Siemens Financial Services (SFS) has released a new research paper examining how UK manufacturers can more easily implement energy optimisation solutions to reduce energy usage with the help of innovative financing methods.
There are major opportunities for the UK manufacturing industry to optimise energy consumption and generation to make major savings. According to the report, entitled ‘Saving without Spending’, cost savings from energy optimisation programmes are in the region of at least 25%, compared with just 6% actually achieved from reduced energy usage in UK manufacturing in the last five years.
Many manufacturing firms are using the considerable savings from improved energy management to subsidise digital transformation, improve competitive positioning, develop innovative products, implement marketing initiatives, enter new markets, or other business-generative activities. Manufacturing digitalisation also greatly helps to improve monitoring, analysis and optimisation of energy generation, energy waste reduction and recapture, energy transmission, and energy usage efficiency.
Therefore, for companies not yet embarked on an energy optimisation programme, every day that deployment is deferred is a day shareholders’ funds are unnecessarily wasted. However, there are many demands on manufacturers’ capital budgets and energy-optimisation tends not to be regarded as a strategic investment priority over more immediate business development priorities.
Smart financing techniques are becoming available which harness future energy savings to fund the implementation of energy optimisation solutions. Chief Financial Officers (CFOs) can therefore ‘pay for outcomes’ – in this case energy savings from optimised generation, transmission and efficiency, along with resilience against disruptive power outages. In the case of smart manufacturing, this is leading to the rise of a concept called ‘Energy-as-a-Service’[i]. Manufacturers are conserving their capital for growth and business development initiatives – including digitalisation – and choosing to let integrated technology-service-finance companies fund the digital transformation of their factories, plant and production sites.
These solutions also enable CFOs to optimise their capital deployment by moving tangible investments – such as the energy optimisation of a manufacturing site – away from capital expenditure (CAPEX) on the balance sheet and into operating expenditure (OPEX). There are a variety of modern financing models available, with the most attractive option offering low or zero-net-cost for the manufacturer from smart solutions partners.
Mark Kelly, Project Development Director, Distributed Energy Systems (DES), Siemens says, “Manufacturing CEOs or CFOs looking after the interests of shareholders and investors are looking to minimise demands on their capital and secure long-term outcomes, such as lower and more predictable energy costs. Optimising their manufacturing sites using ‘Energy as a Service’ means their own capital is not at risk, and frees up their funds for other strategically important investments or for shareholders. Manufacturing companies have made great strides in energy optimisation but these new innovative solutions will mean there is much more that can be done.”
Gary Thompson, UK Sales Director – Siemens Industries and Markets, Siemens Financial Services (UK) adds, “Potential savings from energy optimisation are considerable, especially in high-energy-intensive manufacturing industries. UK manufacturers currently spend in excess of £8 billion per year on electricity and gas, and the long-term trajectory of industrial electricity prices is upwards.
“Innovative financing methods regard energy savings as a source of funding – to effectively pay for the conversion to optimised energy generation, transmission and consumption over a given period. The beauty of these schemes is that they eliminate the main obstacle to smart energy conversion – i.e. the need to raise and commit scarce capital which is under pressure to be deployed elsewhere.”