Sector trends

Manufacturing outlook: energy resilience

Take a deep dive into the actions and tools the manufacturing sector and its supply chain are using to reduce energy costs and cut carbon.

Watch the highlights from our Manufacturing Outlook webinar on reducing carbon emissions and costs

Our panel

Laura Capper, Head of Manufacturing & Construction, NatWest Group

Rob Labinski, Head of Electrification, Octopus Energy

Mark Dodwell, Director, bank’s Climate Propositions

Jon Sharrock, Group Finance Director, WN VTech

What are the key issues for manufacturers and suppliers as we start a new year?

Last year sky-high natural gas and oil prices wreaked havoc across the world. The consequences of a global energy crunch meant spiralling costs for consumers, as well as manufacturers and their connected supply chain.

The government Energy Bill Relief Scheme to support businesses through the winter comes to an end in March. A new Energy Bills Discount Scheme (EBDS) will operate from April 2023 to April 2024 for eligible non-domestic consumers in Great Britain and Northern Ireland.

The volatility of the energy markets and energy-led cost pressures have left the industry highly exposed. Energy therefore remains a risk for UK businesses in 2023.

Energy volatility: how is the market changing?

Although he doesn’t have a crystal ball, Rob Labinski, Head of Electrification at Octopus Energy, does have access to the latest energy data and trends.

  • He flags a prediction that bills will peak in or around April 2023. This outlook is supported by energy analysts Cornwall Insight. But the situation is highly unpredictable and depends on factors including government action, inflation and geopolitical events.
  • Renewables produce the majority of our energy in the UK: expect to see a focus on wind and alternative fuels to drive down costs.
  • Electric vehicles are here to stay: battery electric vehicles outsold diesel cars in December 2022 according to the Society of Motor Manufacturers and Traders. Consider how this could impact your fleet management and costs.

Five tips from Octopus Energy to reduce costs and carbon:

“You could run ahead with any of these today and start to see significant cost decreases,” says Rob.

  1. Generate more of your own energy and reduce your demand – this could lower costs and drive revenue.
  2. Buy renewable energy – using greener, cleaner alternatives such as solar means you’re less exposed to volatile prices and risk.
  3. Consider transitioning your transport to electric alternatives ¬– total cost of ownership for electric vehicles can be  lower than internal combustion engines, so you could see benefits to operational costs across fleets in some cases.
  4. Control your production in line with cheaper periods – prices tend to be high in the early morning and between 4 - 7pm, for example.
  5. Weigh up the costs and efficiencies of a transition to renewable heat such as ground source heat pumps, especially where you have a consistent low to mid-level heat demand (40-120 degrees).

How this might affect your energy bill depends on several factors but the Energy Saving Trust expects heat pumps will become the cheapest as well as the lowest carbon form of heating available.

How is WN VTech putting energy actions in place to mitigate volatility?

Jon Sharrock is Group Finance Director of vehicle manufacturing specialist WN VTech. It has seven production sites across the UK as well as international operations in Germany. As interest in its product portfolio, engineering capabilities and electric vehicles increases, it is experiencing business growth.

As a manufacturer of electric vehicles including buses, ambulances, police cars and funeral cars, the business is not only pushing boundaries in terms of sustainable vehicle technology. It is also on a learning curve to reduce its own energy costs and Scopes 1 and 2 greenhouse gas (GHG) emissions.

That’s why it took part in our Carbon Planner tool pilot in October 2021, explains Jon. As a growing SME, the management team did have a sustainability ambition but were time poor and lacked the relevant knowledge to set off on a carbon reduction path.

“It was a great exercise because it gave us actions and educated us on opportunities to reduce carbon,” says Jon. “In 2022, like a lot of businesses, our energy costs went up roughly fourfold. But we’re starting to see savings from these initiatives and we’re looking to bring in solar from 2023 and hope to see payback from that.”

Here’s a flavour of WN VTech’s actions:

  • Electrified company vehicles
  • Rolled out LED lighting across all sites
  • Found more ways to control and recycle waste, including cardboard, fibreglass, and water
  • Investing in building management systems for new facilities
  • Implemented a cycle-to-work scheme and funding to use public transport to get people to work in a carbon-reduced way
  • Introducing ideas and actions to the supply chain

“The Carbon Planner tool was very useful for us and it’s free. Importantly, it gave us motivation to accelerate and embrace our carbon reduction journey.”

Jon’s top three tips to mitigate against rising energy costs and reduce carbon

  1. In all manufacturing businesses, the best and most practical ideas often come from the shop floor. Get ownership at the top level first and then push it down.
  2. Make sure you do the basics. Manufacturing businesses can sometimes forget the simple things. One of our biggest savings has come from turning equipment off when we’re not using it.
  3. Set targets and measure what you’re doing – this is critical. A bit of healthy competition on targets can be good as well.

For a deeper dive into the energy outlook for manufacturers and suppliers, including tips on increasing efficiency and reducing costs, watch our 15-minute video

Do you know your carbon footprint?

Sign up to the Carbon Planner today to find out how your business could potentially reduce emissions.

This material is published by NatWest Group plc (“NatWest Group”), for information purposes only and should not be regarded as providing any specific advice. Recipients should make their own independent evaluation of this information and no action should be taken, solely relying on it. This material should not be reproduced or disclosed without our consent. It is not intended for distribution in any jurisdiction in which this would be prohibited. Whilst this information is believed to be reliable, it has not been independently verified by NatWest Group and NatWest Group makes no representation or warranty (express or implied) of any kind, as regards the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use made of or reliance placed on, this information. Unless otherwise stated, any views, forecasts, or estimates are solely those of NatWest Group, as of this date and are subject to change without notice. Copyright © NatWest Group. All rights reserved.

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