Siemens Financial Services (SFS) has released a new research paper examining how UK manufacturers can more easily implement energy optimisation solutions to reduce energy usage with the help of innovative financing methods.
Pushed by the demands of the UK’s decarbonisation policy, a new business model – Energy as a Service (EaaS) – is shaking-up the way industry looks at its energy supply and use. Advances in decentralised energy systems, digitalisation, and decarbonisation have created the opportunity for the UK’s manufacturing industry – traditionally heavy users of heat and power – to create ‘energy intelligent’ systems for onsite generation which enhance efficiency, reduce costs, and guarantee security of supply. By using EaaS financing models and solutions, manufacturing companies are optimising their energy supply and demand without the need to invest their own capital.
Saving without spending: how smart financing for manufacturers is allowing investment in energy optimisation without the need to commit capital
There are major opportunities for manufacturing industry to optimise energy consumption and generation to make major savings, however there are many calls on capital budgets and energy is not always viewed as a strategic investment priority over day to day business development. This paper outlines how new finance models Energy-As-A-Service eliminate the need for manufacturers to commit budgets to energy optimisation, removing the main obstacle which stands in the way of achieving these considerable cost savings.
An open letter to Finance Directors of manufacturing companies
Dear Finance Directors,
How important is energy to your manufacturing business? Important, right? Energy costs are a substantial line item in your P&L costs, and they’re probably rising, dragging down your profit margin on the year. Energy is very important to you.
At least that’s what you’re supposed to say.
But just between us, we can be honest, right? There are probably other things that are a higher priority for you this year, aren’t there? You have a limited capex budget with high hurdle rates for non-critical investments. You’re facing pressure to invest in new growth and business development initiatives. And you are not quite ready to trust your energy manager when he or she promises a two-year payback.
Which leaves you to make what appears to be the most sensible choice – wait until next year, and have another look at it then. There might be a larger capex budget, and a critical infrastructure investment requirement might more easily force your hand.
But have you considered what your competitors are doing? They invested in energy cost reductions, driving down their opex margins, increasing their competitiveness and profitability, and delighting their shareholders. In fact, a holistic energy cost strategy on a manufacturing site, looking at on-site energy supply and energy efficiency, could have reduced their energy costs by up to 25%.
So every day you defer on securing these savings is a day lost to your competitors and a day lost for your shareholders.
But you’ve heard this before, haven’t you? And it’s easy from those of us in the cheap seats to tell you what you ‘should’ do on energy, when you are rightly focussing on your priority – your manufacturing business.
But that’s where new commercial models come in. With an Energy as a Service offering, the right energy solution provider can guarantee energy cost savings, finance the solution so there is no capex requirement, and secure reduced energy cost opex on your P&L in time for next year’s budget.
That means you don’t have to lose any sleep about whether cost savings will materialise, or internal hurdle rate requirements, or capex budgets.
Plus, with those annual energy cost savings, you can free up cash today to invest in your priority areas: digital transformation, new innovative products, marketing initiatives, and new markets.
So, energy probably isn’t your business’ highest priority right now. And I think that’s OK. With the right financing solution and a trusted ‘energy as a service’ partner guaranteeing the outcome, it shouldn’t have to be.
If you want to learn more, read a new research paper from Siemens Financial Services (SFS) examining how UK manufacturers can more easily implement energy optimisation solutions to reduce energy usage with the help of innovative financing methods. Available at www.siemens.co.uk/energyasaservice