The UK’s high intensive industrial energy consumers continue to face stubbornly excessive energy costs, ongoing carbon reduction commitments and future power supply uncertainties. Over 55 per cent of a current energy bill is made up of non-energy related charges, many of which are highly volatile.
At the same time, the falling cost of renewable energy solutions and the development of smart technologies driven by digitalization - the technology focus of Industry 4.0 - presents real opportunities to help tackle some of the important energy-related concerns businesses currently have.
The publication in recent months of two significant reports: the government’s ‘Clean Growth Strategy’, and the independent ‘Cost of Energy Review’ conducted by Professor Dieter Helm, has put the UK energy market firmly in the spotlight and articulated many of the primary concerns for the business community.
The reports collectively highlight important issues around current energy cost for UK businesses when compared with European counterparts, as well as the nation’s ability to satisfy the carbon reduction targets set down in 2008’s Climate Change Act.
Professor Helm, one of the country’s leading energy experts, strongly argues that the cost of energy to Industrial and Commercial (I&C) users remains too high for a number of reasons. In the view of many, this is hampering the competiveness of the UK’s industrial sectors which are striving to compete within a globalized economy.
This observation also comes at a time when the Government’s ‘Clean Growth Strategy’ advocates both the establishment of industrial energy efficiency schemes, and the development of decarbonization and energy efficiency action plans to aid the UK’s energy intensive industrial sectors. The Department for Business, Energy & Industrial Strategy’s (BEIS) Industrial Strategy White Paper states that some £6bn ($8bn) could be saved by 2030 through investment in cost effective energy saving technologies in the industrial and commercial sector.
It is clear that industrial and commercial energy users face an unpredictable and shifting energy-related landscape; one where challenges associated with the high level and predictability of energy cost, security of supply and environmental impact must be confronted.
But what can be done to help?
Current technical solutions driven by the digital innovation that sits at the heart of Industry 4.0 present opportunities for industrial customers to deal with such challenges.
The increased adoption of flexible, decentralized and renewable energy generation strategies - estimated to reduce energy costs by 55 per cent - was clearly highlighted by BEIS in the Clean Growth Strategy for its positive potential.
Such a public pronouncement should be considered as a good start in terms of promoting effective long-term energy solutions for either legacy business infrastructures or new build developments that can co-exist with the centralized power plant model.
Value-driven, on-site and flexible solutions such as implementation of cogeneration combined heat and power plants, small-scale localized power generation capability, microgrids and energy storage technology can deliver a range of business-orientated benefits, including energy cost reduction, independence from utility influence, optimized energy efficiency performance and ongoing reliability of supply. The growing importance, for example, of protecting energy security is highlighted in a recent report from Centrica. It stated that 33 per cent of energy decision-makers say their organization is ‘not prepared’ for a disruption to their energy supply from a temporary grid failure, while 81 per cent of businesses say they have experienced at least one energy-related failure in the past 12 months.
That is why we are seeing a move towards small-scale plant installation in efforts to bring energy closer to the end users and cut down the negative effects of wasted energy resulting from transportation requirements.
However, I would also urge stakeholders to further explore and actively consider the benefits that are now attainable from a potentially powerful combination – one that brings together on-site, efficient and lower carbon generation options outlined above, with innovative and low-cost digital analytic measures and controls for energy monitoring and consumption reporting. These are the type of data solutions that digitalization is able to bring to the market.
Better intelligence and understanding drives better decision-making and the range of digital data collection and reporting tools now available to industrial energy users, can, for example, inform strategic planning objectives that tackle energy consumption levels and, with it, energy cost.
While attractive to many, the ability to access the solutions – whether decentralized power generation, renewable technologies, digital analytic tools or a combination - can often be compromised by CAPEX and OPEX restraints. This means a number of industrial energy users are missing out on the tangible business benefits that can be gained.
Energy as a Service
The answer for many could be ‘energy as a service’ (EaaS) – a new market proposition for the industrial sector.
EaaS has been designed to help overcome the myriad barriers (including financial) that many businesses face, and provide new service offerings around energy and digital adoption which tap directly into both energy control and digitalization implementation concerns.
Siemens aims to facilitate processes that can unlock answers to cost, sustainability and energy supply challenges, by wrapping these solutions into a service offer which is both commercial and measurable. Such services are underpinned with a payment plan that maximizes the customer’s ability to control cash and profits.
In a typical scenario, the customer may want to install a new asset or energy system on site to provide bespoke generation or tackle energy consumption and, ultimately, boost their competitiveness. Moving away from the traditional approach that would typically see company CAPEX employed, Siemens offers a service to deliver an outcome the end user wants from the solution through a period of time.
Siemens procures and installs the required asset using financial support from Siemens Financial Services (SFS), and delivers a performance-based service with the customer being charged a monthly operating or service fee. Siemens supplies the technology hardware, the digital infrastructure, the service. For the customer, a shift from CAPEX to OPEX makes them more competitive, and allows them to focus on other strategic investments, as well as improving their cash flow.
EaaS can enable industrial users to better allocate total energy costs and regulatory risks, deal more effectively with ever-evolving energy market mechanisms, future-proof concerns around security of energy supply and better position themselves to meet the environmental targets all companies have been set.
Ralf Kortner is Head of Distributed Energy Services with Siemens UK
For more information, please visit https://www.siemens.com/uk/en/home/company/topic-areas/sustainable-energy/local-energy.html