its pathway to net zero carbon emissions and provides the following targets:
- NHS Carbon Footprint: for the emissions the NHS control directly, net zero by 2040, with an ambition to reach an 80% reduction by 2028 to 2032 (compared with a 1990 baseline)
- NHS Carbon Footprint Plus: for the emissions the NHS can influence, net zero by 2045, with an ambition to reach an 80% reduction by 2036 to 2039 (compared with a 1990 baseline)
The report also provides that, “The NHS estate and its supporting facilities services – including primary care, trust estates and private financial initiatives – comprises 15% of the [NHS’] total carbon emissions profile.” Accordingly, there are significant opportunities for emissions reductions in the secondary and primary care estates respectively.
The planned investment through the New Hospitals Programme provides a once in a lifetime opportunity for 48 NHS Trusts to upgrade their facilities to provide world class healthcare. However, these new hospitals will only account for around 20% of the total space in the secondary estate, so it’s clear that a ‘whole site’ approach needs to be taken when assessing the future emissions profile for the NHS.
The graph below (‘Interventions to reduce emissions in the secondary care estate’) has been published by the NHS to demonstrate the scale of the challenge ahead. It reveals that the key areas for emissions reductions are in ‘upgrading’ and ‘optimising’ existing building uses, along with ‘on-site generation of renewable energy and heat’.
G&T has been working with NHS Trusts to analyse the market, identifying how Trusts can meet this target and determine what level of investment is needed to upgrade and transform the NHS Estate to meet Net Zero 2045.
Net Zero Influencers
The UKGBC established its Framework Definition for net zero carbon (NZC) buildings in 2019, which can be summarised in to four categories:
- Construction of buildings
- Operational energy consumed in the use of buildings
- Renewable energy generation
- Residual Carbon and offsetting
For property and construction professionals, there are some key areas in the guidance to understand, particularly when considering how the definition might impact the estates strategy for organisations like the NHS, and the development of the existing hospital estate to net zero standards.
The UKGBC guidance and how the four stages of the process help to achieve a net zero rated building is easier to understand in the context of individual buildings.
Below, we look at how the guidance might apply in the transformation of large estates and what type of interventions may be needed to ensure a whole-site net zero rating can be achieved.
The aims of Net Zero should achieve:
- significant reduction in carbon footprint
- lower annual energy costs
- efficient maintenance through centralisation of infrastructure
- improved environmental conditions
- well-being and social benefits
G&T has developed a simple process for establishing high level capital budgets and whole-life investments for large estates, as explained below.
Budgeting for Operational Net Zero
G&T has been working with NHS Trusts to develop a system and processes for establishing the costs of net zero. Our two-stage process allows clients to quickly determine the likely long-term capital investment needed to meet their own net zero targets. Stage 1 establishes the long-term development strategy for their site while Stage 2 implements costing methodologies for various net zero interventions.
Stage 1 – Strategy Overview
- Masterplan – provide an overview of current development plans to evaluate constraints on optimum performance
- Operation – establish current energy efficiency profile to enable comparisons against benchmarks
- Embodied – consider the optimum mix of refurbishment ahead of new buildings
Stage 2 - Costing Methodology
- Baseline – we establish the ‘Business As Usual’ long-term cost profile as the baseline
- Capital Costing – we use our knowledge and experience to test various design solutions
- In Use Profile – we project long-term energy costs and maintenance of the estate
- Residual Carbon – we profile the offsetting costs and sensitivities to price fluctuations
- Option Studies – we project the 2040/2050 profiles and cost-benefit analysis of each option
The steps listed above help us to quickly identify a range of possible net zero development options available for a large estate, allowing for informed decision making and resulting in a clear roadmap to achieve the targets.
NHS Hospital - Example Intervention
Working with engineering designers, we have produced cost models for three different intervention models, measured against existing ‘baseline’ operations (or ‘Business As Usual’ operations).The ‘Present Day Emissions’ are based upon Trust sites continuing to consume gas as the main heating source. The three intervention models are:
- The ‘Localised Interventions’ are based upon the reduced carbon output when refurbishing the existing buildings to current regulations, with like-for-like replacement of plant and infrastructure, and continuing to consume gas. All new buildings are assumed constructed to the Net Zero Carbon Hospital Standard.
- The ‘Electric Energy centre’ intervention is based upon high performance refurbishment of existing, with all new buildings constructed to the highest aspirational energy standards. No gas. All heating and power provided from electrical sources, including heat pumps and renewables, with centralised plant connected to district heat and power.
- The ‘Gas and Electric Energy centre’ is similar to the above. A hybrid mixture of gas CHP and heat pumps, with centralised plant connected to district heat and power.
The graph above provides a clear indication that significant engineering interventions will be required to achieve a net zero estate.
Even with strict refurbishment of existing estate buildings, the reliance on gas as the main heating source is likely to result in around 50% of annual carbon emissions remaining unresolved. This places a greater requirement for on-site generated renewable energy, such as photovoltaics or wind turbines.
Any residual balance of emissions relies on carbon offsetting to achieve net zero. Current indications suggest a range of costs from £25 to £95 per tonne (GLA) for any annualised residual carbon. However, the UKGBC guidance is clear that carbon offsetting should be the last resort. Relying on offsetting also misses the opportunity to provide new, clean energy systems, which also bring longer-term cost savings through efficiencies in annual fuel consumption and maintenance.
The all-electric and gas/electric ‘hybrid’ energy centres offer the best on-site solution but these may initially fail to achieve a full reduction in emissions based on 2021 forecasts. However, the all-electric solution will benefit from further decarbonisation of the National Grid while the hybrid solution has the potential for hydrogen or bio-gas conversion once the market has matured and technology has advanced in line with the Government’s 2030 target of reducing greenhouse gas emissions by at least 68% compared to 1990 levels.
Capital Cost Profiles
A significant initial capital investment is required to enable these net zero improvements. Below in Figure 2 we’ve shown a typical capital expenditure profile compared against the ‘business as usual’ localised interventions baseline, which we have indexed to 100 for ease of comparison.
The above gives an indication of the typical additional capital expenditure required. The all-electric solution involves more than two-and-a-half times the capital needed for ‘business and usual’ and the hybrid (ie gas and electric) solution is just over two times the capital cost. However, this does not tell the whole story. When Whole-Life costs are considered over a 20-year period, the total expenditure profile is much closer (as shown in Figure 3 below):
Whole Life Cost Profiles
The Whole Life cost profile paints a different picture and reinforces the need to think longer term.
The 20 year Whole Life projection sits alongside the NHS target date of 2045 and assumes that all intervention measures would be completed by 2025, allowing 20 years to reach their optimum performance and demonstrate that net zero can be achieved by 2045.
The Whole Life costs are also useful for comparing and testing cost options against established benchmarks for energy intervention projects. The ‘cost to save a tonne of carbon’ over the lifetime of a project is a key metric referenced by Salix (the organisation that provides interest-free Government funding to the public sector to improve energy efficiency, reduce carbon emissions and lower energy bills) under the Public Sector Decarbonisation Scheme (Phase 1). Salix will provide 100% grant funding for projects that meet a compliance criteria threshold of no more than £500.00 per tonne (CO2e) with a few exceptions (in Category 3). Our data suggests that full net zero intervention measures for large hospital estates over a 20-year period would exceed this cost benchmark, potentially in excess of £1,000 per tonne of CO2(e) saved per annum.
The guidance published by the UKGBC (and indeed other bodies) sets out a process for establishing net zero principles that can be followed by project stakeholders.
The first stage of the UKGBC guidance deals with embodied carbon in construction projects and the requirement for measurement and offsetting prior to Practical Completion. A method for calculation of both the embodied carbon emissions in new buildings is provided by the RICS in their guidance “Whole life carbon assessment for the built environment”. For the NHS New Hospital Programme, this will be an essential tool in calculating the additional embodied carbon created by the 48 new hospitals, and also for planning the mitigation of these additional emissions. In itself, this is a detailed exercise requiring the whole design and supply chain to understand how the selection of construction materials influences the outcomes.
However, this is only one part of the net zero challenge. The other important factor is in the operation and energy consumption of buildings and how we address any residual carbon footprint over the lifetime of the building operations. This is particularly important for existing estate holders, such as the NHS, that are committed to achieving net zero within their existing property portfolio in line with Government targets.
Much of the work to reduce carbon emissions will be carried out within existing building stock, starting with clear and transparent measurement of energy consumption and operational patterns. This will improve our understanding of how we use these buildings on a day-to-day basis and seasonally across the year. Understanding how we use and interact with our buildings will enable better modelling and allow us to forecast which solutions and interventional measures are most effective for achieving net zero in operation.
The UKGBC has also established some important principles around ‘additionality’ of renewable energy and the importance of establishing the true ‘green’ credentials of energy suppliers for carbon accounting.
The decarbonisation of the National Grid does not provide an easy way out. New developments place additional demand on the existing supply capacity and infrastructure. They cannot rely on simply plugging-in to the Grid and consuming the ‘greener’ energy available. Instead they must first look to generate their own renewable energy. This might involve a range of possible renewable energy solutions which add to the cost of construction works.
Purchasing truly ‘green’ energy will require proof and certification of the energy source and the provenance of the carbon offsets will be demonstrated on an ongoing, annual basis. It’s clear that net zero is not a fixed status that can be claimed for the lifetime of the building. It will require constant evaluation of the buildings’ operations.
Investment in new technology and advances in ‘green’ fuels will contribute to further reductions in emissions, allowing for a long-term alternative to gas as the primary heating fuel. However, infrastructure and logistics will require further investment to convert to these green fuels, along with ongoing works to decarbonise electricity.
Finally, investments should be modelled with whole-life in mind rather than just short-term capital expenditure. The long-term benefits of transforming large estates to net zero emitters provides other added value benefits such as improving local environments, creating employment in the new sectors and allowing the UK property sector to play a leading role in setting the example for others to follow.
 Additionality is a well-established concept in sustainability reporting and verification. It means that a claim of emissions reductions should only ever be made where it can be proven that the emissions reduction came about because of the intervention of the building operator and would not otherwise have happened. Projects that comply with this principle result in verifiable emission reductions or emission avoidance, as their impact is to increase renewable energy generation.