Manufacturing is an inherently energy-intensive industry sector. Vast amounts of energy are needed to power, heat, and cool equipment and machinery, factories and buildings.
Typically, the power needed to run their processes accounts for up to 20% of a manufacturer’s operational costs.
To remain competitive, manufacturers must continually seek to improve productivity, reduce total energy use, and boost further investment. At Aggreko, for example, we have customers looking to reduce their energy bills by as much as 20% and avoiding triad charges of £130k.
This guide will help manufacturers consider ways to reduce energy costs, manage energy usage more efficiently and maintain production in a challenging investment climate.
In my view, there are two obvious ways that businesses can start to manage better their energy costs:reducing energy waste; and lowering reliance on grid electricity.
Reducing energy waste
Waste is just that. A cost which offers no benefit and needs to be eliminated. Through even small energy efficiency measures, manufacturers can make marked improvements to energy savings in the long-term, especially when planning to generate on-site power.
These small changes could be as simple as ensuring production processes and machinery are running efficiently by implementing proper maintenance regimes all year round, through to eliminating energy losses from uninsulated buildings and systems and ensure lighting and ventilation systems are being used efficiently.
These steps are basic but important and will help prevent using more energy than needed or wasting it unnecessarily.
Reducing reliance on the national grid
Many major manufacturers negotiate long-term, fixed-rate energy contracts to manage their costs without the worry of future energy price rises. However, this may not suit everyone, and the downside is clear – these businesses will miss out on cost savings if energy prices drop. In addition, fixed-cost agreements do not offer any flexibility or variation in energy use.
To combat this lack of flexibility, some have started to generate electricity on-site, for example through the use of temporary gas generators.
This is increasingly becoming an efficient way to become less reliant on grid electricity, whilst also improving the security and reliability of your power supply. Gas generators also offer favourable savings in time and costs.
While reducing costs is a key consideration for manufacturers, they face an additional challenge to making this a reality in the form of an increasing demand spike.
A challenging investment climate
Across the UK and Ireland, the manufacturing sector is experiencing a huge spike in demand – the highest in the UK since early 2008. This means that the sector faces the challenge of marrying the need to reduce energy costs with meeting an increase in demand.
Despite the period of growth, businesses within the manufacturing sector remain extremely cautious to invest in capital expenditure (CAPEX) programmes needed to continue this growth, partly because of the uncertainty around Brexit and future exchange rates.
There are also concerns about any possible trade tariffs imposed by the US and other global trading nations, and perhaps even by the EU after the terms of Brexit are finalised.
For smaller manufacturers, limited access to the finances they require to expand their businesses is often a major problem.
The ability to adapt to changes in demand by increasing output in a sustainable way, can be a major hurdle for many businesses – not just access to the needed finance and the approval of CAPEX, especially against the backdrop of economic uncertainty, but also in practical terms.
Increasing production while reducing costs
So, what should manufacturers do to sustain their energy and maintain this trend of successful growth?
Where manufacturers use electricity or thermal energy in their production processes, increasing production output means also increasing the amount of energy required.
A viable option is the use of temporary power and cooling.
Energy cost savings can be made by generating and consuming power onsite instead of using grid power, or alternatively the power generated can be sold back to the grid, creating another form of revenue.
Importantly, these cost savings and the additional income can be invested straight back into the business to sustain future additional growth.
Energy usage in the manufacturing industry can be a huge cost pressure but - if managed properly – it needn’t be.
It is more important than ever for manufacturing managers to be aware of their energy costs and how they can be curtailed, while keeping production output as high as possible.
Similarly, turning to temporary power solutions could be a cost-efficient method to maintain production and reduce your reliance on the grid.
The UK manufacturing sector is growing and is continually recognised as a global leader. We must ensure that energy needs do not hold this sector back.