The Impact of Insufficient PSDS Funding on NHS Trusts and the Path Forward

The UK’s National Health Service (NHS) is widely regarded as one of the most vital institutions in the country. However, its sustainability and ability to deliver quality care are increasingly under pressure due to rising energy costs, aging infrastructure, and growing environmental mandates. The Public Sector Decarbonisation Scheme (PSDS), introduced to support public sector bodies in reducing carbon emissions and improving energy efficiency, has been pivotal in enabling NHS England Trusts to address these challenges. Yet, insufficient funding for the scheme has left many Trusts unable to meet their goals, with limited energy efficiency projects proposed by trusts in 2024 being approved for funding. This gap has forced Trusts to postpone critical upgrades, such as replacing outdated heating systems or installing renewable energy sources, thereby exacerbating financial strains and slowing progress toward environmental sustainability.

This article explores the ramifications of inadequate PSDS funding on NHS England Trusts and proposes a path forward to ensure these essential institutions can thrive while achieving their net-zero targets.

The Role of PSDS in the NHS

The PSDS was launched by the UK government to provide grants for public sector bodies to invest in energy-efficient technologies and renewable energy solutions. NHS Trusts, with their substantial energy consumption and significant carbon footprints, have been major beneficiaries of this scheme. From upgrading outdated HVAC systems to installing solar panels and implementing LED lighting, PSDS funding has enabled many trusts to reduce energy costs and carbon emissions.

Energy efficiency improvements are not merely a matter of environmental compliance for the NHS. Energy costs represent a significant portion of operational budgets, which are already stretched thin. By lowering energy consumption through PSDS-funded initiatives, NHS Trusts can redirect savings toward patient care, staff wages, and critical medical equipment. Furthermore, decarbonisation initiatives align with the NHS’s broader goal of achieving net-zero carbon emissions by 2040, a target outlined in its “Delivering a Net Zero NHS” plan.

The Consequences of Insufficient Funding

Despite its potential, the PSDS has faced criticism for its limited and inconsistent funding. NHS England Trusts that fail to secure grants are often left struggling to finance much-needed upgrades, leading to several negative outcomes:

1. Increased Energy Costs

Insufficient funding means many trusts are forced to rely on aging, inefficient systems that consume excessive energy. Rising energy prices compound this problem, leaving Trusts with higher operational costs. These additional expenses divert funds away from patient care and other essential services, exacerbating existing financial pressures.

2. Missed Decarbonisation Targets

The NHS’s commitment to achieving net-zero emissions by 2040 is contingent on access to adequate funding for energy efficiency projects. Trusts unable to secure PSDS grants risk falling behind on this timeline. Failure to meet decarbonisation targets not only undermines the NHS’s environmental credibility but also exposes trusts to potential regulatory and reputational risks as government and public scrutiny of carbon emissions intensifies.

3. Operational Disruptions

Aging infrastructure is more prone to breakdowns, resulting in increased maintenance costs and operational disruptions. For NHS facilities, this can mean interruptions to critical services such as heating, cooling, and electricity—all of which are essential for patient care and the safe operation of medical equipment.

4. Lost Opportunities for Innovation

PSDS funding enables Trusts to adopt cutting-edge technologies such as heat pumps, building management systems, and battery storage solutions. Without sufficient funding, Trusts miss out on opportunities to modernize their facilities, improve resilience, and reduce long-term costs through innovative energy solutions.

The Broader Implications for Public Health

The financial and environmental challenges posed by insufficient PSDS funding have far-reaching implications for public health. Higher operational costs can lead to cuts in staff, reduced patient services, and delayed infrastructure maintenance. Furthermore, inefficient energy systems contribute to poor indoor air quality, which can negatively affect both patients and staff.

On a broader scale, the NHS’s role as a major public sector entity means its success or failure in achieving decarbonisation targets sets a precedent for other organizations. If the NHS struggles, it sends a discouraging signal about the feasibility of large-scale public sector decarbonisation efforts.

The Path Forward

To address the challenges posed by insufficient PSDS funding, a multi-faceted approach is needed:

1. Streamline the Grant Application Process

Many NHS Trusts struggle with the complexity and competitiveness of the PSDS grant application process. Simplifying the process and providing technical support to applicants could help more trusts access funding.

2. Foster Public-Private Partnerships

Encouraging collaborations between NHS Trusts and private sector organizations can unlock additional funding and expertise. Innovative financing models such as energy performance contracts (EPCs) can enable trusts to implement energy projects without upfront capital expenditure.

3. Leverage Technology and Data

NHS Trusts can benefit from investing in data-driven solutions to monitor and optimize energy use. Advanced analytics can identify inefficiencies and prioritize areas for intervention, ensuring that limited funds are used effectively.

4. Advocate for Integrated Policy Support

Decarbonisation is a cross-sector challenge that requires integrated policy support. NHS England Trusts would benefit from coordinated efforts across government departments to align funding schemes, regulatory frameworks, and technical assistance.

The Public Sector Decarbonisation Scheme has the potential to be a game-changer, enabling Trusts to reduce energy costs, lower carbon emissions, and improve patient care. However, the current levels of funding are insufficient to meet the growing demand for energy efficiency projects. Without immediate action, NHS England Trusts risk falling behind on their carbon reduction goals, exacerbating financial pressures and undermining their ability to provide high-quality healthcare.

To ensure the sustainability and resilience of the NHS, it is imperative that the UK government increases PSDS funding, simplifies access to grants, and supports innovative solutions for energy efficiency. By addressing these challenges, the NHS can continue to lead by example in the fight against climate change, while safeguarding its mission to deliver world-class care to all.

Introducing Centrica Business Solutions’ Internal Funding….

For NHS England Trusts that do not receive PSDS funding, alternative solutions are essential. Centrica Business Solutions offers flexible, in-house financing options that can bridge the gap between current inefficiencies and a sustainable future.

We have a number of funding solutions available including:

• Discount Energy Purchase (DEP): Financing on-site generation assets over a 7–15-year contract, with agreed p/kWh unit rates for electricity generated.
• Power Purchase Agreement (PPA): Financing on-site renewable generation assets over 15-20 years, inclusive of asset, financing, and operation.
• Flexible Term Agreement (FTA): Enhancing DEP with the ability to replace or return CHP units after 3-5 years.

Benefits of Centrica’s Solutions

• Cost Savings: Significant reductions in energy and maintenance costs.
• Carbon Reduction: Lower carbon emissions contribute to sustainability goals.
• Operational Efficiency: Modern, efficient energy systems reduce downtime and improve reliability.