FUNDING AND NET ZERO
How can NHS estates reach Net Zero?
The Carbon and Energy Fund’s (CEF) Steven Heape argues that while the NHS’s Net Zero ambitions are achievable, progress now hinges on pragmatic financing, tariff reform, and the courage to embrace transitional technologies that make decarbonisation both technically and economically viable.
Right: Geothermal resources are emerging as a low carbon heat option. Drilling projects can deliver large volumes of low carbon heat.
Below: The CEF is a framework provider that works with public sector clients, such as NHS Trusts, to fund and manage energy infrastructure upgrades and decarbonisation projects.
The NHS has made bold commitments: to achieve Net Zero for directly controlled emissions by 2032 and system-wide by 2040. These targets are rightly ambitious; the scale of the health estate makes the NHS one of the UK’s largest single contributors to public-sector carbon emissions. Since 2020, the Public Sector Decarbonisation Scheme (PSDS) has provided £1.5 bn of capital support for electrification and energy efficiency. Delivered via Salix Finance, this scheme has been transformational. It has allowed Trusts to deliver pioneering projects, such as large-scale heat pump conversions, façade upgrades and early geothermal pilots. But with the funding now withdrawn, we face a daunting question: how do Trusts continue the journey to Net Zero without capital support or revenue funding to soften the cost burden? Even during the PSDS era, many Trusts
hesitated to move to electrified heating. The reason was simple: the economics of heat in hospitals do not add up. Electricity is, on average, five times more expensive than gas. For a typical hospital consuming 20 million kWh of heat per year, that difference is prohibitive. With no new capital streams and revenue budgets already under severe pressure, it risks becoming an impossible challenge. And yet, ‘doing nothing’ is not an option. This article explores the economic and technical conundrum, assesses the available technology pathways, and sets out the policy and financing changes required if the NHS is to achieve its carbon targets while remaining financially sustainable.
The economics of heat Decarbonising hospital heat is the toughest challenge we face. Consider a standard hospital
operating at 80°C flow/return temperatures. A heat pump working in this regime may achieve a
72 Health Estate Journal November 2025
coefficient of performance (COP) of around 2. That means for every unit of electricity consumed, two units of heat are delivered. With electricity costing 30p/kWh, the effective cost of heat is around 15p/kWh. Compare this to a modern gas boiler: gas at 5p/kWh, with an 85 per cent efficiency, delivers usable heat at ~6p/kWh. Even though the heat pump is twice as efficient, the raw economics make it more than double the cost of gas. On a 20 million kWh annual load, the difference equates to millions of pounds per year. Energy-efficiency measures such as fabric
improvements, airtightness, and lighting upgrades are essential, but in hospitals they rarely deliver the surplus savings needed to finance major low-carbon heating infrastructure. The Eastbourne Hospital project demonstrated this: a full façade upgrade significantly improved performance, but the business case still required subsidy and could not self-fund subsequent renewable investments. Solar PV, often seen as the ‘quick win’, also has limits.
As the grid decarbonises, the marginal carbon savings from PV diminish. Financially, PV yields modest returns compared to the scale of hospital demand. It should form part of the solution, but it cannot carry the weight of decarbonisation alone.
Carbon and Energy Fund
Star Energy
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76
