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Sheffield, UK

2022.07.04 Chris Rason - Managing Director, Aggreko Energy Services

Rising energy costs and volatility highlight power struggle for UK manufacturers

The majority of manufacturers currently face the perfect energy storm as they admit rising energy bills have significantly impacted their margins and ability to remain competitive in the last two years. This is the headline finding from our latest report The Power Struggle.

While solutions are available to help counter this through distributed solutions, some government support, and EaaS contracts, we are seeing an increase in manufacturers enquiring about more flexible solutions.

As businesses grapple with increasingly volatile energy prices, we commissioned the new research to determine how attitudes to decentralised energy solutions have changed since our 2019 report Bridging the Energy Gap (BTG).

The latest survey encompassed 251 manufacturers across the UK, spanning Junior and Senior Managers, Directors and C-suite Executives.

The primary findings from our report draw the energy crisis into sharper focus, with 75% claiming that the rising cost of energy is having a direct impact of their business’ ability to remain competitive. Moreover, 65% admitted that they had experienced a power cut in the last 18 months.

Chris Rason, Managing Director at Aggreko Energy Services, said: “Our latest research serves to compound concerns that were highlighted in our 2019 report Bridging the Energy Gap. The rising cost of energy has long been a concern for the UK manufacturing sector, though recent events have escalated the scale of this challenge to entirely new levels.

“At this juncture, it’s important to re-evaluate how attitudes to on-site power generation might have changed in the last three years to ensure that manufacturers are equipped with effective means of navigating this crisis.”

Despite the Department for Business, Energy and Industrial Strategy (BEIS) recently announcing new funding for high energy usage businesses, belief that this will aid the UK manufacturing industry remains lukewarm, with only 28% claiming to be “very confident”. Moreover, this scheme does not currently address the dwindling stability of grid connections and increased risk of power outages, meaning that the sector must contend with these challenges alone.

In light of these issues, over 60% of manufacturers are now considering generating their own electricity using distributed solutions – a 12% rise from BTG. Energy as a Service (EaaS) contracts were cited as a popular way of achieving this as it removes the barriers of high upfront capital investment, though there were concerns that getting locked into such contracts could leave businesses exposed to high demand penalties from the provider.

In response to this, we have evolved the business model of ‘Hired Energy as Service’ (HEaaS), wherein customers can access distributed energy solutions without being locked into long-term contracts and fixed energy pricing. The modular nature of such agreements also allows supply to be scaled up or down at short notice in accordance with site demand.

Chris concludes: “The results of our latest report indicate that many UK manufacturers are looking to on-site power generation as a solution to the current energy crisis. However, capex budgets and restrictive contracts remain a key barrier here.

“For this reason, we believe that adopting flexible methods of on-site power generation, such as Aggreko’s Hired Energy as a Service, will be key to helping businesses navigate this challenging period.”

To view the full report, click below.

Download Power struggle report