Key points
TL;DR: How Finance Can Power Decarbonisation in Manufacturing
Manufacturers face rising pressure to decarbonise yet often lack the capital to invest in sustainability-enabling technology. Energy-as-a-Service (EaaS) financing models offer a solution by funding energy optimisation projects through the future cost savings they generate.
This removes the need for upfront capital and allows manufacturers to reduce energy use cut emissions and improve resilience while maintaining cash flow.
Backed by real-world examples like NEG and strong private sector appetite for funding decarbonisation initiatives EaaS is a practical way to accelerate net zero progress across UK manufacturing.
The manufacturing industry is under pressure to minimise carbon emissions by reducing energy use in manufacturing processes or changing the energy mix[i].
These regulatory and financial pressures[ii] are all the more urgent as shareholders are increasingly aware of how fuel costs, network costs and poor energy purchasing decisions are harming their investments.
In fact, on the ethical front, shareholder groups are now starting to say that they will withdraw investment from companies which do not meet environmental, social and governance (ESG) standards[iii].
Operationally, any manufacturer’s energy optimisation strategy should be based on addressing both energy supply and energy demand simultaneously, using a holistic, integrated, site-specific approach.
Manufacturers need to tackle their energy costs, ensure security of energy supply, and meet sustainability expectations at the same time. This so-called value stacking is the key to success. It helps future-proof energy supply, drive down consumption costs, reduce exposure to unpredictable cost hikes, drive carbon reduction achievement, create new revenue streams and deliver financial benefits in the short-term.
Barriers to energy optimisation
With substantial operational cost savings to made in manufacturing processes, as well as increasing shareholder pressure and stringent regulatory drivers, what is preventing the majority of manufacturers from immediately securing these benefits?
First, an expert partner is needed to identify energy-saving solutions. As one industry commentator notes[iv],
“Many manufacturers don’t have an asset-level understanding of energy consumption – this means they might have a view of total energy usage for a facility, but won’t know how much of this is lighting, heating or production equipment usage. But by understanding energy consumption at a more granular level, it’s possible to identify inefficiencies and make changes – almost instantly.”
Yet, even after a trusted partner has undertaken the necessary analysis to find an attractive, cost-effective solution for a manufacturing site, the ability to access that integrated energy solution – whether decentralised power generation, energy-efficient plant and buildings technologies, renewable technologies, digital analytic tools or a combination – can often face a hesitation to risk capital on what has traditionally been viewed as a “non-core” investment priority.
Affording the substantial investments in sustainability-enabling technologies that are required to meet decarbonisation targets remains a challenge, especially in a time of rising input costs[v] and challenged industrial output[vi].
Energy-as-a-Service: harnessing future savings to fund today’s transformation
New business models, known as Energy-as-a-Service arrangementsor energy performance contracting, can secure operational cost reductions without putting pressure on capital resources, avoiding putting capital at risk, and ensuring expected savings are realised.
The supplier is delivering a service – meeting energy optimisation targets – and is being authorised by the manufacturer to use the cost savings to fund the infrastructure required. This Energy-as-a-Service approach allows a manufacturer to rely on an expert energy solutions provider to deliver a specific outcome, removing any need for the manufacturer to deploy any of its own (scarce) capital.
Instead, the manufacturer is charged a monthly fee against the delivered cost savings, sometimes producing a net operational benefit, but in all cases supporting the monthly fee. Moreover, an Energy-as-a-Service provider covers all aspect of transformation, including installation, operation, performance management and maintenance.
Energy-as-a-Service arrangements tend to be offered by specialist financiers who have an in-depth knowledge of how the technology will deliver in practice and will be able to flex the financing arrangements to deliver an affordable solution – sometimes even cost-neutral.
In simple terms, no capital needs to be spent as the future savings pay in whole or in part for the energy-efficiency conversion.
The size of the prize: around Great Britain
Siemens Financial Services’ (SFS) modelling[vii], based on real-world examples, has estimated the level of energy savings that could be achieved by the manufacturing industry in different parts of the UK, by deploying Energy-as-a-Service financing structures.
Taking into account existing levels of energy efficiency in UK manufacturing industry, and assuming all remaining manufacturers implement energy-efficiency initiatives, then energy-as-a-service arrangements could help implement a reduction in manufacturing electricity and gas use of around two thirds of official climate targets.
While the UK government’s new Great British Energy initiative[viii] presents a welcome roadmap for the UK to reach its long-term clean energy goals, energy-as-a-service arrangements offer manufacturers the opportunity to benefit from efficiency gains here and now.
Speeding up progress
| NEG reduces operational costs with guaranteed energy savings from Siemens Nippon Electric Glass (NEG), a leading glass manufacturer, wanted to invest in its Wigan facility to become more energy efficient and improve operational efficiencies. Siemens identified key areas where processes and equipment could be implemented to refine efficiency. This included installing new Siemens motors and controllers, new water pumps, flow meters and replacement of nearly 3000 LED light fittings. Siemens leveraged the expertise of its financing arm – Siemens Financial Services (SFS) – to offer NEG an end-to-end solution combining finance and technology, that spread NEG’s payments across a 5-year term to align with guaranteed energy savings, effectively making the investment net zero. With the installation of the technology, NEG is now seeing significant reductions in operating costs, totalling around 3 million EUR across the financing period. |
A great proportion of official decarbonisation targets – at least those related to electricity and gas consumption – could be achieved through the widespread implementation of energy-as-a-service solutions.
Fortunately for manufacturers, specialist financiers in the market have a strong appetite for financing these arrangements, so manufacturers can invest in sustainability-enabling technology and infrastructure in a way that is cash flow friendly and avoids the need to commit large amounts of (scarce) capital up-front.
While any policy encouragements, subsidies and tax incentives from government are very welcome, harnessing private sector capital – through these ‘as-a-service’ arrangements – will truly move the dial and help accelerate UK manufacturing industry towards its energy efficiency and climate goals.
[i] MDPI, G.Nota, Energy Efficiency in Industry 4.0, 2020,
International Energy Authority, Driving Energy Efficiency in Heavy Industries, 17 Mar 2021,
SP Global, How Russian Companies are Responding to Growing ESG Pressures, 8 Feb 2021,
International Energy Authority, Greater energy efficiency could double China’s economy, 15 Feb 2021,
[ii] Forbes, Manufacturing Industry Trends 2024: The Economy, AI, And Supply Chain, 11 June 2024,
[iii] For instance: Allianz, ESG move into the mainstream (and the boardroom), 24 Mar 2021; Money Marketing, Aviva to shun companies that ignore net zero, 21 Mat 2021; Ernst Young, More investors turn to sustainable investment funds, 9 Jul 2021,
[iv] The Manufacturer, Start small, dream big – the future of energy efficiency for UK manufacturers, 9 Mar 2022,
[v] Office for National Statistics, Producer price inflation, UK: July 2024, 14 Aug 2024,
[vi] Trading Economics, United Kingdom Industrial Production,
[vii] The Siemens Financial services methodology takes the lowest level of energy optimisation savings experienced in its research base of real-life examples, even though these can be as high as 50%+ in high energy consumption sectors. In addition, the methodology only scales the volumes of energy savings across 50% of the available manufacturing estate. This helps manufacturing CFOs be confident that the estimates in this paper are a reliable starting point for their business cases regarding the level of benefit to be gained, and that real-life savings are likely to be considerably higher. Estimates of energy optimisation savings across a typical financing period of 5 years are noted in the table – covering both the manufacturing sector as a whole, along with a range of higher energy consumption subsectors. In each case, Standard Industry Classification (SIC) codes are used, so that readers can define precisely the subsectors of manufacturing industry covered. These financial volumes effectively represent the scale of self-funding finance for energy optimisation conversions which smart financiers and solutions providers can help manufacturing industry deploy.
[viii] www.gov.uk/government/publications/introducing-great-british-energy
FAQs: Decarbonising Manufacturing with Finance
What is Energy-as-a-Service (EaaS)?
A financing model where energy-saving technology is funded using the savings it generates over time
Why is it important for manufacturers?
It allows manufacturers to decarbonise without upfront capital reducing risk and improving efficiency
What benefits does EaaS offer?
Lower energy bills reduced carbon emissions improved energy security and short-term financial gain
Why don’t more manufacturers act now?
Many lack asset-level energy data or hesitate to invest in what they see as non-core priorities
Who funds the transformation?
Specialist financiers fund installation and management of energy systems in return for a monthly fee
Is EaaS only for large manufacturers?
No it’s scalable and suitable for businesses of all sizes looking to improve sustainability
What does “value stacking” mean?
Combining energy savings security and sustainability into one holistic strategy for better outcomes
How much impact could EaaS make in the UK?
Siemens modelling shows EaaS could help cut two-thirds of electricity and gas emissions in UK manufacturing
Can this approach support long-term goals?
Yes EaaS supports decarbonisation targets while preserving capital and improving operational resilience
Is there market appetite for this financing?
Yes private sector financiers are actively seeking opportunities to support industrial decarbonisation through EaaS
