Manufacturers are constantly challenged to do more with less, but one area leaving the handbrake on in terms of progress is the industry’s reliance on fossil fuels. They stand to benefit significantly from smarter energy use. By Jordan Griffiths.
Australia’s manufacturing industry spent $5.3bn on electricity in 2019, more than the combined spend of mining, transport, utilities and construction. Of this consumption, 45% of energy consumed by manufacturing is derived from natural gas and 22% comes from coal, while renewables only account for 28%.
The writing’s been on the wall for fossil fuels for a considerable time now. Continuing to rely on natural resources to maintain growth exposes a business to serious risks, not just to its public image, but also exposes its tangible and intangible value. If the environmental arguments alone aren’t rousing enough, the price of renewable energy now rivaling those of fossil fuels means that manufacturers can make huge financial savings by getting a handle on their energy usage.
There are two ways manufacturers can go about saving with smarter energy use: they can switch to renewable energy; or they can find ways to cut down on the amount of energy they need to continue operations. These aren’t mutually exclusive strategies, and there are multiple factors to consider when finalising an approach.
Electrification is growing in popularity, and as the cost of carbon rises, renewable energy costs drop – driven by the introduction of global emissions reduction targets. It’s not necessarily feasible for every operation to be electrified, but as technology matures, we’ll see more processes adopt that approach, especially those with low CO2 emissions. For example, 28% of steel globally is produced using electric furnaces, which require as little as a fifth of the energy required for a traditional blast furnace.
Our north star for sustainability transformation is a ‘Triple Zero’ concept, focusing on zero loss, zero harm and zero waste. In Australia, significant industries are increasingly applying this strategy when it comes to smarter energy use. Australia’s mining sector has long been a vital part of the country’s economy; however, the environmental damage caused by large-scale mining is threatening the sector’s future. The Granny Smith gold mine in Western Australia is a standout example of the industry addressing this issue, by installing one of the world’s largest renewable energy microgrids to support extraction and smelting processes. Powered by more than 20,000 solar panels and supported by a 2 MW/1 MWh battery system, the innovative system reduces the mine’s fuel consumption by 13%.
Elsewhere, South Australia is driving green hydrogen innovation, following up its recent Hydrogen Export Prospectus with an announcement from State Premier Steven Marshall, to provide $37m in state funding for upgrades to the $240m Eyre Peninsula Gateway Hydrogen Project, which features a 75 MW electrolysis plant. The project will ultimately increase sovereignty in Australian domestic markets reliant on green hydrogen and ammonia, as well as expanding green export opportunities.
Aspiring to adopt green energy is a good starting point; however, most businesses are struggling to get a foothold. In Australia, businesses can buy renewable energy directly from a solar or wind farm using a Power Purchase Agreement (PPA). These agreements allow businesses to buy renewable energy on a long-term contract, often at a cheaper rate.
The other strategy, cutting down on existing energy usage, can be trickier to facilitate in an existing business. Energy will always be needed in manufacturing, and the nature of some processes are more energy-intensive than others. It’s up to every industry to encourage more energy efficiency and demand for carbon offsets, which then drives investment into renewables. Manufacturers can aid this cause by re-evaluating the product itself through a triple-zero lens, in order to futureproof operations; as well as reviewing the time of day operations can take place, in order to efficiently tap into lower energy market prices.
In the long term, manufacturers can look to the Circular Economy mode for guidance, which aims to decouple business growth from the use of scarce resources. The core theme within this model is the concept of resource recovery, or a more succinct way of putting it: recycle and upcycle.
Resource recovery sees businesses recover embedded value at the end of the production cycle, in order to become a supplier for another production cycle. To understand and capture the full business opportunity of the Circular Economy, manufacturers need to embed recycling into processes as early as the design stage. In this new environment the unit cost of resources becomes less of a factor because instead of using additional resources to manufacture new goods, companies and customers use what’s already in the market. Focus shifts from producing things from virgin resources to transferring existing products between users and transforming used products into new ones.
A perfect example in the Australian manufacturing sector is the partnership between Cleanaway, Pact Group and Asahi Beverages to build a $45m polyethylene terephthalate (PET) plastic bottle manufacturing plant in Albury – the largest in Australia. Once it’s fully operational and online, the plant is slated to process the equivalent of one billion bottles a year, producing recycled PET pellets that will be used to manufacture new recycled packaging material.
Not every manufacturer is in a position to invest so significantly in reforming its byproducts, but every business can start adopting green energy in some way or form. It can seem intimidating but once you start thinking about how to separate your business’s growth and goals from reliance on fossil fuels, incorporating sustainability into your business processes will become second nature. Not only will the environment thank you for it, but so will your bottom line.
Jordan Griffiths is Managing Director – Operations at Accenture.