Decarbonising PFIs: NISTA's new toolkit explained

Background to decarbonisation 

The UK Government has a legally binding commitment to reach net zero emissions by 2050. As set out at the Budget, decarbonising the public sector estate is a key element of the UK's net zero strategy and decarbonisation of PFI projects forms a necessary part of this workstream. 

There are a number of sector relevant decarbonisation targets too, such as the NHS Net Zero Strategy which sets out that the NHS should be net zero for Scope 1 and 2 emissions (those directly controlled by the NHS) by 2040 with an 80% reduction by 2028 to 2032. This means for some sectors decarbonisation is more time critical than in other sectors. 

Importance for PFI projects

The majority of PFI contracts were entered into prior to decarbonisation becoming a priority for the Government, meaning that they largely do not deal with energy efficiency or how net zero should be reflected in the relevant project. As well as supporting wider Government aims, reducing carbon emissions can lead to energy efficiency and associated cost savings.

Decarbonisation of the PFI estates needs to be considered in the context of the contractual structure of a project, parties will need to consider both (i) their contractual rights and (ii) the impact that the implementation of any change will have on the maintenance and lifecycle obligations in the project agreement. With hundreds of operational PFI/PPP projects due to expire in the coming years, ensuring expectations and responsibilities are clearly identified and contractualised will be important to support effective handback. 

Dealing with decarbonisation whilst there are public private partnerships in place avoids the issue of decarbonisation of a particular project becoming a solely private sector or solely public sector issue upon expiry.

Fundamentally, stakeholders in PFI projects will need to identify what they want to achieve and then make a plan which takes into account what's viable and achievable - the NISTA toolkit will support this. 

NISTA PFI decarbonisation toolkit

Last month, NISTA published the PFI Decarbonisation Toolkit to help public sector contract managers develop decarbonisation plans for their PFI estates to support wider decarbonisation commitments. This follows the guidance NISTA released regarding good practice for decarbonising operational PFI projects in 2023. 

Key takeaways:

• There is a need to ensure project stakeholders are joined up and clear goals are developed regarding decarbonisation.
• The recommended steps to take towards decarbonisation are:

1. Collate energy data for the relevant project (e.g. consumption and emissions levels)

2. Ensure you know your PFI contract in detail, ensuring that existing requirements are adequately met

3. To engage with the relevant stakeholders

4. Implement short, medium and long term actions, such as starting with reducing energy demand and then working towards new solutions 

5. Project Co and the Contracting Authority should agree a long-term plan 

• Associated guidance on Whole Life Carbon management has been published by NISTA that sets out guidance and good practise on approaching whole life carbon management to inform how carbon reduction can be enacted across project lifecycle. 

The toolkit is made up of:

•  a template terms of reference for a decarbonisation working group, to enable project partners to collaborate on the development of a project decarbonisation plan;
• a template actions checklist, to support decarbonisation working groups;
• a technical note on LED lighting Qualifying Change in Law, developed to assist with understanding eligibility tests for Qualifying Change in Law contract provisions under standard form PFI contracts; and
• a PFI project emissions calculator, developed in collaboration with Local Partnerships.