The outlook has not been promising but then manufacturing has faced some of the most challenging trading conditions for decades. David Bean, Solutions Group Manager at Mitsubishi Electric Automation Systems Division explains.
Inflation, higher interest rates and more aggressive competition from overseas have put SMEs and even established businesses under considerable strain. These pressures have also coincided with price shocks in the global energy market, hitting high users hardest, and magnifying the need for efficient energy management.
Still, there is cause for optimism. In November 2023, the government announced £4.5bn in funding for eight sectors of UK manufacturing, with some £960m set aside for clean energy provision.
In an election year, it’s difficult to say if this investment will materialise, though the announcement is useful as it points to one of four key drivers in today’s energy market. And understanding these drivers – and how to manage them – will be key for maintaining healthier margins in production environments.
Four key drivers
Capacity is arguably the most important driver. According to McKinsey, power consumption is set to double by 2050 as electrification increases. While an issue that extends far beyond the next 12 months, the strain this will place on high energy users is undeniable. Not least because the grid is already struggling.
Decarbonisation and resilience are also shaping how manufacturers use energy. The overall contribution from renewables to the UK grid is increasing which is unquestionably positive news for the country’s net zero ambitions. However, the intermittency inherent to this process means mains power is no longer as dependable as it once was.
This naturally raises questions about security of supply and is partly why distributed energy resources are growing in popularity. These technologies allow businesses to generate, trade and consume electricity in a way that’s simply not possible when relying on a traditional centralised grid, limiting exposure to the type of market shocks seen over 2021-2022.
And this leads to the final driver; cost. Manufacturers are understandably paying greater attention to the amount they pay for energy, even as market conditions appear to be returning to something resembling ‘normal’ but this does not guarantee protection from further disruption. So, what can be done?
Towards continuous improvement
As with any complex problem, the best course of action is to identify and manage the factors that remain within control. Few businesses will be able to anticipate changes to the cost of energy because it’s the one commodity most sensitive to change. Still, companies can offset some of the uncertainty by making better use of what’s already being consumed.
Efficiency is hardly a new issue for manufacturing. It makes sense for high energy users to scrutinise how, when and why electricity is used – particularly when it comes at a premium – and this realisation has led to considerable progress over the last 20 years. However, with more powerful tools now available, our efforts now need to move from smaller interventions to a programme of continuous improvement.
Smart energy solutions, such as Mitsubishi Electric’s energy management portfolio, are able to address some of the challenges posed by the four key drivers. Take decarbonisation. Research shows many businesses are confident in their ability to deliver a sustainability programme, yet the managerial and operational processes needed to make this transition a success are often lacking.
This is where digitalisation is critical. Digital tools make it easier to optimise and execute energy strategies based on trends from real-time manufacturing data. Without this level of insight, it’s impossible to know whether energy is being used effectively and if there are assets requiring attention.
Smart energy management also makes it easier for businesses to integrate distributed energy resources as they become available, such as microgrids and battery energy storage systems. While we are still some way off a fully decentralised energy network, the direction of travel is clear. This model provides better energy resilience and the opportunity to make use of green energy infrastructure. Given the government’s £960m pledge, it now appears an opportune time for manufacturers to explore these opportunities.
This isn’t a call for software but rather a change of approach. The industry’s energy needs will only grow as we head further into the decade and most businesses will need greater clarity around consumption to remain competitive – especially in the UK. Smarter management will provide that clarity, but also a means to take full advantage of emerging developments in the energy market. In an uncertain climate, now is the time to take ownership of what can be controlled. The sector’s future depends on it.
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