Health Service Focus

10.06.19

Can the NHS find savings in their energy bills?

As the NHS works harder than ever to meet challenging targets within limited budgets, many trusts are finding it increasingly difficult to find new efficiencies and further reduce costs. But could energy be the key to unearthing savings?

At first glance, NHS trusts’ energy bills don’t appear to hold savings opportunities. They have been rising year-on-year for the past decade, which is a trend that’s set to continue - it’s estimated that by 2020, trusts could see their energy prices rise by up to 45% compared to 2016 rates.

Such increases threaten to divert resources away from frontline services, but there are ways for trusts to mitigate rising energy costs and even drive savings. Better procurement, avoiding inaccurate charges and prioritising energy saving opportunities can all free up more budget for vital resources.

Better buying

Understandably, budget certainty is a top priority within NHS organisations, and this leads many to opt for fixed price annual contracts. By locking into a fixed rate, however, trusts can miss out on lower prices if wholesale markets fall. Fixed contracts also typically contain a heavy risk premium, leaving organisations paying over the odds for their energy.

By taking a more flexible approach to their energy buying, trusts can take advantage of falling markets without adding significant risk. A ‘capped’ contract locks in a maximum price, which allows trusts to have cost control but also enables them to act if prices fall. On average, NHS trusts could save 15% by switching from a one-year fixed contract to a longer ‘capped’ strategy.  

Avoiding inaccurate charges

NHS trusts often have multiple sites with half-hourly meters in their portfolio, which creates a huge volume of data. This leaves a wide margin for errors, from incorrect usage charges to erroneous consumption calculations, which could mean they overpay for their energy.

Historical audits can recover significant refunds, but most trusts only carry out audits every two or three years. To avoid overpaying suppliers, it’s crucial for trusts to undertake ongoing invoice validation, so any errors are identified and corrected within the financial year. By ensuring that their energy bills are accurate, trusts can also avoid allocating more budget than is necessary to energy costs over other frontline services.

Reduce consumption

When it comes to carbon reduction, the NHS is leading the way, collectively unlocking over £1.8bn in lifetime financial savings through investment in energy efficiency. It’s not only beneficial for the environment, however, as driving down their consumption is also the most sustainable way for organisations to cut their energy costs.

While it may seem that many of the obvious areas for efficiency improvements have already been acted upon, trusts should be able to drive further efficiencies by utilising data. Monitoring their energy usage data can help them to understand their typical usage and spot opportunities to reduce consumption. They can also use their data to determine the effectiveness of any efficiency measures they adopt.

Act now to mitigate rising costs

The sooner NHS trusts act to optimise their energy strategies, the greater chance they have to mitigate future energy cost rises.

Inenco has created a special report on reducing cost and carbon in the NHS, with case studies and practical advice for trusts. To download the report, visit www.inenco.com/nhs-trusts.

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