How can NHS estates reach Net Zero?

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 But with the funding now withdrawn, we face a daunting question: how do Trusts continue the journey to Net Zero without capital support or revenue funding to soften the cost burden?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 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.

Technology pathways

• CHP: Yesterday’s hero, tomorrow’s dilemma

For a decade, Combined Heat and Power (CHP) was the go-to technology. With generous spark spreads and carbon accounting that favoured on-site generation, CHP delivered substantial revenue savings and rapid paybacks. Many Trusts regret not having installed more capacity during this ‘golden window’.

Today, with electricity grid carbon factors falling, new gas-fired CHP generally increases emissions. Yet, context matters. In regions with access to low-carbon hydrogen that meets the government’s Low Carbon Hydrogen Standard, CHP could make a comeback. If hydrogen can be supplied at the same price as natural gas, hospitals could retain the economic benefits without the carbon penalty. For multi-site Trusts with one hospital near a hydrogen cluster, CHP revenues from that site could even be recycled to support decarbonisation at less advantaged sites.

• Hybrid models

Another approach is to accept CHP as a transitional technology. A trust might install CHP now, benefiting 
from significant revenue generation. If structured correctly, this revenue can be ring-fenced and recycled into heat pump deployment and supporting infrastructure, effectively using CHP as a ‘bridge’ technology. While politically uncomfortable for some, it could create affordable, fundable projects over a 15-year horizon — provided policy allows Trusts to retain and reinvest the benefit.

• Heat pumps with storage and smart tariffs

If CHP is unpalatable, the next frontier lies in pairing heat pumps with batteries and thermal storage. This model relies on time-of-use tariffs: charging batteries with cheap off-peak electricity and deploying that energy at peak times when prices spike.

Although battery technology is proven, we have yet to see a full-scale NHS deployment combining batteries with 100% electrified heat. There are pilots, but no scaled schemes. With the right tariff structures and supplier partnerships, this approach could materially shift the economics.

• District heating

District heating offers promise, particularly where local authorities or developers are investing in large-scale low-carbon networks. But the case depends heavily on the carbon factor of the heat supplied — both today and projected to 2040. Resilience and redundancy are critical: a hospital cannot compromise patient safety by relying on a single external source. Where conditions are right, however, district heating can provide a viable long-term path.

• Deep geothermal

Deep geothermal is re-emerging as a serious option. Projects drilling 2 km or more into the subsurface, using open-loop systems, can deliver large volumes of low-carbon heat with a 50-year asset life. The Carbon and Energy Fund has been at the forefront of bringing these projects to NHS sites, with the British Geological Survey mapping favourable locations.

The challenge lies in upfront risk. Until the well is drilled, heat yield cannot be guaranteed, leaving Trusts exposed to £600—700k of early risk. Yet once proven, these schemes are net-present-value positive over long horizons. If a 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.

• 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:

• 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.
• 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 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.

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:

• Hybrid models that recycle CHP revenues into heat pumps.
• Regional hydrogen opportunities.
• Battery-enabled tariff-shifting strategies.
• Deep geothermal, if early risk can be de-risked by central support.
• 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.