2022 is seeing a surge in manufacturing electrification, as many manufacturers make the switch to renewable energy and aim to meet government sustainability demands. According to a Deloitte study, 70% of manufacturing executives stated they plan to embrace industrial electrification processes.
According to McKinsey projections, renewable energy sources are likely to produce more than half of the world’s electricity by 2035, and because renewables cost less in the long run, electricity prices will drop. This combined with rising sustainability expectations for the industry will increase demand for electric-powered products, such as cars, space heaters, and farming machinery.
However, as manufacturers embrace electrification, new challenges will emerge. These include:
- Evolving Supply Chain Processes: Manufacturers might need to improve the efficiency and alter the scale and of their supply chains to meet the demands of electrification. They will then have to consider the associated risks of a new supply chain.
- New Materials to Understand: Producing electric products may require teams to acquaint themselves with new materials. Manufacturers will then have to consider the material’s strengths and weaknesses and adjust their production process accordingly.
- Newer, Stricter Regulations to Follow: The move to renewable energy means adhering to stricter governance. Manufacturers embracing electrification will have to be ready to adjust all aspects of their production process, from the design stage to the end product.
The Current State of Manufacturing Electrification
Industries now understand how essential renewable energy is to the future of manufacturing, but the shift to sustainability isn’t easy.
Firstly, industry leaders are under pressure to alter their manufacturing processes. Evolving legislation and rising environmental concerns are making it increasingly challenging for manufacturers to stick to traditional practices. Manufacturers are now having to review their practices and publicise their own energy usage, as well as make pledges to reduce greenhouse gas emissions.
In addition, lowering emissions boosts a company’s inherent business value, encouraging manufacturers to become genuine advocates for electrification. Part of this has stemmed from the increased transparency around environmental, social, and corporate governance (ESG) criteria that illustrates the cost-benefit ratio of investing in electricity.
Most manufacturers who have their sights set on renewable energy know that this shift will require new materials and methods to maintain productivity. They’re also willing to deconstruct and reconfigure their existing infrastructure to serve their new electric needs.
Aside from structural and logistical considerations, electrification’s upfront costs could overwhelm manufacturers. That’s why it’s crucial for businesses to find supply chain partners that can ease the pressure of sourcing and working with new materials.
Keeping Electric Manufacturing Costs Down
Manufacturers must address both the necessary financial investments and perceived costs of electrification to move forward confidently and successfully. Here are the most significant financial roadblocks manufacturers are likely to face:
- Extended Research and Product Development Periods: Transitioning to new product designs and materials and learning to work with new teams and individuals will take time. If this process is not efficiently streamlined or budgeted for, costs will balloon as the project continues. Moreover, if their short-term ROI isn’t bearing fruit, it could overwhelm businesses. It will also be challenging to foresee a future of low-carbon emissions if in the early stages the business is financially unstable.
- Need for New Technology and Production: Electrification is still a relatively new process, so the industry will need time to see how it will affect both businesses and consumers. Production lines and supply chains will take time to settle into measurable patterns, and it will also take time for initial outgoings to prove their worth.
- Cost-Cutting Initiatives: Government bodies are beginning to plan for the transition to clean energy. The U.S. Department of Energy has pledged to cut solar energy costs over the next 10 years, and it is making sizable investments in the development of technologies like perovskites and cadmium telluride to make thinner solar cells. Although these are exciting innovations, they are costly, and manufacturers will have to cut costs as they make their initial commitments to electrification.
Financial concerns are proving a hinderance for many manufacturers looking towards electrification. It’s crucial, then, for businesses to find cost-effective electrification methods that can ease the transition.
Lessons From Existing Manufacturing Industry Disruptors
In a time of rapid growth, adjustment, and nascent technologies for manufacturers, we can look back to previous disruptors to see the benefits of transition.
Consider the case of Woolworths, for example. When the retailer took the risk of rolling out the first closed-door fridges, the upfront investment was huge. However, the company ended up saving more than $10 million.
In the case of electrification, pilot commitments show how companies taking costly risks can see massive payoffs. Plus, they’re giving the next generation of manufacturers the ability to learn from their pioneering projects.
Tesla’s investment in electric vehicles almost created the manufacturing electrification demand that followed. Elon Musk paved the way for his competitors to invest in their own R&D, and his success encouraged others to take the industry seriously and begin their own innovations.
We can also see the importance of distribution networks. Any electrification of industrial processes is going to require a network of specialist minds to come together. New use cases like farm machinery will require industry partnership to combine insight with engineering innovation to support new infrastructure.
Disruptors can also highlight where the demand is. The birth of electric vehicles revealed a crowd of consumers that were pushing for change. Consumers are increasingly interested in sustainability, and there’s a growing demand for ethical business practices. This is forcing manufacturers to evolve and communicate those shifts to their audiences.
These lessons from electrification pioneers are only the tip of the iceberg. As other industries embrace this shift, there will be a lot of disruptive changes, but they will ultimately benefit everyone.
Industries Primed for Electrification Disruption
There are many industries that are on the cusp of electrification. These include:
From passenger vehicles to heavy-duty trucks and commercial vehicles, the transportation industry is being heavily encouraged to switch to electric. The transportation industry is notoriously slow to change, but it’s shifting recently due to developments in battery performance and the electrification of passenger vehicles. However, 98.3% of heavy and medium trucks in Europe still run on diesel, according to the European Automobile Manufacturers’ Association. – OUTDATED
Electrification of the automotive industry requires new and evolving infrastructure, including machinery and many moving parts. Battery-electric versions of old industrial staples are beginning to emerge. Manufacturers of excavators, like JCB and Caterpillar, are beginning to switch to zero-emission machinery.
Commercial buildings are also on their way to electrification. There will be 40.5% more commercial floor space available by 2050, according to predictions by the Center for Climate and Energy Solutions. However, once commercial buildings are in place, they tend to remain and produce a huge amount of emissions. The time is now to adjust our building processes and introduce electrification.
There’s been a surge in electrification in the fields of wind and solar energy. The prices of parts, modules, and materials have dropped. The cost of building a wind turbine, for example, has fallen 58% over the past decade. This has made wind and solar technology much more accessible for both businesses and consumers, and this snowball effect could lead to carbon neutrality by 2050.
Having begun with electric vehicles and construction machinery, electrification is now moving into the agriculture industry. Manufacturers like John Deere are working on tractor models with autonomous functions, while others work on solar solutions for driving machinery, like weed-pulling robots. With agriculture accounting for 5% of industrial energy consumption, businesses are under pressure to make the shift to electric.
Air control and refrigeration management are two areas with the biggest potential for electric transformation. Refrigeration has been named a ‘super pollutant’ and its renovation has been identified as the most urgent climate solution. Moreover, with the exacerbation of climate change, drastically more air conditioning will be needed by 2050, so the need for HVAC-R electrification has never been more crucial.
With climate changing by the day, government sustainability expectations on the rise and consumer demand for clean energy, manufacturing is under a lot of pressure to ‘go green’.
Here at Optimas, we both manufacture and source sustainably. Contact us to ease your shift to electric through a trusted supply chain partner.