Carlos ArandaJodie Eaton, CEO of Shell Energy, explores the challenges and opportunities facing the UK automotive industry and explains why maximising energy efficiency must remain an operational priority.
Automotive manufacturing is widely considered to be a jewel in the crown of the European economy.[1] In the UK alone, the sector generates a total combined revenue of £82 billion, provides employment opportunities for almost 800,000 people[2] and accounts for 14.4% of total exports.[3]
These figures are set to further increase, with data from the Society for Motor Manufacturers and Traders (SMMT) revealing a significant upward trend in sector outputs. In September 2023 alone, 88,230 vehicles left British factories, 25,105 more than the previous year.
While the future of automotive manufacturing seems bright, the industry faces some difficulties. From ongoing pressure caused by the 2035 ban of all new petrol and diesel car sales to a growing market requirement for differentiation through software rather than hardware, rapid change brings with it new challenges. These pressures overlap with wider macroeconomic hurdles, including volatile wholesale energy prices, supply chain disruptions, geopolitical tensions and the ongoing impact of both Brexit and the COVID-19 pandemic.[4]. As a direct result, Britain’s competitiveness within the global automotive marketplace is waning.[5]
But while energy market volatility is a significant challenge for manufacturers, so too is regulation. While the UK is no longer strictly aligned to EU policy, it is committed to reducing its national energy use, minimising carbon emissions and accelerating progress towards net-zero emissions.
Under the EU’s Green Deal, for example, businesses need to achieve carbon neutrality by 2030 and energy intensive users including automotive manufacturers see this as a tight deadline. With regulation and market forces coming to a head in a way no-one could have predicted, how can the sector adapt? What is more, should it be seen as yet another hurdle to overcome, or instead as a cost-saving business opportunity?
At Shell Energy, we appreciate that maximising operational efficiencies while navigating the energy transition requires stringent management. Cost and regulatory pressures such as the Zero Emission Vehicle (ZEV) mandate[6] – the legal requirement for vehicle manufacturers to meet targets for electric vehicle (EV) sales – make change ever more pressing. But how should automotive manufacturers tackle the complicated nexus between efficiency, cost and regulation?
Understand your starting point
SMMT’s latest Sustainability Report[7] shows that the UK automotive manufacturing sector shrunk its emissions to the lowest level on record last year, with emissions per vehicle made cut by -2.8%. It reports that efforts to drive efficiencies and use more green energy are having a significant impact, with CO2 emissions down by nearly 17,700 tonnes in 2022 compared with 2021. Recent sustainability investments in automotive manufacturing, included in the Sustainability Report, range from green technology innovations, increased deployment of LED and natural lighting, air source underfloor heating, solar panels and production efficiencies.
The automotive industry has always had a strong track record in pinpointing efficiencies through its adoption of lean principles and this is good news for the drive for efficiency. A laser focus on finding ways to optimise efficiency while at the same time delivering growth, will be a continuing challenge in the future.
Technology has an important role to play. Advances in smart monitoring and AI are likely to enable further insight into setting realistic and sustainable objectives to further decarbonise. Detailed energy audits, an ESOS report for energy (with Phase 3 extended to June 2024), or an SECR report for carbon are all valuable tools.
Having access to real-time insight into energy use across your operations will continue to pinpoint inefficiencies, flag areas of waste, reveal opportunities for improvement and identify immediate savings.
Analyse opportunities for savings
While it might seem obvious, the cheapest kilowatt-hour (kWh) is always the one you don’t use. Once you have the means to measure your progress, the next step is to stop consuming energy whenever and wherever you can.
Can you move high energy processes to lower tariff times? Can you deploy smart technologies to switch equipment off when it is not being used, or change shift patterns to benefit from more daylight? Can you move production hours away from peak times to benefit from lower cost energy unit rates?
All these operational tactics to improve business efficiencies can dramatically reduce your energy consumption and reduce carbon emissions in the process. Of course, they won’t happen overnight, but can result in notable financial savings and help your business to reduce its carbon emissions.
Improve your asset efficiency
Next, it is worth thinking about replacing inefficient assets. While this is an upfront investment, it will generate long-term savings. Such measures include, investing in smarter, more efficient plant equipment, changing out your lights for LEDs, fitting the most efficient heating, cooling and ventilation systems, installing control systems, updating motors and pumps for more efficient models and looking at the fabric or your buildings to exploit daylight use and minimise heat loss.
In short, if do everything you can to reduce energy consumption in your day-to-day operations, the payback will start when you switch on new equipment.
Leverage the opportunity of decarbonisation
Why stop there? Having eliminated unnecessary consumption and improved efficiencies, it is far easier to decarbonise what remains.
Measuring your carbon impact and considering Scope 1 (those you create through daily operations), Scope 2 (those created elsewhere, but that you directly import) and Scope 3 emissions (those you are indirectly responsible for creating – your value chain) is by far the best place to start.
To decarbonise Scope 1 emissions, the key is to replace any hydrocarbon fuels with renewables, electrify heat wherever possible, install wind turbines and fit solar panels to generate on-site renewable energy. To decarbonise Scope 2 emissions, the answer lies in working with electricity suppliers to procure carbon free, or lower carbon, power. Another option is to invest in onsite power storage systems, which can be charged when energy tariffs are low and discharged during peak periods.
Tackling Scope 3 emissions are the most challenging. The solution lies in working and co-operating with partners, suppliers and other stakeholders to manage the shared carbon responsibility. Businesses can ask suppliers to report on their carbon footprint, ensure they can explain their energy usage and work together to reduce the carbon generated by doing business together.
Engaging a partner for the future
Because there is no single solution when it comes to optimising energy efficiency and working towards the long-term goal of achieving net-zero emissions, every business in such a highly competitive industry can benefit from bringing in external expertise.
At Shell Energy, we offer a simple and reliable solution for managing your energy costs and planning your net-zero roadmap. We supply renewable electricity and lower carbon energy options to businesses nationwide, including the installation of renewable energy generation technologies and the electrification of both transport fleets and heat production. We are also on hand to offer a comprehensive suite of energy products and solutions to help businesses make changes with confidence.
For energy intensive users, such as automotive manufacturers, the fluctuating cost of energy will continue to impact finances for the foreseeable future. While energy efficiency has been on the agenda for years, many sections of the automotive supply chain could benefit from redoubling their focus. Embracing change to maximise efficiencies, while getting ahead of regulatory change, will be pivotal in maintaining competitiveness at a time of fast and far-reaching change.
Sources
[1] https://hansard.parliament.uk/commons/2023-07-12/debates/4F6624C5-D2AB-48B2-9861-8B30903C6F25/AutomotiveIndustry
[2] https://www.smmt.co.uk/industry-topics/uk-automotive/#:~:text=With%20more%20than%20182%2C000%20people,%C2%A377%20billion%20of%20trade.
[3] https://www.smmt.co.uk/vehicle-data/manufacturing
[4] https://www.motasoft.co.uk/2023/01/27/automotive-industry-predictions/#:~:text=Energy%20crisis&text=The%20high%20cost%20of%20fuel,fuel%20cars%20and%20commercial%20vehicles
[5] https://www.smmt.co.uk/wp-content/uploads/sites/2/SMMT-Trade-report-2021.pdf
[6] Zero emission vehicle (ZEV) mandate consultation: summary of responses and joint government response – GOV.UK (www.gov.uk)
[7] SMMT Sustainability Report 2023: How the industry is reducing its emissions – SMMT
