Improving Energy Efficiency in the NHS
Applications for Capital Funding 2012-13

Improving Energy Efficiency in the NHS
Applications for Energy Efficiency Funding

Prepared by the NHS Estates & Facilities Policy Division, Group Operations and Assurance Directorate, Department of Health

You may re-use the text of this document (not including logos) free of charge in any format or medium, under the terms of the Open Government Licence. To view this licence, visit www.nationalarchives.gov.uk/doc/open-government-licence/
© Crown copyright 2012
First published January 2013
Published to DH website, in electronic PDF format only. 
www.dh.gov.uk/publications
Contents
Foreword5
Supporting Carbon and Energy Efficiency in the NHS
1.	Introduction7
2.	Funding conditions7
3.	Funding process8
4.	Application Qualifying Criteria1
5.	Timescales
6.	Contact Points3
ANNEX A – Additional Finance Information4
ANNEX B – Energy Efficiency Fund Application Form – Stage 16

Foreword: Parliamentary Under Secretary of State for Health, Dr Dan Poulter
The Government is making available £50 million of capital in 2013-14for NHS Trusts and Foundation Trusts, to fund new and innovative projects to improve energy efficiency and reduce the carbon footprint of the NHS by reducing energy usage, carbon emissions and improving resilience to climate change. 

Climate change is one of the gravest threats we face, and that urgent action at home and abroad is required. We will use a wide range of levers to cut carbon emissions, decarbonise the economy and support the creation of new green jobs and technologies and will implement a full programme of measures to fulfil our joint ambitions for a low carbon and eco-friendly economy. The NHS Carbon Reduction Strategy for England (CRS) published in January 2009 and updated in January 2010 sets an ambition for the NHS to help drive change towards a low carbon society. The strategy shows the scale of reduction in carbon the NHS aspires to contribute towards the U.K target, which commits the UK to an 80% reduction in carbon emissions by 2050. The CRS also recommends key actions for the NHS to become a leading sustainable and low carbon organisation, identifying a 10% reduction by 2015 as an ambition for the NHS.

The provision of NHS healthcare services is highly specialised and energy intensive. Hospitals are open 24 hours a day, 365 days per year. The NHS has one of the largest estates in Europe, covering 6,886 hectares of land with 28million sq.m of floor space and is one of the biggest users of energy in the UK, costing almost £600 million every year. This fund gives hospitals the go-ahead for all kinds of efficiency projects that will help them reduce the amount of energy they use and, as a result, their energy bills. 

Energy consumption is a major consideration for NHS organisations in terms of budgetary availability when focusing on costs for front line patient services.

Saving money on fuel and energy bills means more money for the NHS to spend on front line patient care, as well as a healthier environment for future generations.

Prioritising the fund at a four to five year return on investment means that the NHS will be able to reinvest energy savings of up to £12.5million per annum on front line care reoccurring.  

That means more money for the NHS to spend on patient care, as well as a healthier environment for future generations.

Many NHS organisations have already worked hard improving their carbon and energy efficiencies through their own investment and initiatives. However, this Government recognises that there will be many such organisations that would like to do more, but that their existing funds are targeted on more immediate priorities. 

This capital allocation is intended to further support NHS organisations to deliver on the NHS Carbon Reduction Strategy for England (CRS).

Dr Dan Poulter MP
Parliamentary Under Secretary of State for Health

Supporting Carbon and Energy Efficiency in the NHS

1.	Introduction

1.1	The Capital Funding Programme will promote the Government’s green agenda, by financially assisting the NHS to mitigate the effect of climate change by improving its energy efficiency.
1.2	The Programme Sponsor is Karen Wheeler, Director General - Group Operations and Assurance Directorate and the Senior Responsible Owner is Peter Sellars, Head of Profession- NHS Estates & Facilities Policy Division.
1.3	This document sets out the conditions for funding, the application process, the qualifying criteria and timescales and includes:
•	Financial Guidance (Annex A)
•	Application Form and Ranking Criteria  (Annex B)
1.4	In order for DH to comply with the public sector Equality Duty it will be necessary for the selection process to pay 'due regard' to the duty under section 149 (1) of the Equality Act 2010.  In doing so, NHS Trusts applying to the fund will need to demonstrate they have considered equalities as they apply, and then deliver as part of their scheme, where appropriate, if the bid is successful. 
1.5	Section 149 (1) of the Equality Act 2010 sets out a general Equality Duty, with three main aims which are:   
•	eliminate unlawful discrimination, harassment and victimisation; 
•	advance equality of opportunity between people who share a protected characteristic and people who do; 
•	promote good relations between people who share a protected characteristic and those who do not.

2.	Funding conditions

2.1	The capital fund is for NHS Trusts and Foundation Trusts in England only 
2.2	Funding will be available as Public Dividend Capital from 14 June 2013 in the total sum of £50m. 
2.3 	Approved schemes will need to demonstrate recurring benefit, contribute to the overall carbon saving target in the Climate Change Act, and raise the average carbon and energy performance level across the NHS in England.
2.4	Trusts will submit an initial application (Stage 1) and, if successfully approved in principle, a subsequent, final Stage 2 application assuring the details of the scheme.  
2.5	DH will centrally manage the Programme fund and, should qualifying applications exceed the funding available at Stage 1, apply ranking criteria to determine approvals. 
2.6	Most carbon and energy efficiency investments comprise an upfront investment to improve energy consumption and lower costs. 
2.7	Applications will provide information on the risks applicable to the proposed scheme including financial, operational and contracting where applicable. Action should be taken to mitigate these risks locally including due diligence on solutions, warranties and fixed prices and performance standards included in contracts. Investments will also need to consider the impact on maintenance and operating costs. There are a number of different approaches to investment appraisal. For this initiative, the Net Present Value (NPV) is used, and data is required to demonstrate value for money for the investment and help in prioritising applications.
 2.8	Work proposed in the applications is expected to improve the quality of the overall environment for patients, visitors and staff.
2.9	Joint applications from multiple NHS organisations are welcomed. Local arrangements should be made to manage each organisation’s contribution to the application.
2.10	While this initiative is primarily targeted at carbon and energy efficiency, applications that improve efficiency in relation to similar areas, e.g. water, waste and adaptation towards climate change will be considered.
2.11 The aim of this investment is to achieve efficiency savings in carbon, energy and the costs of buying energy over the long term. It is not to support legislative requirements such as the Building Regulations. Successful schemes will be funded under the Public Dividend Capital arrangements, with no fixed repayment required, if this expenditure can be capitalised as part of the scheme. The DH reserves the right to demand a PDC repayment if the payments are not capitalised as part of the scheme. Evidence will be required to support the application.
2.12	When schemes are complete, applicants will provide a full report, as well as regular interim reports, and financial breakdown to allow lessons to be learnt and the sharing of knowledge for the benefit of others in the future. 
2.13 Additional finance information, which, for a bid to be considered should be complied with can be found at Annex A.

3.	Funding process

	The programme will have four stages:

•	Stage 1 – Initial application leading to an approval in principle
•	Stage 2 – Confirmation of application, providing assurance of scheme details and releasing funding
•	Stage 3 – Project completion, case study and evaluation, 
•	Stage 4 – Sharing information, communicating lessons learnt and best practice.

3.1	Stage 1 (initial application)

3.1.1	Applications should be made by 28 February 2013 using the form contained in Annex B and be submitted electronically to:energycapital@dh.gsi.gov.uk clearly indicating in the‘subject’ box “Stage 1 Application – Energy Fund”..
	3.1.3	Applications should include the following details:
•	Details of the Trust and relevant contact details;
•	Confirmation of support from Chief Executive and Director of Finance;
•	Broad outline of proposed scheme including capital cost and timetable;
•	Statement of estimated carbon/energy/cost saving including:
o	Current overall energy and carbon performance of Trust in kWh/m2 and kgCO2e/m2 for  (2010/11)	
o	Current carbon and energy performance of buildings to benefit from scheme (if different)
o	Initial estimate of total capital cost (inclusive of fees, VAT etc)
o	Scheme energy/carbon/cost saving (perannum) of proposed scheme (at current energy contract value)
•	A clear summary of any expected benefits that will contribute towards improving patient services.

3.2	Stage 2 (Confirmation of application)

3.2.1	Successful applications from Stage 1 will be notified in accordance with the timetable below, when a Stage 2 application will be required. On confirmation of progress to Stage 2, the Trust will be required to submit robust cost details, fully worked energy/carbon benefit analysis, scheme timetable and monitoring arrangements. Further evidence of meeting the Qualifying Criteria (see section 4) may be sought to support your application. The Stage 2 application is to be submitted electronically clearly indicating in the subject’ box “Stage 2 Application – Energy Fund”. Funding will be released in accordance with the timetable detailed below.
3.2.2	Allocations will be made on a fixed sum basis. Any additional financial requirements will be at the risk of the organisation concerned.
3.2.3	Scheme monitoring, on a quarterly basis, will be initiated on allocation of funding to scheme completion.
3.2.4	DH reserves the right that if schemes are not confirmed at Stage 2, other lower ranked applications may be considered.

3.3	Stage 3– Scheme Completion - Case Study and Evaluation

3.3.1	Schemes are expected to achieve practical completion by 31 March 2014.
3.3.2 Trusts are expected to submit a case study and evaluation incorporating lessons learned and including (but not limited to):
•	Collating high quality ‘before and after’ photos as a demonstrable way to evidence the benefit and change the funding has made.
•	Documented identification of how the scheme has considered sustainability issues with respect to procurement, scheme management etc.
•	Financial breakdown, cost recovery, including actual costs, carbon and energy summary including performance details. 
•	An Energy Diary in line with the carbon and energy calculations based on ERIC definitions and the applicable tariffs in kWh and kgCO2e.
•	Assessment of adaptation, climate and energy benefits, revenue savings and other benefits in line with those in the original application
•	Background evidence and research, on the final scheme 
•	An identified breakdown of how this scheme has benefited frontline services
3.3.3	A report, certified by the Trust Board, is to be submitted to the Department by 30 August 2014. The report should include lessons learnt, the benefits realised by the project and any recommendations which could be shared with the wider NHS.

3.4	Stage 4 Sharing information

3.4.1	Consideration will be given by DH to publishing a report of completed schemes to advertise best practice and innovation and to identify where patients have benefited.

4.	Application Qualifying Criteria

4.1	A DH Energy Efficiency Fund Working Group will evaluate applications. All applications are expected to meet the criteria set out within this document. Additional Ranking Criteria contained within the application form is designed to assist the Working Group in making final recommendations, to the programme governance, on before awarding funding. The minimum qualifying criteria for applications is:
•	That the application form has been filled in correctly, with clear information and signed by the Chief Executive and Finance Director.
•	Evidence of due-diligence and assurance processes at local level
•	That the Trust has considered its duty under section 149 (1) of the Equality Act 2010, and this can be evidenced as part of the application at Stage 2
•	That the scheme achieves a carbon emission and energy efficiency saving that can relate back to the energy saving within the carbon and energy calculations. 
•	How much funding is required and is it below the threshold of £3 million?
•	That the applications are exclusive to the NHS organisations only
•	That the scheme identifies the key element of benefit, achievement of energy carbon efficiency saving and energy performance improvement
•	That the amount of on-going financial savings made through the proposed work has identified the amount achievable which may be re-invested into patient services
•	That the application identifies a return on the initial capital investment and the time period that it considers as the simple payback period
•	That energy calculations are based on ERIC definitions, and the applicable tariffs in kWh at the site on 2 January 2013
•	That whilst the fund will not support schemes specific for metering provision, but will encourage the introduction of sub-metering sufficient to prove/evaluate the performance of the scheme and in support of the scheme achieving compliance with the requirements of the Display Energy Certificates (DEC) and Energy Performance of Buildings EU Directive
•	Applicants agree to participate in interim and final reporting requirements as well as project specific Case Studies

Exclusions
•	General carbon and energy awareness training will not be funded; however, training relative to safe operation of new equipment and metering may be included.
•	The fund excludes research, investigation, or technologies that have not been proven to show clear carbon, energy efficiency and cost savings.
•	Primary Care Trusts, GPs and Dentists are excluded from applying to the fund.
4.2	The DH Energy Efficiency Fund Working Group has the final decision on each application based on the above criteria as well as the group's knowledge and expertise in accordance with these terms of reference. There will be no appeals process to decisions.

5.	Timescales

5.1	The initial application process (Stage 1) is required to be completed by 28 February 2013
5.2		Initial “approval in principle” to Stage 1 applications will be made by 4 April 2013.
5.3		Stage 2 applications must be submitted electronically by 8 May 2013 to energycapital@dh.gsi.gov.uk clearly indicating in the ‘subject’ box “Stage 2 Application – Energy Fund”.
5.4		Funding for successful applications will be announced by 14 June 2013.

5.5 Provisional Timetable as follows:
Week Commencing 21 January 2013
Stage One “Expression of Interest” application for bidders issued on the DH website 

By 28 February 2013
Deadline for Stage One “Expression of Interest” application to be submitted 

By 4 April 2013 
Stage One evaluation “Expressions of Interest” bids complete and announced. Stage 2 ‘”Committed to Proceed” applications sent to successful trusts

By 8 May 2013
Deadline for Stage Two applications to be submitted via email 

By 14 June 2013
Stage Two evaluation ‘detailed bids’ complete and notification of successful applicants. Including release of full/staged capital allocation to enable projects to commence.

By 28 June 2013
PS(H) NHS Energy Efficiency initiative launch 

In July 2013
Evidence and information gathering commences

By 31 March 2014
Schemes completed

By 30 Aug 2014
Trusts to submit their report to the Department

By September 2014
Department publishes initial evidence and findings from Schemes

By 31 March 2015
Department publishes national best practice guidance derived from the evidence and findings of the energy efficiency schemes and their reports which are to be submitted to DH in January2015.

6.	Contact Points

For queries about the Fund , please contact: 
Ian Rowlan, Senior Engineer – DH Project Manager
Email: ian.rowlan@dh.gsi.gov.uk or energycapital@dh.gsi.gov.uk

On receipt, the applications will be reviewed for completeness, accuracy and applicability. NHS organisations may be contacted if amendment or further information is required. 

ANNEX A – Additional Finance Information

This funding for this initiative will, in principle, be made available under Public Dividend Capital (PDC) in 2013-14 and therefore can only be spent on items that count as capital expenditure in your Trust’s accounts and is currently only available in 2013-14.  Discussions should be held locally between the Estates & Facilities, Finance and Operational members of the applying organisation to ensure that this method of funding including timing of its spend is consistent with their operational and financial plans and operational standing financial instruction. 
The Annual Revenue Savings requested in the application should be based on the costs of energy directly attributable to the improved energy usage including other directly attributed costs, but net of any increased running costs and based on the ERIC calculations.
There is no lower financial limit for applications but an upper funding limit of £3m per scheme has been set, which may be reviewed by exception and on a case-by-case basis.
The capital allocated from the 2012Carbon and Energy Efficiency Fund will be available from June 2013 to NHS Trusts through Public Dividend Capital (PDC). 
Applications should include the total of all capital outlay, including enabling costs, design/ scheme fees, equipment, building works, appropriate VAT.
Trusts will be responsible for payments of any such charges and depreciation costs and should, therefore, be fully taken into account when evaluating the affordability and cost benefit of the scheme as the organisation will be expected to cover any costs not included in the Stage 2 application.
Applications that are successful will receive formal notification in the form of a letter, which will contain further details from DH finance. Trusts will be able to draw down PDC payment when required through normal central procedures. Wherever possible, Trusts should aim to complete schemes and payments within the financial year of approval and all by 31 March 2014.
Trusts with successful applications will be required to submit mandatory Scheme Progress Monitoring returns to DH at key milestone stages for each approved scheme.
Final Stage 2 applications submitted for approval should include the total of all capital outlay i.e. enabling costs, design/scheme fees, equipment, building works, appropriate VAT, etc but will be exclusive of on-going revenue costs.
Initial survey costs should be included in the application, but Trusts should note this cost would be at their own risk if the application were unsuccessful.
Trusts should also note that the fund would not take on-board capital or affordability/revenue risk after approval of capital following a successful application.

Key Issues
Applications will need to be approved by the Chief Executive and Director of Finance at Stage 1.
Applications will need to be agreed by the Trust Director of Finance at all Stages and evidence provided by way of a copy of the signatures on Application Form.
The risk of additional capital cost over-runs and affordability/revenue consequences will be carried by the Trust.

Explanation of how the Carbon and Energy Efficiency Fund fits with the new capital regime:
Funding of capital investment through Borrowing Regimes:
Since their establishment, NHS Foundation Trusts have been able to access capital under Prudential Borrowing Arrangements. They are allowed to retain all cash generated through their operations for reinvestment in fixed assets, such as their buildings and equipment. 
They may also borrow up to their performance-based Prudential Borrowing Limits (PBLs) to fund further investment on top of that which they can finance with their own cash. 
In addition, DH may make allocations of Public Dividend Capital (PDC) to fund capital investment, where it deems it appropriate.
The new borrowing regime for NHS Trusts:
From April 2007, NHS Trusts have accessed capital under a similar borrowing regime as has been in place for FTs since their inception.

ANNEX B – Energy Efficiency Fund Application Form – Stage 1

NHS TRUST DETAILS	
NHS Trust name:
Address:

Trust point of contact name:
Telephone:
Email:

Have the following committed to the proposed project:	YES
(please tick)	NO
 (please tick)	
Chief Executive			
Director of Finance			
What is the value of your bid?	£	

Outline of proposed project requiring funding (maximum of 500 words)
	
Potential savings £	Potential re-investment as %	

Funding Conditions Checklist (to be met for applications to be considered)	Yes	No	
The scheme demonstrates recurring benefit, contributing to the overall carbon saving target in the Climate Change Act and raising the average carbon and energy performance level across the NHS in England.			
The risks applicable to the proposed scheme including financial, operational and contracting, where applicable, have been assessed and mitigation planned.			
Net Present Value (NPV) assessment has been used and data is available in spreadsheets to demonstrate value for money for the investment.			
The aim of the investment is to achieve efficiency savings in carbon, energy and the costs of buying energy over the long term and not to support legislative requirements such as the Building Regulations.			
The application is for funding under Public Dividend Capital arrangements, with no fixed repayment required if this expenditure can be capitalised as part of the scheme and, if not, it is agreed PDC repayment will be made to DH, if demanded.			
Provision has been made to provide a full report when schemes are complete, as well as regular interim reports, and financial breakdowns to allow lessons to be learnt and the sharing of knowledge for the benefit of others in the future. 

Qualifying Criteria Checklist (please tick appropriate box)	Yes	No	
The application form has been filled in correctly, with clear information and signed by the Chief Executive and Finance Director.			
The Chief Executive is satisfied that due-diligence and assurance processes have been undertaken			
The Finance Director is satisfied that the investment is value for money			
That the Trust has considered its duty under section 149 (1) of the Equality Act 2010, and this can be evidenced as part of the application at Stage 2			
The scheme achieves a carbon emission and energy efficiency saving that can relate back to the energy saving within the carbon and energy calculations			
The funding requirement is fixed and is below the threshold of £3 million			
The applications are exclusive to the NHS organisations only			
The scheme identifies the key element of benefit, achievement of energy carbon efficiency saving and energy performance improvement			
The amount of on-going financial savings made through the proposed work has identified the amount achievable which may be re-invested into patient services
			
The application identifies a return on the initial capital investment and the time period that it considers as the simple payback period
			
Energy calculations are based on ERIC definitions, with the applicable tariffs in kWh at the site on the 2nd January 2013
			
The investment is not a metering provision scheme, but, if applicable, does include the introduction of sub-metering sufficient to prove/evaluate the performance of the scheme and in support of the scheme achieving compliance with the requirements of the Display Energy Certificates (DEC) and Energy Performance of Buildings EU Directive			
Applicants agree to participate in interim and final reporting requirements as well as project specific Case Studies			
Statements addressing each of the six Ranking Criteria are attached to this application 			
Chief Executive 
Sign-off	Signature:
	Name: 	
Director of Finance 
Sign-off	Signature:
	Name: 	
Date		

The table below sets out the additional ranking criteria on which bids will be assessed at Stage 1 if  the total value of qualifying bids received exceeds the £50m limit. Please complete as fully as possible to support your application (maximum of 250 words per criteria) as it is anticipated that the fund is likely to be oversubscribed. 
At Stage 2, you may be required to provide greater detail to support your application.
Ranking Criteria	Weighting	

Show how the scheme leads to a step change in energy efficiency at the Trust
	
15	

Show how the scheme brings added benefits
	
10	

Over what period are the returns projected and what value of return is anticipated to be available for re-investment in relation to the capital investment made
	
30	

What percentage of the returns will be re-invested in patient services, and if less than 100%, how will the balance be utilised?
	
25	

How does the scheme demonstrate on-going sustainability beyond the duration of the availability of this funding ?
	
10	

How does the scheme result in benefits to the wider environment i.e. beyond the Trust around the locality ?
	
10