by Carolyn Newsham, Siemens Financing Partner, Siemens Financial Services
In light of the new government’s updated target for an 81% cut in emissions by 2035, a recent study points to the potential of energy finance solutions to accelerate UK manufacturing’s decarbonisation journey.
Regulatory and financial pressures to reduce energy use and emissions are building on manufacturers. Yet, many individual businesses find their decarbonisation journeys impeded by lack of capital or shareholder reluctance to commit to an investment still deemed non-core.
Fortunately, there are solutions available to end this tug-of-war between, on the one side, pressure to invest in sustainable energy technologies and, on the other, caution about committing capital – in the form of smart finance approaches such as Energy-as-a-Service (EaaS).
New modelling from Siemens Financial Services (SFS) suggests the use of EaaS could help Britain’s manufacturers deliver efficiency savings of over 3.5 million tonnes (18,000 GWh) of electricity and gas a year – helping them optimise energy usage while protecting their capital.
Accelerating progress on UK energy use targets
The SFS model uses real-world examples to estimate the level of energy savings achievable through the implementation of EaaS structures, taking account of existing levels of energy efficiency in UK manufacturing.
The annual savings of over 3.5 million tonnes in manufacturing electricity and gas use, indicated by the model, could help meet around two thirds of the UK’s energy reduction targets for 2030. It’s certainly a compelling reason for manufacturers and engineers to look more closely at EaaS and what it involves.
Energy-as-a-service explained
Energy-as-a Service – also known as energy performance contracting – enables businesses to transition to clean technologies without risking capital upfront. Instead, a specialist partner tailors an arrangement that helps them meet their energy optimisation targets, using future cost savings to fund it. The provider manages design, installation, performance management and maintenance, allowing them to focus on core competencies.
A good example of how EaaS offers affordable access to energy saving technology is Nippon Electric Glass (NEG). The glass manufacturer used an EaaS solution from Siemens and its financial arm Siemens Financial Services (SFS) to improve energy efficiency and reduce operating costs at its manufacturing facility in Wigan.
Siemens identified a number of opportunities to increase efficiency by refining processes, installing new motors and controllers, water pumps and flow meters, and SFS tailored a smart financing solution using the SaaS model. This spread NEG’s payments and guaranteed energy savings over a five-year term, ensuring net zero cost for the business. Over the financing period, NEG’s operating costs were reduced by around €3m and its carbon emissions by around 2,000 tons.
Decarbonisation barriers dismantled
The solution designed and installed for NEG illustrates how EaaS solutions can address two common barriers stalling UK manufacturing businesses on their decarbonisation journey.
The first, as described above, is access to capital. The second is expertise, with many manufacturers lacking the in-house knowledge or resource to identify and transition to an affordable, value-stacking solution for meeting decarbonisation expectations, tackling energy costs, and ensuring security of energy supply.
A specialist supplier can design and deliver a full suite of site-specific technology solutions that guarantee the energy saving and operational outcomes desired, at a price that is affordable.
What next for manufacturers?
Over the coming years, pressure on businesses to decarbonise is likely to step up, not just from government and investors, but from shareholder groups already threatening to pull investments from companies that do not meet environmental, social and governance (ESG) standards.
For many businesses, renewable energy finance solutions like EaaS open the door for an integrated and long-term energy strategy that addresses these pressures, and also offers potential to cut operating costs, reduce vulnerability to energy cost hikes, and futureproof their energy supply.
EaaS is not the only route to achieve these benefits, but for companies like NEG and others, flexible financing has effectively eased the decarbonisation journey and delivered operational efficiencies. As UK policymakers and manufacturing businesses contemplate how to navigate the next few years – not just the climate outlook but the economic one too – energy finance solutions like EaaS deserve close attention.
You can read the full SFS study here.
