Siemens show how to save without spending

Smart financing allows manufacturers to invest in energy optimization with no need to commit capital

SIEMENS Financial Services (SFS) have released a new research paper examining how UK manufacturers can more easily implement energy-optimization solutions to reduce energy usage with the help of innovative financing methods.

They say there are major opportunities for the UK manufacturing industry to optimize energy consumption and generation to make major savings. According to their report, entitled ‘Saving without Spending’, cost savings from energy-optimization 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 already 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 digitalization also greatly helps to improve the monitoring, analysis and optimization of energy generation, energy waste reduction and recapture, energy transmission, and energy usage efficiency.

For companies not yet embarked upon an energy-optimization programme, every day that deployment is deferred is a day shareholders’ funds are unnecessarily wasted, say SFS, but with many demands on manufacturers’ capital budgets, energy optimization often tends not to be regarded as a strategic investment priority over more immediate business-development priorities.

However, smart financing techniques are becoming available which harness future energy savings to fund the implementation of energy-optimization solutions. Chief financial officers (CFOs) can, therefore, ‘pay for outcomes’ – in this case, energy savings from optimized 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’, whereby manufacturers are conserving their capital for growth and business development initiatives – including digitalization – 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 optimize their capital deployment by moving tangible investments – such as the energy optimization of a manufacturing site – away from capital expenditure on the balance sheet and into operating expenditure. 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) at Siemens, said: ‘Manufacturing chief executive officers or CFOs looking after the interests of shareholders and investors are looking to minimize demands on their capital and secure long-term outcomes, such as lower and more predictable energy costs.

‘Optimizing 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 optimization, but these new innovative solutions will mean there is much more that can be done.’

Gary Thompson, UK sales director - Siemens Industries and Markets at Siemens Financial Services (UK), added: ‘Potential savings from energy optimization are considerable, especially in highly 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 optimized 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 – ie the need to raise and commit scarce capital which is under pressure to be deployed elsewhere.’

‘Saving without Spending’ can be downloaded at: www.siemens.co.uk/energyasaservice