There’s an energy storm brewing: costs are rising, demand is changing and pressure to be ‘green’ is growing. For manufacturers caught in the middle, it can seem like there’s no way out.
“The energy landscape is constantly changing,” says Alex Randall, international key account manager at E.ON (pictured). “As energy has become a more prominent cost than it was before, particularly in the manufacturing sector, there’s therefore a lot more focus on how to manage energy and understand it. Five or ten years ago people didn't really 'get' energy – they just got the bill and paid it, but now there's more of an understanding of all the elements to see how manufacturers can reduce or avoid that cost, and it becomes very much more an active working relationship to battle against commodity changes, regulation changes and various pressures to reduce carbon.”
This hasn’t emerged from nowhere. Consumer pressures to buy more sustainably made products are causing retailers to change the way they source the goods they sell, in turn pushing the pressure down to manufacturers. “Supermarkets such as Marks and Spencer [one of E.ON’s customers] are battling for the green pound: they're looking for customers that have a climate conscience and want green, sustainable, ethical products,” explains Randall. “To get those products on their shelves, they're now having to go back to their suppliers to source these products, and the manufacturing industry is obviously much further down that supply chain. We're finding lots of food and beverage manufacturers, for instance, are under increasing pressure to reduce their carbon footprint. There are quite a lot of manufacturers that probably have ignored [energy consumption] for many years and got away with it. But now it's something that's part of their customers' requirements. As a result, it's an area that is changing quite dramatically.”
The Spotify or ‘energy-as-a-service’ model
The past decade has seen E.ON’s offering change from what Randall calls “being the people who send you an electricity or gas bill” to a focus on “energy solutions”. This involves a long-term partnership with customers, exploring energy usage and ways of reducing consumption and cost. “It’s about finding the right solution to help the customer achieve their goals,” says Randall. “Manufacturers are excellent at making things; E.ON is excellent at energy management.”
The idea of an ‘as-a-service’ model – offering energy (in this case) as a commodity that can be provided to the end-user in a similar way to gas or electricity – is beginning to gain popularity. Randall says to think of it as a Spotify subscription, where the user pays a monthly fee to listen to music – or power their factory. “Energy is starting to make the transition to this sort of model, where E.ON will become a partner of choice, working with the customer to optimise their energy consumption.”
Contracts with E.ON under this model can be as flexible as needed. Indeed, the customer doesn’t even have to buy their energy from E.ON. the length of the partnership is determined by technology implemented. “On-site energy generation through things like solar PV is one of the longer-term projects,” says Randall. “If we're going to install solar panels on the roof, that's going to be a 25-year partnership, because that technology takes a long time to pay back. We can do much shorter-term projects things like LED lighting, which may pay back to one or two years. We also provide building management control systems, where we control their internal machines. For example, we work with Marks & Spencer controlling the lighting, fridges and freezers, heating and ventilation in their stores. We constantly manage the contract to make sure that we're optimising it so that if, for example, there's a hot day, we know to turn their heating down across all their stores, saving money and reducing consumption. Those contracts may only be one or two years long. We also offer a design and build service, where we can come and build, say, a wind turbine and then walk away, leaving the customer to run it. We prefer, though, to enter into long-term working relationships because energy legislation and technology is constantly changing, so it’s vital that we work with the customer long-term. It's important to have a partner that is a couple of steps ahead of those technologies so we can take the customer through that transition.”
A developing storm
The energy landscape is showing no signs of simplifying. New technology, such as sensors, can provide more data than ever before, allowing manufacturers to tweak line performance to find the ‘sweet spot’ between output and energy consumption.
Legislation is playing its part, too: the recently introduced Energy Savings Opportunity Scheme (ESOS) means a company now has to report on its energy consumption. “To be able to report on energy usage, you have to monitor and understand it,” warns Randall. “There is more and more pressure from politicians now to hit carbon targets. Theresa May committed to zero carbon – that's written into the law now – so those targets are having to be set. It's where the UK is leading the rest of the world in terms of carbon targets. In the manufacturing industry, it used to be that the number one thing customers want to do was save money, and if you could cut carbon at the same time, that's an added bonus. That has definitely changed now and carbon is becoming more of a focus. The government hopefully will be looking to introduce a carbon tax. If that happens, you really start to see the shift, because if a carbon tax comes in, it will become more cost effective to go to carbon neutral technology.”
Sometimes, the need to accurately report on energy use is self-inflicted. The ISO50001 energy management standard also requires a detailed breakdown of energy use in industrial settings – and is having an effect on the way energy consumption is viewed. “Now, when I walk into a factory, the majority have already done the LED lighting and had sensors installed. The knowledge gap now comes from knowing that these systems can actually be connected and optimised through a building management system. Cost is one of the major factors, certainly for smaller manufacturers. That's one of the areas where E.ON's new business model, aboutbeing an energy solutions business, can help our customers. We can fund these projects and give them opportunity to take on projects that previously would have been out of reach.”