The need to use less energy is becoming critical to manufacturers. New developments in the energy landscape are impacting business everywhere. It’s now crucial to reduce energy use to stave off growing internal production costs and also meet external demands for carbon reduction. Increasing investments toward sustainability will create additional value for the business, lowering costs and making it more competitive.

Energy usage is causing production costs to rise

For manufacturers, the cost of energy matters because they use so much. Industry consumes fully one-third of all energy in the United States¹, and manufacturers in heavy industries expend the greatest amounts of it because of their energy-intense processes².

The cost of energy has been rising globally – surging 60% in 2022 to record highs – and impacting production costs³. While the World Bank predicts both natural gas and coal prices overall will decline by 11% in 2023 (still leaving prices much higher than in 2021), it also acknowledges that US natural-gas prices are still expected to be double their average over the last five years by 2024³.

To make matters worse, the International Energy Agency (IEA) says, “the world is in the middle of a global energy crisis of unprecedented depth and complexity⁴.” Certain regions of the US, with the Midwest and South-Central at the highest risk, are under the threat of electricity shortages for years to come⁵.

External sources are demanding emissions reduction

Yet, there are even more reasons to lower energy usage. Manufacturers must meet the carbon reduction demands of stakeholders and third parties, like investors, customers and regulatory agencies.

Environmental, social and governance (ESG) performance and technology has gained the attention of investors. They’re putting their money where their market projections are, divesting companies with a low ESG rating and backing those with a high rating. PWC predicts that, in the US, ESG-oriented assets under management will more than double from $4.5 trillion in 2021 to $10.5 trillion in 2026⁶. 

Customers are also becoming more selective. A 2022 survey from Capterra found that 84% of consumers are willing to pay more for sustainable products, despite inflation⁷. Throughout the supply chain, sellers are demanding suppliers produce sustainably in order to avoid impacting their own emissions reporting and customer sales.

US regulatory agencies and governments are continuing to develop policies and regulations in support of sustainability, and they’re evolving rapidly⁸. Harvard says that this could be a watershed year for ESG-focused regulatory developments⁹. The ability to take action and report on lower energy usage is becoming increasingly important.

How manufacturers can reduce energy usage

IDC says that by 2024, “the top five companies in each sector will be those that used technology to innovate their way out of a global crisis.¹⁰” And advanced analytics, including AI, is one of the most important manufacturing solutions for sustainability. In fact, Forrester called out Bosch in its 2022 The Future of Manufacturing report, noting that global Bosch factories have been carbon neutral since 2020, and AI and IoT solutions were critical in achieving that objective¹¹.

By analyzing the massive amount of IoT data in a plant, AI and advanced analytics can help optimize energy usage, manage rising costs, lower CO₂ and improve ESG rating. These technologies determine where excess energy is being used, identify optimum shift parameters for each process and recommend exact process setpoints that will minimize consumption without impacting yield or quality.

If quality is low to begin with, manufacturers can also use AI to make improvements. Excess scrap and waste and having to re-work products requires additional energy usage, which leads to unnecessary, additional carbon footprint and adds to production costs. Advanced analytics can help increase first-pass yield by identifying the root cause of quality control problems – and predicting and preventing those problems.

The sooner the better

Manufacturers face an energy crisis that has the potential to dramatically reshape where and how goods are produced. Which manufacturers will choose to be at its mercy, and which will leverage this crisis to become industry leaders?

The time to evolve and incorporate the power of AI and advanced analytics is now. Forrester predicts that in 2023, 30% of manufacturers will pivot IoT investments to reduce their energy bill¹². If nearly 1/3 of manufacturers are able to produce at a lower cost – and more sustainably – those who don’t make this transition will quickly lose their competitiveness in the market. 

Learn more about what analytics can do for your plant – watch this video about how the world’s largest producer of bricks won the Microsoft Intelligent Manufacturing Award for sustainability by using advanced analytics and AI to lower energy usage and emissions.