Energy Efficiency in the Health Sector

Conclusions

The Department of Health’s (DH) approach to statewide planning for energy efficiency is inadequate. It does not have a documented policy or plan and lacks a strategic focus and a coordinated approach. It also does not align with health services’ local planning.

While there have been improvements in energy efficiency across the health system over the past seven years, the lack of an adequate planning approach has potentially limited the gains that could have been made. Specifically, DH's planning approach limits its ability to demonstrate whether it is appropriately allocating resources to areas of greatest need or highest risk, and whether it is sufficiently prepared for emerging challenges.

DH believes that individual health services should be responsible for their own energy efficiency planning. However, this approach is not conducive to optimising and driving outcomes at a system level. Despite this stance, DH undertakes a range of ad hoc centralised activities. These activities include estimating cost pressures on health services to inform future planning activities and investigating the feasibility of expanding cogeneration energy supply—the simultaneous generation of two forms of useful energy—to selected metropolitan and regional hospitals. These activities confuse whether planning for energy efficiency is a statewide or health service level activity.

Findings

Energy efficiency performance measures

Implementing relevant and appropriate performance measures of energy efficiency is challenging in a healthcare environment because each health service differs in terms of its clinical services, patient activity and use of floor space.

DH combines three separate measures to assess health service energy efficiency performance at the statewide level. These measures cover energy consumption ‘intensity’ by considering floor area, bed days, and separations, which is a measure of an episode of care. These three measures collectively give an indication of health services’ energy efficiency.

However, there are deficiencies in each measure that limit the reliability and usefulness of DH’s reported energy performance information. These deficiencies mean that DH cannot reliably compare the energy efficiency of health services. DH acknowledges these limitations and is working to improve how it benchmarks health services’ energy efficiency.

Statewide energy efficiency performance

Despite the deficiencies with the performance measures, DH and health services’ reported performance shows improvement in energy efficiency. Between 2005–06 and 2010–11, the total volume of health services’ energy consumption increased by around 1 per cent, or approximately 30 000 gigajoules. This is a positive result given:

• the total floor area across all health services increased by 6.3 per cent, or 149 000m²
• the total number of bed days increased by 7 per cent, or 311 000
• the total number of separations increased by 16.4 per cent, or 216 000.

Over the same period, health services’ energy costs have increased by around 25 per cent. This can be attributed primarily to increases in energy prices, as well as increases in energy use arising from health services’ increasing demand for their services.

Health services’ total greenhouse gas emissions have also increased by 7 per cent since 2005–06, mainly due to an increased share of electricity use.

A range of initiatives have contributed towards improving statewide energy efficiency. They include changes to energy supply arrangements, the installation of energy efficient products, sustainable infrastructure design and the outsourcing of energy intensive functions.

DH has estimated the total impact of the carbon pricing mechanism on health service expenditure will exceed $13 million in 2013, increasing each year until it reaches nearly $19 million in 2020—around $132 million in total. DH has also projected that health services’ total energy consumption and greenhouse gas emissions will continue to increase over this period.

While DH and health services have improved energy efficiency over time, continuing this trend will be a significant challenge.

Statewide planning and implementation

While DH is responsible for statewide health planning, its role in planning for energy efficiency in health services has been limited. This, in part, reflects its devolved accountability model, which allocates responsibility for planning to the health services—a position at odds with the activities it undertakes.

Despite the significance of the energy consumption and associated emissions of Victoria’s health services, DH has not adequately planned to address the issue. It does not have a policy or plan for energy efficiency. Rather, it has sustainability principles, not all of which directly relate to energy efficiency. The principles serve as high‑level guidance for improving energy efficiency in health services, and include:

• providing support and advice to service partners to assist them and the broader community to adapt to the health implications of a changing climate
• improving environmental performance by integrating sustainability implications in business operations and striving for continual improvements in the management of environmental impacts
• promoting the application of the sustainability actions within broader government policies and programs as they relate to improving the health and wellbeing of Victorians.

With the exception of the sustainability principles and several high-level diagrams showing its sustainability activities, DH has only started to document its efforts to plan more strategically very recently. In June 2012, DH developed a framework for energy management in the health sector, following preliminary feedback from VAGO on its lack of a strategic planning approach. The framework builds on, and updates, DH’s broader sustainability direction.

However, it is unclear how DH plans to operationalise and report against the new framework. It is a high-level document and does not include key elements of an effective strategic approach.

DH is taking other actions to improve energy efficiency in health services. The Department of Treasury and Finance’s (DTF) Greener Government Buildings program (GGB) requires all departments to improve the energy efficiency of all of their facilities, which for DH are its health services. GGB is now one of DH’s key energy efficiency initiatives.

DH has taken a pilot-based approach to implementing GGB in health services. This approach allows DH to adapt the program to a healthcare environment and lower the risks associated with its wider rollout. However, it has taken DH nearly three years of planning to reach the request for tender stage of the pilot project, and the project is around 12 months behind schedule.

While DH considers this approach essential, it cannot be assured that the time and expenditure spent to date will lead to improvements in energy efficiency. This is because DH’s actions do not have the full support of DTF—the funder and administrator of GGB—and DH has not actively consulted with the energy service contractors and DTF on its proposed changes to the program’s contractual documents. Consequently, there is a risk that DTF may not approve DH’s proposed approach.

Health service planning and implementation

Health services are responsible for planning to meet the needs of their local communities. In the absence of an adequate documented statewide planning approach, they need to develop their own plans for improving energy efficiency. These plans should outline goals, actions and monitoring arrangements that will drive continual improvements.

The three health services audited—Austin Health, Eastern Health and St Vincent’s—demonstrated adequate planning for energy efficiency at a local level. They used a combination of environmental management strategies and Environment and Resource Efficiency Plans. However, their reporting does not enable the progress of initiatives to be assessed.

Recommendations

1. The Department of Health, in consultation with health services, should improve the measures it uses to assess health service energy efficiency performance.
2. The Department of Health should adopt a more focused and strategic approach to planning for energy efficiency in the health sector to:
   • support consistent planning at a health service level
   • align with statewide goals for health services.
3. The Department of Health, in consultation with the Department of Treasury and Finance and health services, should update its strategic implementation plan for the Greener Government Buildings program to incorporate:
   • the approved program rollout to 20 health services
   • learnings from the energy performance contract delivered at the Peter MacCallum Cancer Centre.
4. The Department of Health and the Department of Treasury and Finance should agree on which healthcare facilities are to be included in the Greener Government Buildings program going forward.
5. The Department of Health, after consulting the Department of Treasury and Finance and approved energy service companies, should assess the risks associated with:
   • the Department of Health’s modified approach to delivering energy performance contracts in health services
   • the industry’s capacity to deliver energy performance contracts in line with the Department of Health’s planned rollout under the Greener Government Buildings program.
6. The Department of Treasury and Finance should strengthen its governance arrangements for the Greener Government Buildings program to:
   • better protect its investments through the program
   • influence departments’ participation by clarifying roles and responsibilities and its required involvement in delivering and scheduling energy performance contracts
   • clarify departments’ performance reporting obligations
   • encourage information sharing between departments.

Submissions and comments received

In addition to progressive engagement during the course of the audit, in accordance with section 16(3) of the Audit Act 1994 a copy of this report was provided to the Department of Health, Austin Health, Eastern Health, St Vincent’s, the Department of Treasury and Finance and the Environment Protection Authority with a request for submissions or comments.

Agency views have been considered in reaching our audit conclusions and are represented to the extent relevant and warranted in preparing this report. Their full section 16(3) submissions and comments are included in Appendix A.

1.1 Energy use in the health sector

Victorian public sector facilities account for around 1.5 per cent of Victoria’s total electricity and gas consumption. The sector's largest users are healthcare providers—health services and hospitals—which account for around 26 per cent of public sector energy consumption.

Figure 1A
Energy use distribution in the Victorian public sector

Source: Victorian Auditor-General’s Office.

Most metropolitan and some regional hospitals are large facilities that have high levels of energy use. This is because of specific operating requirements, such as:

• continuous operation—areas such as ward spaces, intensive care units and emergency departments are normally operational 24 hours a day, while other areas like operating theatres and birthing suites are kept on standby should they be needed at short notice
• use of energy intensive medical equipment—healthcare is becoming increasingly dependent on using sophisticated equipment that consumes high volumes of energy. This equipment includes machines for magnetic resonance imaging (MRI), magnetic resonance tomography (MRT) and computed tomography (CT) scans
• infection control—health services’ ventilation systems must keep the air sufficiently clean inside critical areas, such as operating theatres and isolation rooms
• temperature control—health services are designed to maintain a tight temperature range, and this includes particularly stringent requirements for some areas such as intensive care
• on-site services—large specialist and regional health services often have kitchens and laundries that consume high levels of energy.

Acute care spaces, such as wards, emergency departments and surgical areas typically consume the most energy of all functional areas. This is due to their 24 hour operation and specific domestic hot water requirements, reliance on medical equipment and stringent infection control requirements.

1.1.1 Emissions

Victoria relies on fossil fuels, such as brown coal and natural gas, to generate around 96 per cent of its energy needs. Brown coal alone produces around 55 per cent of Victoria’s greenhouse gas emissions.

Through their effect on climate, greenhouse gas emissions pose potential risks to human health, due to increases in extreme weather events and infectious diseases. Recurring heatwaves can lead to specific risks such as heart attacks, strokes and heat exhaustion—all of which are likely to increase the demand on health service providers and their energy consumption.

After Victoria’s water entities, health services are the second largest emitter of greenhouse gases, accounting for around 20 per cent of public sector emissions. Additionally, Victorian health services’ total greenhouse gas emissions have increased by approximately 7 per cent since 2005–06. The Department of Health (DH) projects that emissions, along with energy use, will continue to grow substantially due to increasing demands on health services.

1.1.2 Costs

While energy costs make up a small proportion of the overall health system budget, health services still spend significant amounts on energy. In 2010–11 alone, Victorian health services’ energy costs totalled nearly $70 million, $51 million of which was spent on electricity.

Health services’ energy costs have grown by around 25 per cent since 2005–06. This is due to increases in the demand for energy and therefore energy consumption, as well as the increases in energy prices. Improving energy efficiency in health services provides an opportunity to reduce these costs.

DH projects energy costs will grow more rapidly following the introduction of a carbon pricing mechanism in 2012. Modelling commissioned by the department estimates that the annual financial impact of the carbon pricing mechanism on health services will exceed $13 million in 2013, and rise steadily to $19 million by 2020.

1.2 Responsibility

Health services are responsible for managing their own energy efficiency. However, DH remains accountable for the performance of the public health sector as a whole. DH, as the manager of Victoria’s public healthcare system:

• provides direction and support to health services in improving energy efficiency
• monitors health services’ energy consumption and greenhouse gas emissions
• builds energy efficient healthcare facilities
• researches innovative technologies and alternative energy sources, including cogeneration—the simultaneous generation of two forms of useful energy, such as electricity and heating, from one energy source.

1.3 Responses to improve energy efficiency

Energy efficiency improvements refer to a reduction in the energy used for a given service or level of activity. Actions to improve energy efficiency include:

• improving the efficiency of facilities and equipment, including the replacement of chillers, pumps and lighting
• improving the control of facilities and equipment, including the installation of building automation systems, sensors and timers
• switching to new energy supply sources, such as cogeneration.

Under the previous Victorian Government, various initiatives were developed to improve energy efficiency in health services. The current status of these initiatives varies, with some ceasing, others continuing and some whose status is uncertain.

1.3.1 Greener Government Buildings

The Greener Government Buildings program (GGB) aims to reduce energy costs, water use, and greenhouse gas emissions, through delivering energy and water efficiency projects in existing government buildings and infrastructure. GGB follows an energy performance contract (EPC) model, where energy service providers identify and install energy and water efficiency solutions and guarantee the achievement of projected savings.

All departments are required to participate and meet the following targets:

• By 30 June 2012, facilities accounting for 20 per cent of a department’s total energy consumption must be committed to an EPC or equivalent project.
• By 30 June 2018, facilities accounting for 90 per cent of a department’s total energy consumption must be committed to an EPC or equivalent project.

The program was announced in 2010, however, departments have been working towards the 2012 and 2018 targets since 2009. The Department of Treasury and Finance administers GGB.

1.3.2 Health services’ environmental management measures

In addition to public sector-wide energy efficiency programs, health services implement their own measures to improve environmental performance, often under the direction of DH. These include environmental management strategies, plans and ResourceSmart programs. These measures are designed to reduce environmental impacts and provide indicators of performance with respect to energy consumption, waste production, water usage and greener procurement strategies.

1.3.3 Environment and Resource Efficiency Plans

Under the Environment Protection Act 1970, the Environment Protection Authority is responsible for administering the Environment and Resource Efficiency Plans (EREP) program. The EREP program requires all commercial, industrial and government sites that use more than 100 terajoules (TJ) of energy and/or 120 megalitres (ML) of water each year to:

• assess their energy and water use, and waste generation
• develop an EREP that includes actions that pay for themselves within three years or less, to reduce energy and water use and waste production
• implement the actions in the approved EREP
• report yearly on implementation progress.

Eleven Victorian public hospitals participate in the EREP program. The program is currently being reviewed and its continuation is uncertain.

1.3.4 Government Sustainable Energy Targets

The Government Sustainability Energy Targets (GSET) program commenced in 2001 and required each department and statutory authority to:

• improve energy efficiency in government buildings by 15 per cent by July 2006, and by 20 per cent by July 2011
• purchase 10 per cent of their electricity as GreenPower by July 2006, and 25 per cent by July 2011.

Departments and agencies collectively achieved the program’s 2006 targets, while performance against the 2011 targets is still to be confirmed in the updated GSET performance report.

The Department of Sustainability and Environment administered the GSET program until June 2011. The future of the GSET program is currently under consideration.

1.3.5 Commonwealth legislation and measures

In addition to Victorian initiatives, there are a number of Commonwealth Acts and measures that may have implications for energy efficiency in the health sector, including:

• the Clean Energy Act 2011, which sets a carbon pricing mechanism
• the National Greenhouse and Energy Reporting Act 2007, which requires entities that over a certain threshold to report on their greenhouse gas emissions and energy use
• the Energy Efficiency Opportunities Act 2006, which requires businesses that use a large amount of energy to identify energy efficiency opportunities
• the National Environment Protection (National Pollutant Inventory) Measure, which is a public database showing the emissions of 93 reportable substances reported by organisations.

1.4 Audit objective and method

The objective of the audit was to assess whether the Department of Health and health services have been effective in improving energy efficiency in health services. To address this objective, the audit examined:

• how the Department of Health and health services planned to improve energy efficiency
• whether the Department of Health and health services are implementing energy efficiency initiatives and meeting energy efficiency targets.

The audit examined the role of the Department of Health in planning for energy efficiency across the health sector. It also examined the planning and actions taken to improve energy efficiency at three selected metropolitan health services: Austin Health, Eastern Health and St. Vincent’s.

The audit also examined the activities of the Department of Treasury and Finance in administering GGB, and the Environment Protection Authority in overseeing the EREP program.

The audit was conducted in accordance with Australian Auditing and Assurance Standards.

The total cost of this audit was $330 000.

3.1 Introduction

Public hospitals are the Victorian public sector’s biggest user of energy and second biggest emitter of greenhouse gases. Improving the energy efficiency of health services has the potential to reduce not only environmental impacts, but also the impact of rising energy costs on health service budgets and service delivery. Achieving these improvements requires a planned approach at a statewide and local level that is both coordinated and strategic.

3.2 Conclusion

The Department of Health’s (DH) approach to statewide planning for energy efficiency is inadequate. It does not have a documented policy or plan and lacks a strategic focus and a coordinated approach. It also does not align with health services’ local planning. This limits its ability to demonstrate whether it is appropriately allocating resources, or is prepared for emerging challenges.

DH believes that individual health services should be responsible for their own energy efficiency planning. However, this approach is not conducive to optimising and driving outcomes at a system level. DH undertakes a range of ad hoc centralised activities, including estimating cost pressures on health services to inform future planning activities, and investigating the feasibility of expanding cogeneration energy supply to selected metropolitan and regional hospitals. Again, these lack strategic focus, are uncoordinated and do not align with health services’ local planning. This means there is no cohesive system-wide approach to assuring that policies are being implemented as intended. It also does not allow for experience to be shared in a way that builds on successes and avoids the repetition of unintended outcomes.

One of DH’s key mechanisms for improving health service energy efficiency is the Department of Treasury and Finance’s (DTF) Greener Government Buildings program (GGB), which involves mandatory targets within set time frames. DH has taken a cautious approach to planning for this program, and consequently will face significant challenges in meeting the targets in the time frame expected.

3.3 Statewide planning and implementation

With 87 health services across the state, there is a need for a coordinated and strategic approach to planning for energy efficiency. The consequence of not doing so is that increased energy use, and therefore costs, will be borne by government and taxpayers. The approach to planning should be documented in a way that aligns policy objectives with implementation and:

• details the actions needed to drive improvement in the short and long term, with time frames for implementation
• outlines priority issues and resource requirements
• details the management of risks
• details monitoring arrangements
• aligns statewide and health service level planning.

While DH is responsible for statewide health planning, its role in relation to planning for energy efficiency has been limited. This, in part, reflects its devolved accountability model, which allocates responsibility for planning to the health services—a position at odds with the activities it undertakes.

3.3.1 The Department of Health’s energy efficiency policies and plans

DH does not have a policy or plan for energy efficiency. Rather, it has sustainability principles, and not all of these directly relate to energy efficiency. The principles serve as high‑level guidance for improving energy efficiency in health services, and include:

• providing support and advice to service partners to assist them and the broader community in adapting to the health implications of a changing climate
• improving environmental performance by integrating sustainability implications in business operations and striving for continual improvements in the management of environmental impacts
• promoting the application of the sustainability actions within broader government policies and programs as they relate to improving the health and wellbeing of Victorians.

DH’s planning approach has generally been ad hoc and does not always align with health services’ local energy efficiency planning. This approach covers a range of important yet disconnected initiatives, including:

• commissioning work to estimate the financial impact of the carbon pricing mechanism, in addition to wider cost pressures, on health services to inform future planning activities
• investigating the feasibility of expanding cogeneration energy supply to selected metropolitan and regional hospitals. This work is significant because DH’s preliminary modelling estimates that installing cogeneration in 14 of the largest Victorian health facilities would result in annual greenhouse gas reductions of 163 333 tonnes and recurrent cost savings of $17.3million
• investigative studies aimed at enhancing the understanding of specific issues, for example, the contribution of medical equipment to a hospital’s total energy consumption
• its preparatory work for implementing energy performance contracts (EPC) under DTF’s GGB program
• integrating energy efficiency into healthcare capital projects
• working with health services to install energy saving measures at existing facilities
• working with health services to develop and implement environmental management strategies.

With the exception of the sustainability principles and several high-level diagrams showing its sustainability activities, DH has only very recently started to document its efforts to plan more strategically. In June 2012, DH developed a framework for energy management in the health sector—following preliminary feedback from VAGO on its lack of a strategic planning approach—recognising their statewide planning role for energy efficiency. The framework builds on, and updates, DH’s broader sustainability guidance.

However, it is unclear how DH plans to operationalise and report against the new framework. It is also a high-level document and does not prioritise resources or allow for a cost-benefit analysis of its operational aspects. This does not enable DH to better assign resources to strategies that may achieve the best energy efficiency outcome for health services. DH advised that the framework will be communicated to health services through the department’s broader sustainability communication program.

While DH is responsible for statewide planning, its stated position in relation to energy efficiency is to devolve planning responsibility to health services. This approach has the potential to result in a lack of coordination—exacerbated by the number of health services individually planning—and lacks a strategic focus because of the individualised local planning. It is also not conducive to optimising and driving outcomes at a system level. However, DH’s devolved model is not supported by its energy efficiency practices, which reduce the clarity around whether DH or health services are responsible for specific planning functions.

The lack of clarity about whether planning is centralised or devolved is evidenced by:

• DH developing sustainability principles and committing to embed them in health service practices
• DH’s requirement that health services have environmental management plans
• DH’s role in collecting, collating and providing standardised reports to health services on their energy consumption and energy costs
• DH centrally developing and managing health service involvement in GGB, including developing consistent contracts and managing the tender processes.

3.3.2 Planning and implementation under the Greener Government Buildings program

DH is taking action to improve energy efficiency in health services. DTF’s GGB requires all departments to improve the energy efficiency of their facilities, which for DH are its health services. In addition to the initiatives identified earlier, GGB is now one of DH’s key energy efficiency initiatives.

Planning for the Greener Government Buildings program

DH has taken a pilot-based approach to implementing GGB in health services. Austin Health was chosen as the first health service to take part in the program due to its high energy consumption and willingness to participate. This approach allows DH to adapt the program to a healthcare environment and lower the risks associated with its wider rollout.

In line with DTF requirements, DH first developed a plan for the pilot project in 2009 and then updated it in 2011. Broadly, the 2009 and 2011 plans outline:

• the Austin Health facilities included in the pilot
• the types of healthcare facilities to be excluded from the program
• the proposed governance arrangements for the pilot project
• the estimated time lines for implementing the pilot project
• its capacity to meet the targets and manage risks
• an environmental profile of health services.

The pilot project has fallen significantly behind schedule since starting in 2009. While DH originally planned to go to tender for the pilot in ‘early 2011’, this did not occur until May 2012. Since it started, planning for the pilot has taken around three years.

The project delays have resulted directly from DH and Austin Health identifying and responding to specific concerns they identified with GGB. These issues included:

• the application of DTF’s standard GGB processes and templates in a healthcare environment
• the costs incurred by DH and Austin Health if latent conditions, such as asbestos, are discovered during the EPC process
• the level of transaction costs that would be incurred by DH and Austin Health in implementing the pilot project.

To address these concerns, DH has sought technical project management, commercial, legal and insurance advice. It has also made extensive changes to DTF’s standard contract. The cost of DH’s actions is around $371 000 as of February 2012.

Sound planning is critical to effective program implementation. While DH and Austin Health consider their approach essential to reduce the risks associated with the pilot project and to improve the future rollout of the program across other health services, they cannot be assured that their investment in time, and expenditure to date, will lead to improvements in energy efficiency. This is because DH’s actions do not have the full support of DTF—the funder and administrator of GGB—and DH did not actively consult the energy service contractors (ESCOs) and DTF on its proposed changes to the contractual documents.

In amending the standard contract, DH has strengthened its position compared with the original contract. Instead of consulting with the ESCOs in making these changes, it provided them with this information when the pilot project went to tender in May 2012. Considering that the ESCOs have not seen this contract before—having worked previously under the standard contract—they will be unfamiliar with the changes, some of which involve increased protection and flexibility for DH and Austin Health. This creates the risk that the ESCOs will challenge the amendments, or price the transfer of risk, further delaying the project due to prolonged contract negotiations and potentially increasing the cost of the program.

DTF is opposed to the extent of work carried out by DH to address its concerns with GGB. DTF has accepted some of DH’s changes to the standard GGB contracts, however, it believes that many other changes to the contract were unnecessary on the basis that health services are not a unique environment for delivering EPCs, citing examples of successful EPCs delivered in Queensland and internationally. DTF also considers the risks associated with the latent conditions are low. DH and DTF need to resolve these differences in opinion.

Ultimately there is little effective collaboration and consultation between DH and DTF around GGB. This has been exacerbated by DTF not exercising effective governance and oversight of the agencies involved in GGB, and thus DTF is not in a position to guide and influence DH’s activities. The GGB guidelines, which DTF developed and ‘own’ lack the governance arrangements needed to influence DH’s extensive changes to the standard GGB contracts and processes. While this issue has been partly addressed by DH inviting DTF to sit on its newly established GGB steering committee, DTF still needs to strengthen its guidelines to improve governance and better protect its investments.

A consequence of what is ultimately a thorough but poorly managed planning process is that DH, in its 2011 plan, acknowledged that it would not meet the GGB target of having sites that account for 20 per cent of its total energy consumption committed to undertaking an EPC by 30 June 2012.

Implementing the Greener Government Buildings program across the health sector

In April 2012, DH approved the rollout of GGB across 20 of Victoria’s largest energy using health services between 2012–13 and 2015–16, at a total estimated cost of $59 million. According to DH’s preliminary scheduling for this rollout, it believes it is well placed to meet the 2018 target of having at least 90 per cent of its total energy consumption committed to undertaking an EPC.

However, meeting this target will be a significant challenge because:

• DH has been planning for the single pilot project since 2009 and only went to tender in May 2012.
• DH excluded selected new and soon to be redeveloped facilities from its preliminary scheduling for GGB, despite DTF rejecting DH’s request to do this in March 2012. In DTF’s view opportunities remain to implement EPCs and achieve energy savings at these types of facilities. These facilities form part of DH’s 90per cent target.
• DH estimates that, without the exclusion of new and soon to be redeveloped facilities, it would need to implement as many as 50 EPCs to meet the target, or 7–8 EPCs per year between 2012 and 2018.

Importantly, there is no certainty that there is enough industry capacity to develop the EPCs required for DH to meet its 2018 target. This risk has become more significant as the pilot project has fallen behind and condensed DH’s schedule for rolling out EPCs across the health sector. DH will need to draw heavily upon DTF’s knowledge of industry capacity to manage this issue throughout the rollout.

Figure 3A compares DH’s progress towards the GGB targets with other departments. The work required to meet the targets varies between departments, depending on the total energy consumption of each. Specifically, to meet the 2018 target DH needs to develop enough EPCs to cover 3 651 000 gigajoules of energy use. In contrast, the Department of Planning and Community Development appears to be the most advanced department under the program, but only needs enough EPCs to cover 288 000 gigajoules of energy use.

Figure 3A
Summary of departments’ progress towards Greener Government Buildings targets

Source: Victorian Auditor-General’s Office based on data from the Department of Treasury and Finance.

Collectively, departments have achieved GGB’s 2012 target of having 20 per cent of government facilities committed to an EPC or equivalent project.

GGB has the potential to deliver substantial energy savings through implementing EPCs across Victorian health services:

• During 2010–11, all Victorian health services together consumed around 4 442 000 gigajoules of energy, equivalent to more than 700 000 tonnes of greenhouse gas emissions.
• A small-scale EPC at the Peter MacCallum Cancer Centre is currently delivering annual savings of $136 236 and 2 496 tonnes of greenhouse gas emissions. It has achieved this by upgrading building controls and undertaking mechanical refurbishments.
• A recent large scale education EPC covering the entire RMIT University portfolio is expected to deliver annual savings of approximately $3.25 million and nearly 30 000 tonnes of greenhouse gas emissions. It will achieve this by upgrading heating, ventilation and air conditioning (HVAC), lighting, co- and tri-generation systems—all of which are relevant to a healthcare environment.
• A previous EPC delivered at Ipswich Hospital in Queensland led to annual savings of $106 000, or 142 363 kilowatts of electricity. This included upgrades to HVAC systems and the hospital’s building management system.

While DH and Austin Health view their approach to planning as essential for GGB in health services, their failure to do this efficiently has reduced the potential energy and financial savings that health services can make through GGB. Consequently, health services will bear the increasing energy costs and the potential impact on services.

3.4 Health service planning and implementation

Health services are responsible for planning to meet the needs of their local communities. In the absence of a documented statewide planning approach, they need to develop their own plans for improving energy efficiency. These plans should outline goals, actions and monitoring arrangements that will drive continual improvements.

The three health services audited demonstrated adequate planning for energy efficiency at a local level. They used a combination of environmental management strategies (EMS) and Environment and Resource Efficiency Plans (EREP). However, their reporting does not enable the progress of initiatives to be properly assessed.

3.4.1 Health services’ energy efficiency policies and plans

Each of the three audited health services has adequate policies for improving energy efficiency. Each has also documented an EMS that includes reasonable goals, for example:

• Eastern Health’s goals include reducing energy consumption per bed day by 1 per cent by 2012
• Austin’s Health’s goals include achieving a 10 per cent reduction in energy consumption across all Austin Health sites by the end of 2013
• St Vincent’s goals include reducing energy consumption by at least 5 per cent by 2013.

Health services’ energy efficiency action plans are documented in their EMS and EREPs. Austin Health’s EMS and EREP actions have focused on maintaining air handling units, installing variable speed drives to improve boiler efficiency, and reprogramming lighting control. St Vincent’s EMS and EREP actions have focused on replacing older, energy inefficient infrastructure and installing variable speed drives to provide more efficient cooling. Eastern Health’s EMS actions include conducting energy and lighting audits to help identify improvement areas, replacing existing lighting with efficient technologies, and adopting air conditioning shutdown procedures to reduce energy consumption.

Each of the three health service’s action plans are sufficiently aligned with their respective energy efficiency goals. However, in St Vincent’s case its 2011–13 action plan was not approved by senior management until May 2012.

Eastern Health is more advanced than the other two health services in documenting detailed plans for specific energy efficiency initiatives. These plans clearly outline the goals, expected benefits, possible risks and processes for the delivery of each initiative. Conversely, St Vincent’s has no detailed planning for specific energy efficiency initiatives.

Each of the three audited health services has processes in place to monitor progress against the energy-related aspects in their EMS. Austin Health reports annually against its main energy efficiency goals, and this reporting shows it is meeting these goals. However there is no documented evidence showing Austin Health’s progress to date in implementing its energy efficiency actions. Eastern Health and St Vincent’s annually report on progress against pre-existing energy efficiency goals and actions in their EMS. In St Vincent’s case, its latest EMS shows that it is delivering energy actions as intended. However, progress to date could not be verified for Eastern Health because its latest EMS is still in draft.

3.4.2 Environment and Resource Efficiency Plans

Austin Health and St Vincent’s have prepared EREPs—plans to reduce energy and water use for intensive users—in line with regulatory requirements. Eastern Health’s lower energy and water consumption levels mean that it is exempt from preparing an EREP.

The value of Austin Health’s and St Vincent’s planning under the EREP program has diminished over time. This is because the majority of energy saving actions in Austin Health’s and St Vincent’s EREPs were planned for completion during 2008 and 2009. There was only one energy-saving action with a planned completion date beyond 2011, and many other recent actions were not directly linked with energy savings.

In terms of implementation, we could not assess whether completed EREP actions had been delivered as intended because:

• Austin Health’s and St Vincent’s revised EREPs were often merged with end of year reports, making it hard to differentiate projected savings from actual savings.
• The Environment Protection Authority’s finalising of health services’ EREPs was often not timely. For example, Austin Hospital’s original EREP for the reporting period of 2007–08 was not approved until 21 May 2009.
• Austin Health’s EREPs were revised several times during one reporting period and it was difficult to trace why the changes were made.

At May 2012 the Environment Protection Authority was reviewing the EREP program. It is unclear whether the program will continue beyond its scheduled conclusion in December 2014.

Recommendations

2. The Department of Health should adopt a more focused and strategic approach to planning for energy efficiency in the health sector to:
   • support consistent planning at a health service level
   • align with statewide goals for health services.
3. The Department of Health, in consultation with the Department of Treasury and Finance and health services, should update its strategic implementation plan for the Greener Government Buildings program to incorporate:
   • the approved program rollout to 20 health services
   • learnings from the energy performance contract delivered at the Peter MacCallum Cancer Centre.
4. The Department of Health and the Department of Treasury and Finance should agree on which healthcare facilities are to be included in the Greener Government Buildings program going forward.
5. The Department of Health, after consulting the Department of Treasury and Finance and approved energy service companies, should assess the risks associated with:
   • the Department of Health’s modified approach to delivering energy performance contracts in health services
   • the industry’s capacity to deliver energy performance contracts in line with the Department of Health’s planned rollout under the Greener Government Buildings program.
6. The Department of Treasury and Finance should strengthen its governance arrangements for the Greener Government Buildings program to:
   • better protect its investments through the program
   • influence departments’ participation by clarifying roles and responsibilities and its required involvement in delivering and scheduling energy performance contracts
   • clarify departments’ performance reporting obligations
   • encourage information sharing between departments.