It may all sound too good to be true but the answer lies in the proven model that Siemens has designed for manufacturers who have a strategic challenge, such as reducing their energy consumption, operational expenditure and waste, or improving time to market, yet lack the ready resources typically required for technological investment. A strong partnership, a systematic and data-driven approach, and shared pain and gain are the key elements.
Knauf Insulation and Siemens entered a partnership in 2014. This enabled extensive investment across two manufacturing plants and is now achieving energy savings of over 12,000 MWh/year [GK1] with a yearly reduction of over 5000 tonnes of carbon emissions.
How would Siemens typically work with a manufacturer to get to the numbers and savings they can trust, through to installation and performance monitoring?
1. Strategic engagement
Understand the customer vision and assess the strategic challenge
2. Value discovery
Collaborate with the customer to collect & analyse data and information; identify projects and create the business case
3. Due diligence / Contract development
Construct a finance model that enables an outcome-based service without the need for capital expenditure and with guaranteed savings
4. Project execution
Procure and install the technology required to deliver the desired outcome
5. Review / Verification
Deliver, monitor and measure a performance-based service for a monthly fee
1. Strategic engagementUnderstand the customer vision and assess the strategic challenge
Knauf Insulation solutions enable buildings to be energy efficient and, not surprisingly, the desire to be energy efficient is part of the company’s own vision to create a better world by minimising its own impact on the environment.
Despite a clear ambition to reduce both carbon emissions and energy consumption Knauf Insulation, like many businesses, has limited resources and must deploy them in accordance with business priorities. One issue was that some potential plant improvement projects, particularly those which would deliver a return over the medium to long term, simply did not meet the internal criteria set by the company for capital expenditure. This challenge led Knauf Insulation to enter discussions with Siemens.
That initial phase enabled Siemens to learn about Knauf Insulation processes, clarify desired outcomes, timescales and focus on the best solutions, without the constraints of capital outlay or rate of return.
The result was that both parties agreed to investigate the potential for a pilot project to improve energy efficiency at the St Helens plant, which was due to undergo a refurbishment in 2015.
2. Value discoveryCollaborate with the customer to analyse data; identify a project and create the business case
This is where a strong partnership, a holistic overview and a systematic approach all came into play for Knauf Insulation as it entered into a relationship of mutual trust and collaboration with Siemens.
“We moved things to the next stage and started to integrate Siemens with our plant staff so that the due diligence could really start,” reports Neil Hargreaves, Managing Director, Knauf Insulation. “It was really important to get buy-in from plant teams who are involved with these processes day to day.”
In close conjunction with Knauf Insulation plant managers and operatives, Siemens consultants conducted a detailed analysis and evaluation of the manufacturing processes. This was achieved over several months during which Siemens consultants were sometimes embedded in St Helens (and on a later project in Cwmbran, South Wales). Close cooperation and frequent interaction resulted in verified data.
From Knauf Insulation’s perspective, trust in the figures was critical. Neil Hargreaves again: “As Finance Director at the time I had a series of meetings with the team from Siemens, to really get under the skin of the numbers, start to build relationships and test out the business model that we were looking to put together here in St Helens.”
With agreement from both parties on the numbers, it was then possible to set targets and timelines and for Siemens to build a business case for a package of measures that included high efficiency motors, variable speed drives, site-wide LED lighting and a metering system for St Helens. This technological package would not only enable energy efficiency, operational efficiency and reliability, it would also measure ongoing energy consumption and verify the anticipated savings. The new metering system complemented the existing on-site IT infrastructure to verify energy savings as per guidance from the International Performance Measurement and Verification Protocol, a recognized standard.
Knauf Insulation later commissioned a second, much larger project at its plant in Cwmbran. Darren Holt, who was Plant Manager at Cwmbran at the time, adds, “Reliability of the data is key and so the decision that we made to move forward with the project was all based on the data that was obtained from the plant and analysed by Siemens, in conjunction with Knauf Insulation, and that really allowed us to agree what level of activity we would move forward with.”
3. Due diligence / Contract developmentConstruct a finance model that enables an outcome-based service without the need for capital expenditure and with guaranteed savings
Funding to cover purchase of the new plant assets was organised through Siemens Financial Services, which puts no constraint on capital expenditure as long as payback can be justified. In the case of Knauf Insulation, projections showed that cost savings made from energy reduction measures would not only pay for the new assets over the agreed period, they would also create a surplus cash positive outcome.
4. Project executionProcure and install the technology required to deliver the desired outcome
In 2015, within a contract to the value of £1m, a range of new equipment was installed at St Helens whilst the site carried out a furnace rebuild.
A second project, worth £3.5m, began in 2018 at Cwmbran when the site was undergoing refurbishment. New 1.2 Mw turbo compressors and new dryers were installed along with energy efficient motors, drives and an extensive lighting upgrade, with 1,300 light fittings being changed across the plant. In addition, Siemens’ cloud-based open IoT system Mindsphere was used to gather data from 350 potential data points across the plant and ensure operational efficiency.
5. Review / VerificationDeliver, monitor and measure a performance-based service for a monthly fee
Knauf Insulation gained from fully funded, turnkey solutions, project managed by Siemens highly skilled experts. The company is now benefiting from the Siemens performance-based Energy as a Service model. This involves ongoing data collection and analysis and the submission of regular reports to Knauf Insulation, which pays a monthly service fee for the energy saving, not the overall solution. Continual monitoring ensures that savings are on target.
What makes this approach so different is that it is based on contracted outcomes and comes with guarantees. Knauf Insulation only began to pay once the agreed equipment and systems were installed and commissioned. As Neil Hargreaves, Managing Director of Knauf Insulation, commented: “The framework that we put in place ensured that if the savings that were anticipated weren’t delivered in full, then there would be a degree of pain felt by us but also by Siemens. There was a very high degree of confidence that actually the anticipated savings would be exceeded and I’m grateful five years on to say that was the case.”
Unlocking energy efficiency opportunities
Darren Holt, Plant Manager, Knauf Insulation, summarises what has been achieved so far: “Across the two sites in the UK the carbon reduction is around 5000 tonnes of carbon per year saved, which is around the equivalent of the carbon produced in 800 homes in the UK.”
With such encouraging results Knauf Insulation and Siemens are looking at how further energy efficiency opportunities can be unlocked. Darren says: “The level of energy saving that has been achieved so far, as well as the scale of infrastructure upgrade would not have been possible if we had not entered into the partnership model with Siemens.”