Office of the Comptroller and Auditor General - Press Release VFM examination of Energy Management in the Health Service

Press Release issued on 17 January 1997

VFM examination of Energy Management in the Health Service

The Comptroller and Auditor General, Mr John Purcell, has carried out an examination of Energy Management in the Health Service. A report of the examination was presented to Dáil ?reann today.

The Comptroller’s value-for-money mandate empowers him to examine the economy and efficiency of state bodies. He may also examine how those bodies evaluate the effectiveness of their operations.

The objectives of this review by the Comptroller and Auditor General were to find out whether health boards:

  • procured energy products economically and
  • efficiently converted them into energy output.

Summary of findings

This examination set out to review the management of energy by health boards and voluntary hospitals.

Health boards and publicly-funded hospitals spent ?21.9m on fuels and other energy sources in 1993 (the latest year for which figures are available).

Boards have been generally successful in reducing the cost of energy in recent years. Energy costs peaked in 1985 but decreased until 1989 when they began to rise again. However, in aggregate, they have still not surpassed the 1985 levels.

Energy management practices of the boards and a sample of hospitals and homes were examined to gauge the success of the measures they have taken

  • to minimise the price of fuels or to substitute cheaper inputs and
  • to control consumption by eliminating energy waste and improving the efficiency of energy utilisation.

The performance of health boards, hospitals and homes in procuring energy varied. Expenditure reductions occurred over the period 1984 to 1993 in five boards while costs have remained at or exceeded 1984 levels in the other three boards.

Fuel Substitution

The main reason for the reduction in expenditure on energy by certain boards was the substitution of natural gas and heavy fuel oil for other more expensive fuels. Natural gas now provides 28 per cent of all energy utilised by boards and hospitals, with heavy fuel oil accounting for about 8 per cent.

While hospitals and homes have access to natural gas in only five of the boards, initiatives are also possible in other areas to improve the situation. Substitution of heavier grade oils can yield savings sufficient to recoup the initial capital outlay inside 12 months.

Purchase Price of Fuels

The examination established that the prices paid for the main forms of energy used varied. The average fuel cost per kilowatt hour of energy used ranged from under 1p where it was produced from natural gas or heavier grades of fuel oil, to over 6p for electricity. Electricity is a relatively expensive source of energy. While it supplied 12 per cent of energy output in 1993, it accounted for 42 per cent of energy costs.

Centralised Purchasing of Fuels

There have been some central procurement initiatives.

A natural gas supply agreement covering the period 1992 to 1996 was introduced which, while not fixing the absolute price of gas, established a pricing structure which related prices to oil costs.

A recent initiative has been taken by the health boards to provide for central negotiation of oil prices.

The natural gas agreement did not necessarily reduce costs for all boards. For instance, in the South Eastern Health Board area, hospitals and homes were able to buy gas at lower prices under locally negotiated contracts which were valid until late 1993 or early 1994.

Some boards have maintained dual facilities in hospitals and homes to preserve their purchasing power. Despite the availability of natural gas under centrally negotiated agreements, heavy fuel oil is used in some such facilities where it has been established that it is more economic to do so.

In view of the variations between boards in the unit prices paid for fuel oils and the obvious purchasing power of the sector, there certainly appears to be scope for savings. For instance, it is estimated that central procurement arrangements for fuel oils will generate annual savings of ?114,000 for the North Western Health Board.

Use and Control of Energy

In the course of the examination we measured energy consumption rates in respect of 187 hospitals and homes. The rates were adjusted for factors which influence consumption including degree of exposure of buildings and variations in local climatic temperature. This produced an indicator which could be used to compare energy use in individual hospitals and homes. It cannot, however, take into account the effectiveness of the building fabric and the special energy demands which arise where, for example, hospitals and homes provide kitchen and laundry services on behalf of neighbouring premises.

Energy Use

The main trends observed were:

  • Consumption of energy varied widely with some hospitals and homes using seven times more energy than others for each cubic metre of buildings in use.
  • Considerable regional variation in energy use was evident when health boards were compared. The highest average use was 30 per cent greater than the lowest.
  • Energy use per bed varied substantially in geriatric hospitals and homes with those in the North Western Health Board and the Eastern Health Board consuming well above average.
  • On average, geriatric hospitals and homes in the North Western Health Board had the highest rates of electricity consumption.

Savings on Energy Expenditure

To establish the reasons for the performance suggested by the indicators, we engaged engineering consultants to survey a selected number of hospitals and homes and to identify measures with potential for savings on energy expenditure.

In the 16 health board hospitals and homes examined, the consultants identified:

  • a set of initiatives involving minor outlay which would produce savings estimated at 3.8 per cent of energy running costs and
  • a set of initiatives which would involve capital outlays on equipment and installation costing ?0.76m, but which would produce savings estimated at ?0.28m per year for at least 10 years.

The potential for savings was much less in the four voluntary hospitals examined. In general, it was noted that considerable progress had been made already by the voluntary hospitals in exploiting such opportunities.

Because of the limited number of hospitals and homes visited in each health board area, it is not appropriate simply to extrapolate the potential savings identified over the full range of hospitals and homes. At the same time, there is no reason to believe that the hospitals and homes visited are significantly less economical or efficient consumers of energy than are others.

It is worthwhile to consider the potential overall savings which would accrue if the rate of savings identified in the health board hospitals and homes visited was achieved throughout the health board system. On that basis:

low cost initiatives would generate annual savings of around ?0.5m

further annual savings of ?2.2m, for at least 10 years, could be generated by initiatives involving a once-off capital outlay of around ?6m.

Whatever the scale of potential overall savings on health board expenditure, it should be borne in mind that the same potential for savings does not exist in all health boards since some boards have already implemented extensive energy cost-saving programmes.

Other points to emerge from the engineering examination were:

Energy management performance varied from poor to very good.

Worthwhile savings could be achieved by regular efficiency testing of all boilers.

Instances of inoperative or inaccurate control systems were noted. Control systems typically have shorter lives than the equipment they control and consideration should be given to up-grading them.

Instances were noted where the cost of space heating could be reduced by restricting heating services at times when certain areas are not in use.

Programme are in place to replace tungsten filament installations with fluorescent sources. This should yield saving given the high use of lighting in hospitals.

Areas were noted which were unoccupied for large parts of the day or night but lighting remained switched on. In instances where lighting management systems may not be appropriate the matter might be addressed by means of instructions to staff and posting of notices.

Most boards have installed Building Management Systems (BMS) which make use of computer technology to control and monitor energy use. With a pro-active approach on the part of the boards, these systems have the potential to further reduce running costs and therefore a progressive and phased up-grade to a full monitoring and reporting BMS should be incorporated into all medium term energy management plans.

Boards should adopt a preventative maintenance approach. Laundries, kitchens and operating theatres are heavy users of electricity. They merit separate monitoring to enable their efficiency to be evaluated. Separate metering is required to facilitate this.

Organisation

Health boards do not have stated policies in respect of energy management. There is, however, an evident acceptance of good practice.

The general responsibility for energy management rests with Technical Services Officers (TSOs) who are also responsible for a range of other engineering services.

In order to focus energy initiatives, there is a need for:

  • central guidance by the Department of Health on key issues and
  • a structured consultation forum involving the TSOs.

Reporting of Energy Performance

There is a need to introduce formal accountability for energy management. The annual compilation of performance indicators and their presentation to boards would provide a useful source of information which should facilitate review and any necessary decision-making.

Energy Saving Initiatives

In the course of the examination many achievements were noted and the following good practice opportunities were identified:

  • setting targets to focus the initial drive for conservation
  • establishing local energy committees
  • central or regional negotiation of procurement contracts
  • substituting heavier grades of oil for gas oil
  • decentralisation of boiler systems
  • using BMS equipment to control and monitor consumption
  • ensuring electricity is purchased under the most favourable tariff arrangement
  • minimising the use of electricity, for example by using steam to power autoclaves or gas to power kitchen equipment and
  • re-scheduling work or peak-lopping manage maximum demand which is a critical factor in the determination of electricity costs.

Combined Heat and Power

Hospitals and homes, being consumers of energy for 24 hours each day, are possible sites for combined heat and powers (CHP) plants. This technology supplies heating needs while generating part of the electricity requirement and is worthy of consideration for all medium and large hospitals and homes in the natural gas area. There is a proposal to install a liquid petroleum gas-fired CH unit at Letterkenny General Hospital. If this proceeds, it will provide information about the efficiency of such systems as an energy-saving option outside natural gas areas.

Contract Energy Management

Our review examined the possible contribution that could be made by contracting out energy management or private sector specialists who operate in this area. We concluded that it may be worth considering for certain aspects of energy management in view of the claimed savings and the guarantee of continuing efficient operation. It is unlikely, however, that entire energy management operations at hospitals and homes would lend themselves to this approach.

Incineration

We noted that in the cases of incineration plants examined, no waste heat recovery mechanisms were installed. However, it is proposed to de-commission all existing plan for environmental reasons, so expenditure on the modifications necessary for heat recovery would not be justified.

Appraisal and Funding of Initiatives

A key element in deciding on which energy-saving initiatives to implement is a system of appraisal. There is a need to issue guidance on techniques for ranking proposed initiatives and to establish formal structures at board level to consider them.

Progress can be hampered by the present system of funding. All funds for energy are included in current budgets. Consideration needs to be given to introducing some assignment of funds for capital purposes. Alternatively, where initiatives to achieve medium and long term savings in energy running costs have been identified and duly appraised, there may be merit in borrowing for projects with short payback periods.

For further information about the report contents, please contact:

John Buckley

Tel: +353 1 679 3122

Fax: +353 1 679 3288

e-mail: John_Buckley@audgen.irlgov.ie

Publication Details

VFM Report No. 2: Energy Management in the Health Service

ISBN 0-7076-1609-3

Price ?5

Government Publications Sales Office

Sun Alliance House

Molesworth Street

Dublin 2

Tel: +353 1 661 3111

Fax: +353 1 475 2760


The contents of this page were last updated on 26/09/03