Manufacturers seek step-change in energy performance
How industry is exploring advanced energy solutions to tackle cost pressures and improve competitiveness
Manufacturers are eager to explore innovative new ways of combating higher power prices and improving environmental performance, but they face a number of challenges in converting opportunities into action.
Reducing costs is a prime concern
We listened to the views of sustainability and energy specialists from some of the UK's leading manufacturing businesses at our recent roundtable event, hosted in partnership with edie.
All shared the same concern about the volatility of energy prices and the sharply rising cost of electricity, which is a direct threat to profitability. The businesses reported that they use sophisticated, flexible purchasing strategies to optimise commodity costs, but have no scope to secure more competitive rates on non-commodity costs. These non-negotiable charges accounted for 30% of a typical manufacturers' energy bill in 2010 and are forecast to make up 60% of a bill by 2020.
Exploring distributed energy
Some of the businesses said that this cost pressure is increasing the need to explore distributed energy opportunities that can reduce their dependency on the grid. One of the opportunities discussed was taking advantage of stable long-term gas pricing to self-generate power, using natural gas combined heat and power (CHP) to replace costlier electricity supplies. This widening 'spark spread' is increasing the economic viability of CHP and opening up other cost reduction/revenue generation opportunities from using power more flexibly.
Roundtable guests also appreciated the resiliency benefits of a distributed energy approach and the added potential to ease grid capacity constraints, which can limit and slow business growth by making it difficult to access additional power supplies.
Barriers to progress
While everyone could see the opportunities that the decentralised energy market and new technology offers, they saw some barriers to progress. A common challenge raised was capital constraints and the difficulty of building an investment business case when competing against other valid investment priorities.
This was attributed, in part, to lack of time to understand the complexities of advanced new energy optimisation solutions, and to calculate financial viability – both in terms of energy and operational savings. A number of the roundtable guests said they were struggling to understand and trust the myriad of revenue streams presented through various grid balancing incentives, and to gain assurance that they would deliver an attractive return on investment.
Some of the manufacturers said that there was a lack of clarity and coherence in government policy making, and that the short-termism of the political cycle was making it even harder to implement a more advanced distributed energy strategy.
Easing capital constraints
The constraints on capital are an age-old issue for all organisations and we responded to this challenge in the 1990s by introducing power purchase agreements for CHP. This involves 'leasing' technology to customers, who purchase the generated power at a lower cost than previous grid supplies over the contract term. The heat is supplied free and all maintenance and servicing costs are covered. Similar funding solutions can be applied to other onsite generation technologies, such as solar.
Alternatively, our Energy Services Agreements enable businesses to take a more integrated approach by funding multi-technology energy solutions under a single contract. This is then recovered via the operational savings.
Informing advanced energy saving strategies
Most roundtable participants reported that they had already exploited the 'quicker win' energy efficiency measures, such as LED lighting and building controls, but were now looking at more advanced opportunities that could achieve a real step-change in energy performance.
They recognised that they needed to take a more informed approach to energy saving and many were interested in using advanced energy insights and big data to examine what's happening beyond the meter – at device level. There was a strong view that the data must generate actionable information.
Our Panoramic Power energy insights solution uses wireless sensors to transmit real-time data from equipment to an analytics programme that provides easily digestible insights into how processes and assets are performing.
This provides opportunities to drive both energy and operational efficiency. It's helped a global cement manufacturer achieve a £200k annual saving by diagnosing a faulty conveyor motor that was creating a bottleneck in the process. Further cost savings have been made through identifying unnecessary out-of-hours energy use across buildings and plants.
It was apparent that manufacturers have a strong desire to move on to more mature well informed energy strategies. Some of the roundtable participants were making use of onsite generation equipment and energy consuming assets to flex their energy demand and participate in demand side markets. Many more were interested in exploiting these opportunities, but said that they were looking for trustworthy guidance on what options to pursue, and reassurances that these solutions will not impact productivity and will generate the promised returns.
As manufacturers seek to remain cost competitive amid fierce global competition and the potential disruption of Brexit, there is no doubt that there is huge potential to eliminate energy and operational waste and add value by embracing the opportunities that a decentralising energy market offers.
Find out how we can help manufacturers deliver a step change in energy performance and how our customers in the manufacturing sector are benefiting from advanced energy saving solutions