FUNDING AND NET ZERO
Above: AHUs require a large amount of energy and space, and new equipment must meet the latest standards.
Above right: Retrofitting AHUs could enable lower- temperature operation but space and cost constraints make this difficult – so high-temperature heat pumps are often the most practical solution.
single hospital proves a resource, neighbouring hospitals may also benefit – making regional collaboration key. What is missing is a central risk-funding pot to underwrite exploratory drilling, derisking the entry point for Trusts.
n Practical infrastructure barriers Even when technology economics stack up, physical constraints remain. Hospitals struggle to run at flow temperatures below 70°C without compromising patient comfort or safety. Domestic hot water must reach 65°C to control legionella risk, implying at least 70°C flow. Retrofitting oversized air handling coils could allow lower-temperature operation, but replacing AHUs is often physically unfeasible. New AHUs must meet the latest standards and, if roof-mounted, require costly plant room extensions.
In many cases, the simplest and most cost-effective
approach remains to install high-temperature heat pumps and accept a COP of ~2, rather than attempting complex re-plumbing.
The policy and financing gap Technologies exist. What is missing is the policy and financial framework to make them deployable. Two restrictions bite hardest:
n No PPAs: NHS Trusts are not permitted to sign long- term power purchase agreements. This removes a major mechanism to stabilise electricity costs and de- risk investment.
n No third-party borrowing: Trusts cannot currently borrow externally for projects, even where there is a clear business case and positive return.
As a result, projects that could be self-funding stall because Trusts lack the upfront capital. The paradox is
Steven Heape
Steven Heape FIET, FIHEEM, CEng is head of project development for the Carbon Energy Fund (CEF) and chairs the IHEEM Sustainability Advisory Platform.
The NHS faces a daunting challenge. Without PSDS, capital has dried up. With electricity five times the price of gas, straightforward electrification is financially prohibitive
74 Health Estate Journal November 2025
Conclusion The NHS faces a daunting challenge. Without PSDS, capital has dried up. With electricity five times the price of gas, straightforward electrification is financially prohibitive. Infrastructure barriers add complexity. At first glance, the conundrum looks impossible. But solutions do exist:
n Hybrid models that recycle CHP revenues into heat pumps.
n Regional hydrogen opportunities. n Battery-enabled tariff-shifting strategies. n Deep geothermal, if early risk can be de-risked by central support.
n Collaborative, system-wide thinking between Trusts and local partners.
Ultimately, three things are required:
1. Revenue and capital support from the centre – not necessarily at PSDS scale, but enough to de-risk innovation.
2. Tariff reform – aligning energy pricing with decarbonisation outcomes.
3. Freedom to use third-party funding – so Trusts can act where there is a clear business case.
The NHS cannot afford to wait. The 2032 and 2040 targets are approaching fast. We must be brave, creative, and willing to trial new approaches. We must lobby for policy change that enables delivery. Doing nothing is not an option. The health service’s mission is to protect lives. Decarbonising our estate is not a technical curiosity or financial inconvenience – it is an essential part of safeguarding the health of future generations.
that NHS Trusts could borrow to build a car park, but not to invest in a decarbonisation project with demonstrable financial and environmental returns. Tariff reform is another missing link. Today’s pricing penalises electrification. If electricity and gas prices shifted – for example, with carbon-based pricing or rebalancing of levies – electrification could become far more attractive. Without that, heat pumps look like ‘bad news’ when they are, in fact, the long-term answer. Central support is still required, particularly to de-risk
geothermal exploration and to stimulate large-scale pilots of battery-heat pump systems. Beyond capital, the NHS needs policy change to unlock private capital. Where projects are NPV-positive, denying access to third-party finance is illogical and unsustainable.
Carbon and Energy Fund
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