Global manufacturers are under pressure to shift to more sustainable business practices, both to achieve organizational environmental, social, and governance (ESG) goals and to adhere to shifting industry standards. Many traditional manufacturing processes rely on carbon-intensive energy sources to operate, so achieving decarbonization goals requires major shifts in technology, tactics, and company ideology. 

Electrification is emerging as a key strategy to support manufacturers with aggressive, short-term decarbonization goals, particularly when the decarbonization of heat/thermal processes is necessary. However, understanding where electrification fits into broader operations and how to pursue electrification in ways that serve business and financial goals can be a daunting task.

Manufacturers facing short-term decarbonization goals should look seriously at electrification as a pathway to reduce emissions and future-proof their operations. Other clean power and emissions-reduction technologies are emerging, including green hydrogen and carbon capture, but most of these solutions are still developing, and could come with higher price tags. 

Manufacturers may find electrification strategies more readily available, particularly in industries like food and beverage, pharmaceuticals, and consumer goods, where technologies can support the decarbonization of critical heat and thermal loads. For example, heat pumps can deliver up to three times greater efficiency, making them an economically viable solution for a wide range of low and medium temperature applications. 

When considering electrification opportunities and upgrades, manufacturers should assess the total cost of ownership (TCO) of these technologies rather than focusing solely on the potential return on investment (ROI). Upgrading appliances to higher-efficiency, electric options can reduce energy consumption, lower operational costs, and significantly decrease a manufacturing facility’s greenhouse gas emissions. These factors can all contribute to lower costs over the full lifecycle of the technology. 

Of course, this transition isn’t as simple or straightforward as upgrading equipment. One of the most prominent challenges many manufacturers may struggle to look past are the increased costs associated with upgrading equipment and processes. Infrastructure upgrades represent a substantial capital expenditure (CapEx) for manufacturers.

Decarbonization assets can also increase operational expenditures (OpEx). This rise in OpEx is primarily due to the generally higher cost of electricity per unit, especially for organizations with multiple locations.

However, it's important to remember that electrification typically results in lower overall energy consumption since electricity is generally more energy-efficient than gas. The key factor influencing OpEx is the cost of electricity itself. When the cost of natural gas is significantly higher than electricity (typically 2 to 3 times higher), and sufficient heat can be recovered on-site, OpEx can actually decrease, leading to a lower TCO.

Incentives, tax credits, grants, and other financing opportunities are available to help reduce the upfront costs associated with new technologies. Manufacturers should take the time to research these options when considering and budgeting for technology upgrades. This is also a good time to explore opportunities to reduce energy costs by optimizing consumption. Manufacturers may find value in smart grid technologies or demand response programs to help lower costs in tandem with electrification tactics. 

As more companies utilize electricity in their operations, energy providers are faced with the challenge of accommodating these new and increased loads. Developing the grid infrastructure needed to support the energy transition will take time. In the meantime, manufacturers can partner with utilities to secure reliable power to support the integration of new electric technologies into their existing operations. Deploying on-site battery energy storage can also help a manufacturing facility enhance its flexibility and reduce reliance on the grid during peak periods. 

Ideally, new electrified loads at a manufacturing facility will be powered by clean energy sources. However, sourcing sufficient renewable energy can be difficult, particularly for manufacturers operating in regions with limited renewable resources. Relying on renewable energy certificates (RECs) or offsets can become expensive and infeasible if a company’s electricity needs are high, a likely scenario for manufacturers with large footprints.

Some manufacturers may want to consider power purchase agreements (PPAs) for renewable energy, on-site renewable generation, such as rooftop solar installations or wind turbines, or innovative financing options like utility-as-a-service (UaaS) models. Many companies do not have the time or resources to take on the funding, design, installation, and operation of on-site renewable energy assets.

In some cases, financing such a project would also require changes to a company’s broader investment philosophy. With UaaS models, companies can engage with a third-party energy expert who will own and operate the renewable energy assets. In this way, upfront capital costs are avoided but the benefits of access to clean, reliable power can still be realized.  

Most manufacturers will not be able to reach their long-term decarbonization goals with electrification alone. In some cases, specific technologies they require may not be mature enough, supply chain constraints could delay their progress, or the region in which they operate may make access to these technologies more difficult.

Additionally, financial and business decision-makers may not be ready to take on risks associated with a costly electrification plan. When faced with these challenges and looming emissions reductions goals, there are other tactics manufacturers can explore including biomass, solar thermal, renewable natural gas, and green hydrogen. 

No two decarbonization plans will look the same, particularly across the diverse manufacturing industry. Electrification can be viewed as the cornerstone of many comprehensive decarbonization plans but it should not be considered in isolation. The best approach is a holistic one: manufacturers must look at diverse and complementary solutions that can be catered to individual sites and facilities, collaborate with stakeholders across the entire organization to ensure technological and financial goals are being considered, and engage sustainability consultants who can help accelerate the transition to a more sustainable future.

Jason Bell is Managing Director, Americas at ENGIE Impact. Mateo de Guadalfajara, Senior Manager, Strategy & Implementation and Vivek Girisan, Manager, Strategy & Implementation also contributed to this piece.