1660343209581 Paulwellener

Charging forward with electrification in manufacturing

Oct. 9, 2020

"In manufacturing, electrification can be divided into three key areas: industrial fleets, processes and spaces."

Deloitte's Paul Wellener

In manufacturing, increasing efficiencies and managing operational costs are two perennial business priorities. Where energy choices are concerned, these priorities may now be intersecting with another rising motivation for manufacturing companies: improving environmental stewardship and increasing sustainability efforts. 

In fact, the 2020 Deloitte Energy Transitions survey identified that 86% of manufacturers surveyed have a sustainability plan in place or under development. Furthermore, “reducing energy and overhead costs” and “improving the environment” were the top two benefits that surveyed manufacturing executives expect to receive from their long-term sustainability strategies. It is likely that these two drivers will continue to be intricately interwoven throughout the transition toward cleaner energy in manufacturing. This transition is defined as the process of reducing reliance on fossil fuel and moving toward greater use of cleaner energy sources, such as renewables.

A key conduit of this transition is electrification. Industrial manufacturers surveyed across sectors target achieving 45% overall electrification by 2035, which is 29% higher than their current rate. In manufacturing, electrification can be divided into three key areas: industrial fleets, processes and spaces. Each of these provides manufacturers with opportunities to dial up their sustainability efforts. 

Industrial fleets 

Manufacturers are experimenting with electrifying equipment and industrial fleets. Some companies are slowly transitioning to electric equipment ranging from tugs to forklifts, while others are weighing the benefits of an electric-vehicle fleet. The Deloitte survey identified that US manufacturers are setting average targets of 39% electrifying energy use for transportation fleets by 2035. Cost is a driving factor, but these efforts also support shifting toward low-carbon fuel alternatives for their industrial fleets.

Industrial processes

Manufacturers have significant opportunities when considering how to shift industrial processes’ energy supply from the combustion of fossil fuels to cleaner alternatives. Resource conservation and controlled operations that support lean manufacturing are driving electrification in the plant or factory. Considering that industrial motors contribute to 38% of global electricity consumption, companies are keen to increase the energy efficiency of these motors in their efforts to further support their sustainability objectives. Benefits include longer performance lifetime and increased efficiency.

Industrial spaces

Buildings are traditionally a significant source of carbon emissions. The confluence of electric-powered facility heating and cooling systems and the rise of smart, connected building-management systems is a powerful combination, one that could be a catalyst for using electricity to optimize industrial spaces, including factories, warehouses and offices. Electrification allows more efficient building-energy management by using smart energy systems when compared to gas or coal as an energy source. According to the Deloitte study, US manufacturers are targeting 50% for industrial space and water heating electrification by 2035. 

Charging forward with electrification

As manufacturers continue to source via electrification a greater amount of energy for fleets, processes and spaces, many are choosing to boost their efforts through external alliances. In the Deloitte survey, when asked how their sustainability goals could be met, 64% of manufacturing leaders cited plans to leverage partnerships and joint ventures to transition toward a sustainable future, while 61% will rely on outsourcing strategies with vendors and suppliers. 

As these manufacturers strive to reach their ambitious targets, these partnerships will be key enablers to supporting the broader move toward a cleaner energy future.

Paul Wellener is a vice chairman, Deloitte LLP, and the leader of the US Industrial Products & Construction practice with Deloitte Consulting LLP