7 July 2019

Making energy easier

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.

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

Written by Jonathan Graham – Decentralised Energy Systems team – Siemens

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