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The transforming energy market creates new opportunities for manufacturing industries

The global battle against climate change also transforms the realm of energy. One novelty is the energy flexibility demand market, which can significantly benefit manufacturing industries. What exactly is happening, and what is the role of smart factories and Industry 5.0?

New climate policies are driving the shift toward decarbonized energy production. The share of wind and solar energy increases, but it has a negative side effect: the growing risk of imbalance in the electric grid and energy availability.

To solve the challenge, a new energy demand flexibility market is emerging. What does this mean?

“We can delve into the dynamics of intraday energy balancing markets, a realm where companies can extract financial rewards by demonstrating flexibility in their energy consumption patterns. Participation in these markets not only brings cost efficiencies but can also transform companies into revenue-generating entities if they can manage to offer surplus energy back to the grid,” says Etteplan’s Teijo Salonpää, Director of Smart Factory, Solutions & Technologies.

Participants in the market can gain financial rewards in different ways. Most important one is to avoid energy consumption during peak demand hours and optimize the timing of purchasing energy. Also, if the company owns energy storage assets, it can earn by sharing them with the grid.

“On a daily level, a company's profit margin may increase by tens of percentages. In any case, the market provides a mechanism for new revenue streams and improves overall profitability,” explains Salonpää.

Inflexibility – new bottleneck in manufacturing

Every industrial company faces growing pressure to improve its environmental sustainability. Additionally, partly due to the geopolitical situation, it has become hard to forecast energy costs. Thus, the new flexibility market is very attractive to financial decision makers.

“However, most manufacturing plants can’t join the energy flexibility market just like that. Typically, they are designed according to the assumption that they are always running. Also, they aim to maximize efficiency and eliminate bottlenecks according to lean principles,” says Teijo Salonpää.

“Now, this inflexibility is a new bottleneck. Lean manufacturing needs rethinking.”

To leverage the transforming energy market, a factory must have accurate real-time data about its energy use. Energy services need constant data streams from participants in the new market.

Therefore, a key component is the development of data-driven smart factories together with the emerging Industry 5.0 framework. The latter even aims at sustainability, thus supporting the green transition. Also, it supports meeting human needs in manufacturing.

“Factory operators need new tools to perform the required energy consumption tasks. For instance, they might have to be able to run a certain process at a 60 percent consumption level for the next two hours. This adjustability raises concerns about growing complexity. To solve the challenge, we need smarter factories with better human-machine interfaces,” Salonpää says.

To summarize, new solutions for energy demand flexibility have emerged along with the green transition. Plenty of companies can tap into the market and reap financial benefits. However, the ability to participate requires better data acquisition, changes in production processes, and attention to end-users.

Four benefits of the energy flexibility market

Reduce costs by shifting energy consumption to off-peak hours when energy prices are lower.

Earn new revenue by getting refunds from energy companies for reduced energy consumption during peak hours and sharing energy storage assets.

Improve efficiency by identifying and addressing energy inefficiencies, eliminating unnecessary steps, and optimizing the use of resources.

Improve sustainability by reducing energy consumption and reliance on fossil fuels and using renewable energy sources.