Reducing energy use is often the most effective and efficient way companies can reduce their overall emissions. So, when manufacturing companies are looking to reduce their carbon emissions, they should first focus on what energy efficiency opportunities are easily within reach.
Simple but often underappreciated, energy efficiency efforts are not only an effective way to reduce greenhouse gas emissions and other pollutants but could also deliver non-energy benefits such as enhanced competitiveness, improved profitability and productivity. Generally used to reduce Scope 1 and Scope 2 emissions by lowering energy consumption, energy efficiency best practices can also help reduce Scope 3 emissions if suppliers are properly trained and potentially supported financially.
Of course, to fully take advantage of those benefits, the first step is to understand energy efficiency as a core lever of the decarbonization process.
Energy efficiency is an easy, common and cost-efficient way to decarbonize your business. While it was initially seen as primarily a cost-reduction measure, we now see it as also one of the best decarbonization levers—enabling emission and cost reductions simultaneously, at an implementation price that usually represents a good return on investment. While efficiency measures often seem mature, particularly in the EU, there remains tremendous untapped potential for energy savings as new options emerge—many of which have a payback period of less than four years.
Energy efficiency can deliver economic, decarbonization and energy results immediately. The scale of potential gains, however, varies from industry to industry, and from one country or region to another. ADEME (French Environment and Energy Management Agency) has assessed the energy efficiency potential for various industries in France, finding that some—including the food and beverage sector and the transport industry—should still expect a 30% gain by 2035 compared to 2013, which is truly significant.
Some of the most energy-intensive industries, like primary metals, have already taken advanced efficiency measures, and some countries and regions are well ahead of others. Europe is already very mature in this sense, but still has some potential, as does the United States, where the Department of Energy sees at least 25% efficiency value still on the table in each state. The potential for energy efficiency increases further in some parts of the Asia Pacific region and Africa—as there is much left to do, and policy ambition and technology is less mature.
Energy efficiency can be split into two complementary streams: reducing final energy demand (using less energy) and optimizing utilities production (using energy more efficiently). Final energy demand reduction can itself be separated into two categories: technical solutions and employee awareness. Behavioral change should not be overlooked as a key catalyst for industrial decarbonization efforts.
Nonetheless, technical solutions are what may first come to mind—evidenced by our masterclass participants noting their primary focus is on energy-saving projects such as compressed air (pressure optimization, leak control), steam and hot water (thermal insulation, control of networks) and lighting (LEDs, motion and light sensors).
The second stream—optimizing utilities production—brings its own challenges. For instance, questions around how to optimize an energy vector could include whether steam is the right heat carrier to use, or might hot water be sufficient? At what temperature should the heating networks be? Is the combustion on boilers being properly controlled through O2/CO2 probes? Are chillers being optimized to external temperatures?
Some of these questions may have easy fixes with a quick payback, immediately saving several percentage points of energy consumption. Reducing the pressure in a compressor by one bar for instance, from 8 to 7, can save 7% of its energy consumption. Chiller optimization can generate up to 15% savings in temperate climates. Replacing old assets, such as a compressor or chiller, can also lead to major savings due to technological advancements.
Many of these fixes might seem like minor system adjustments, but harnessing untapped potential is a critical part of reducing your overall energy consumption. Implementing an energy efficiency program across your manufacturing footprint requires sufficient resources and planning, adopting the proper best practices to ensure a successful rollout.
Four common pitfalls impact the success of many energy efficiency programs and demonstrate why it is important to have the right governance and enablers in place to achieve the requisite transformation.
A brief look at each will help us illustrate the type of systemic organizational thinking needed to realize your decarbonization transformation. Undergoing a sustainability transformation involves more than target-setting and introducing efficient technologies. It entails changing an organization’s energy-use mindset so it can close the gap between ambition and action.
The task is not done with a few quick fixes. Organizations should identify energy efficiency champions at each site who will dedicate part of their time to monitoring efficiency and recommending energy saving measures—striking a balance between internal and external expertise. Well-trained people are needed within the company to keep everyone on board with the sustainability efforts, and they should complement more formal efforts to ensure that processes, strategy and KPIs are in place to track performance over time. Creating a transformation is a continuous process requiring company-wide buy-in.
Energy efficiency investments compete with other internal projects for corporate funds, and it's difficult to get sign off on replacing assets that are technically still working but could be replaced with highly efficient alternatives. Identifying subsidies to lower investment costs and avoiding a project-by-project approach can help, but the best option is to change the mindset about investments from looking at return on investment (ROI) to total cost of ownership (TCO). Establishing a baseline and comparing the long-term impact of implementing changes with taking no action will typically show cost savings or no added cost, while simultaneously locking in efficiency benefits for the future.
Another oft-cited example is when a company has actually developed an energy efficiency action plan and equipped it with a budget, but those funds never get spent. Again, this is an issue of site teams wanting to spend those funds on production rather than efficiency, because they mistakenly do not see efficiency as beneficial to the company’s bottom line. What this shows is that without the proper governance and mindset, even a well-considered efficiency model will not be implemented. Along with ensuring the right expertise, management must employ the right governance with the proper incentives to see that corporate targets are cascaded down to individual sites.
Most of the time, energy efficiency projects are still implemented on a site-by-site basis, rather than programmatically. It is critical that the tools and efficiency mentality are in place to enable the sharing of best practices with partners, instead of reinventing the wheel every time a site needs to optimize its energy solutions. If a lever is identified at one site, it should be shared with a partner site, creating synergies and transversality. There is a great deal of potential value to tap into with programmatic practices, and they can help your organization accelerate decarbonization at pace and scale.
There are also various innovative business models to support the implementation of energy efficiency programs. They can help speed up the process as well as ease pressure on CAPEX, as the two described below illustrate.
Part 1 of the WBCSD Net Zero Manufacturing Masterclass Series. View Article→
These projects target a reduction of final energy consumption. As an example, when a company is thinking about upgrading the lighting system with an LED retrofit, the costs involved may cause them to delay. When done as ESaaS, another company covers all the costs of the energy-efficient LED upgrade as a complete turnkey project, for which your company pays a monthly fee. This provides you with energy savings without an upfront cost, depending on the type of action and location as it may not show up on your balance sheet and can provide immediate cash flow—as the budget for electricity with inefficient lighting will exceed the cost once the LED lights are up and running.
These projects target the optimization of utilities production and distribution. In this scenario, a company will be replacing boilers, compressors and chillers. Rather than investing in them directly, the company will be purchasing steam, hot water or compressed air per MWh. The energy savings are realized without up-front CAPEX and it may not show up on the balance sheet, while significant efficiency improvements are realized that help reduce emissions and save costs on operations and maintenance as well.
In both instances—ESaaS and UaaS—the improved efficiency and cost savings can be significant if one considers rolling out these programs across multiple sites and multiple levers, such as HVAC, compressed air, water and waste, as well as the energy demand management services that optimize them.
To bring the initial stage of your decarbonization journey to fruition, the critical question is how to merge energy efficiency with a continuous improvement process. Energy efficiency is not a one-off exercise. Maintaining performance requires dedicating resources to identify, analyze, understand and correct deviations from the plan.
Establishing a foundation for successful monitoring entails having the tools and people in place to obtain an accurate view of energy usage across various sites. Obtaining that view identifies targets for reduced energy consumption and realized savings. The process starts with having granular monitoring tools—referred to as energy management and information systems (EMIS)—to track energy usage. But it is not sufficient to identify consumption levels on your own. Monitoring efforts are significantly aided by artificial intelligence (AI)-enhanced software that enables automatic alerting, intelligent reporting and the defining of baselines. It can, for instance, automatically regulate heating and indicate where energy is being consumed uneconomically.
In addition to monitoring tools, it is advisable to have a team behind the screen to animate their monitoring activity, checking the values, and undertaking root cause analyses. One needs to understand what is actually happening with energy usage to manage corrective or preventive action in the short term and to drive future decision-making processes. Altogether, EMIS, tracking, and verification are the means to make energy efficiency impactful and to unlock behavioral change
A further option involves international standards and protocols for validating and tracking savings. It is harder to track something not consumed than something that is consumed, so it is useful to have a standard such as the International Protocol for Measurement and Verification of Performance (IPMVP). It defines the standard terms and suggests best practices for quantifying the results of energy and water efficiency investments, demand management and renewable energy projects.
Building a baseline of historical data that includes all relevant variables enables one to see the difference between actual energy used and the baseline to determine savings—or the tricky target of unused energy.
Identifying opportunities to reduce energy demand, optimizing utility production, and integrating the right technologies into your sustainability strategy are all essential parts of addressing energy efficiency. But just as importantly, none of these practices are going to bring about long-term improvements and cost efficiencies without also addressing the behavior and awareness of each member of a team. Getting commitments and buy-in from relevant stakeholders is the only way to fully take advantage of the technical solutions and optimizations put in place.
ENGIE Impact and WBCSD are helping the manufacturing industry to move toward Net Zero, by addressing the strategy and implementation of effective sustainability solutions, as well as the hearts and minds of those involved.
Starting out on or accelerating the path to achieving Net Zero requires each of us to consider critical questions about the steps we need to take and strategies to apply within our particular contexts. And while many organizations believe they are already on the right path, key findings from ENGIE Impact’s Net Zero Report suggest otherwise. Namely, while businesses are upbeat and optimistic about their sustainability programs and abilities, the fundamentals necessary to enable that transformation—the decarbonization enablers—are not yet in place.
ENGIE Impact and WBCSD are helping the manufacturing industry develop decarbonization plans that companies across the world can implement and scale up immediately.
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