Energy prices ‘hinders’ competition in manufacturing sector

The benefits of decentralised energy are not being fully realised due to key barriers such as energy security and cost concerns, according to a report published by Aggreko.

The industrial power solutions company has shed light on the state of energy usage in the manufacturing sector.

Out of 200 industrial energy decision-makers polled, 22 per cent said that their energy bills had increased by 50 per cent or more over the last five years. A further 19 per cent said theirs had increased between 30 to 49 per cent.

More than half (55 per cent) of the group as a whole reported that energy prices are impacting their ability to compete in the market.

With rising energy tariffs, 95 per cent of companies believed that reducing their energy consumption was a high or medium priority. Similarly, 82 per cent said that maintaining a reliable and secure power supply was a major or significant concern.

For businesses trying to improve efficiency and decrease energy costs, demand-side response (DSR) is an increasingly popular solution, with 57 per cent of respondents saying that they have been accessing lower electricity tariffs in return for small alterations to their processes.

Of the 40 per cent who have not taken up DSR, the most frequent concern was DSR having a negative impact on production, with just over two-thirds describing this as their major worry. A further 22 per cent said that they lacked the technical resources to implement DSR solutions, while 9 per cent admitted they found it too difficult to understand the potential benefits and pitfalls.

Another potential solution, small-scale adoption of alternative generation methods, has received little attention from many in the industry, with 43 per cent saying they had not put any consideration towards generating some of their own electricity.

Meanwhile 48 per cent said that their companies had undertaken some studies of the feasibility of decentralised generation, however the same percentage had not.

Of those who had initiated some of their own generation, 49 per cent regarded lower energy costs as the main motivating factor. This was followed by 30 per cent who cited security of energy supply, and then 21 per cent who were motivated by sustainability.

The survey found that solar energy was rated as the technology with the greatest potential for UK industry (56 per cent).

The next three options, gas generation, combined heat and power, and wind, were far behind with 18 per cent, 14 per cent, and 12 per cent of the vote respectively.

For those who had not adopted these measures, the biggest subsection (49 per cent) were warded off by the start-up cost required. A further 32 per cent said that they lacked the technical resources to do so, while 17 per cent were worried that adopting decentralised energy solutions would affect production.

When it comes to attempting to adopt solutions, 38 per cent said that they had had requests for energy efficient equipment turned down due to restrictions on capital expenditure, while 59 per cent had not experienced any such problems.

A frequent stopping point for these requests is the timeframe for the return on investment. Just over half (51 per cent) said that their companies required a payback of three years or less on capital expenditure, which can hamper energy efficiency solutions that often bring value over a longer term.

Caroline Bragg, senior policy manager at the Association for Decentralised Energy, said: “More and more businesses are discovering the revenue potential of engaging in decentralised energy and it is encouraging to see Aggreko’s findings that almost 60 per cent are now enjoying lower electricity tariffs for their flexibility. This demonstrates that many industrial processes can engage in demand side response without production being affected.

“For businesses whose production model does not allow this flexibility, however, decentralised solutions can offer an alternative approach, while still helping to reduce energy consumption and allow access to potentially lucrative markets.”