Let’s give the factory floor a clean sweep

Toby Horne, Siemens Infrastructure Financing Partner

 

In the UK, the manufacturing sector contributes £170 billion to the economy each year – that makes up a whopping 9% of the GDP. While this contribution to the economy is obviously very welcome, the associated impact on the nation’s carbon footprint is not exactly something to shout about. If you don’t already know, manufacturing is responsible for 20% of the UK’s greenhouse gas emissions. If the UK is to deliver on its commitment to achieve net zero greenhouse gas emissions by 2050, decarbonising the manufacturing sector will need to be a key priority.

 

In parallel, we’re seeing new regulatory requirements popping up all over the shop, pushing for manufacturers to reduce energy use or switch up their energy mix, with little flexibility for non-compliance. Equally, shareholders are now increasingly aware of the harmful cost of poor energy purchasing decisions on their investments and are moving away from companies that are not actively implementing environmental certification schemes. The stakes are pretty high!

 

The good news is there’s huge potential to reduce the industry’s impact on climate change. Each manufacturing facility can reduce its energy consumption by an average of 20%[1] through energy optimization initiatives – quite a compelling business case if you ask me. The rewards are particularly great for high energy consumption sectors: think food & beverage or chemicals.

 

In fact, our latest research estimates that manufacturing could stand to save $40.3 billion from energy optimization initiatives over the next 5 years within Europe alone. That’s a considerable sum, particularly at a time where operational efficiencies are the subject of more intense scrutiny due to the economic impact of the pandemic. Energy optimization can be a quick win that delivers both cost savings and improved sustainability ratings – a key competitive differentiator in today’s market.

 

This all sounds great, right? Yet, the majority of manufacturers are still at the very early stages of their energy optimization journey. This is often because there is some hesitation to risk capital on a non-core part of their business. Little do they know that smart finance tools are available that enable them to reap these competitive and cost saving benefits without deploying retained capital. The only thing left to do is choose a finance partner to support your energy optimization journey.

 

You’ll know you’ve chosen the right finance partner when they are prepared to take a long-term view about the energy solutions that best meet your unique needs and can guarantee you an outcome – rather than merely selling you a single product or technology. You won’t be surprised to hear that at Siemens Financial Services (SFS) we offer an Energy-Optimization-as-a-Service approach which covers all aspects of transformation, including installation, operation, performance management and maintenance. Essentially, we support your investment in three key ways:

·       Offering a clear and efficient roadmap to net zero that helps you meet your targets for decarbonisation.

·       Giving you security in the knowledge that your outcomes will be delivered through practical, guaranteed solutions.

·       Assisting you with intelligent financing techniques to enable it all.

 

On the larger scale, these arrangements can deliver budget neutral financing. Here’s how it works:

The supplier is delivering a service – meeting energy optimization targets – and is being authorized by the manufacturer to use the cost savings to fund the infrastructure required. This approach allows a manufacturer to rely on an expert energy solutions provider to deliver a specific outcome and removes any need for the manufacturer to deploy any of its own (scarce) capital. Instead, the manufacturer is charged a monthly fee against the delivered cost savings, producing a net operational benefit.

 

If this sounds like something you might want to get on board with, please don’t hesitate to get in touch with me. There’s also a good amount on information about our EaaS services in our dedicated whitepaper on the topic.

 

[1] Automation, Impacting energy through smart manufacturing, Dec 2020; 

 

 

Toby Horne, Siemens Infrastructure financing partner

I am a Chartered Engineering now working in finance to help bridge the gap between these two important topics. In my role at Siemens I deliver finance solutions wrapped around technology, to make industry and infrastructure more sustainable, affordable and profitable.

 

I am also a keen sailor and fisherman.