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Go Green to Save Green

John Commins, for HealthLeaders Magazine, May 12, 2009
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Alternative energy and conservation efforts can mean serious savings for healthcare systems.

Last year, by the time gasoline lapped over the $4-a-gallon threshold and utility bills got so heavy they needed an extra stamp, Henry Garvin had already warmed up to solar power as a cost-efficient alternative energy source.

Garvin, the COO of San Luis Valley Regional Medical Center, an independent, non-profit, 56-staffed-bed acute-care hospital on the very sunny and high plains of south-central Colorado, was determined to go solar after he returned from vacation in his native Texas, where it seemed like everybody was putting up windmills or installing solar panels. "I just kept thinking there ought to be something we can do," Garvin recalls.

Fast forward to June 2009 when—if all goes right—SLVRMC will flip the switch and activate a 17-acre solar array that will provide as much as 85% of the hospital's electricity. "We did a few Internet searches, checked on Google, and it looks like we will be the highest-percentage user of solar energy for a hospital in North America," Garvin says.

Soaring energy prices also provided a nudge toward solar power for Mitch Hanna, chief administrative officer of Sutter Auburn Faith Hospital, about 25 miles northeast of Sacramento, CA. In June, the 40-staffed-bed community hospital, part of the Sutter Health system, plans to flip the switch on a solar power grid that is being built atop the employees' open-air parking lot. "It has the dual benefit of shading their cars, particularly for those who work the day shift and come out at the peak of the heat at 3 p.m., and we also will generate about 40% of the hospital's energy needs," Hanna says. "We are also putting receptacles at the base poles so that when and if electric cars become more popular people will be able to charge their cars while they are working."

SLVRMC's solar field, located about 1.5 miles from the hospital, will cost about $11 million by the time it's finsihed. The Sutter Auburn grid will cost $9 million. Garvin and Hanna say they didn't have the up-front money to make the switch to renewable energy, and it was unlikely that they could have gotten a loan in this troubled economy. And because they are nonprofit hospitals, they couldn't take advantage of renewable energy tax credits. So the two hospitals entered into a power purchase agreement with venture capitalist companies that specialize in solar power.

Under SLVRMC's contract with Sun Edison, for example, Sun Edison fronts the cost of the project, builds it, and then sells the power to the hospital. "I don't understand their business and I've tried not to. They are very secretive," Garvin says. "Somehow, they know how to go after the rebates so it's doable for them." Garvin says his hospital initially estimated savings of about $35,000 annually when energy costs were blowing holes through the roof last year. Now, with prices significantly lower, he estimates they will save about $20,000 a year. "That [savings] will increase every year," he says. "We've already negotiated the price each year that we are going to buy from the solar field. We expect the market will go up faster than the price increase for the solar field."

Solar power's considerable start-up costs are its biggest obstacle. Advocates for solar power say it is cheaper in the long-term, but they concede that getting to the long-term is difficult, especially for hospitals running on tight margins and in a frozen credit market. "A lot of folks in our industry are saying if you can get it down to $1 a watt installed it's doable," says Monique Hanis, director of communications for the Solar Energy Industries Association. "Right now, it's about $8 a watt for residential and $4 a watt for commercial and larger-scale projects."

Despite the high start-up costs, Hanis says circumstances are proving favorable for solar power. "We have things converging all at once between energy policies, the economy, the concern about the environment, and the momentum we have with the public and government at all levels," Hanis says. "There is a realization at state and local levels that we have to address climate change and carbon emissions."

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