Energy Efficiency in Manufacturing: How to Reduce Energy Costs and Improve Efficiency

Energy is a significant operating cost for many manufacturers. From production machinery and compressed air to heating, cooling, and other essential systems, keeping a manufacturing site running can require substantial amounts of electricity and gas.

But improving energy efficiency isn’t simply about using less energy. It’s about understanding where energy is being consumed, where it may be wasted, and how your operations can achieve the same or greater output while using energy more effectively.

The opportunities can range from straightforward changes to how equipment is operated to larger investments in more efficient technology, commercial solar, battery storage, and smarter energy management.

There’s no single approach that works for every manufacturer. Different processes, operating hours, and energy requirements all influence where the greatest opportunities lie.

Understanding how your site uses energy is the first step towards improving efficiency and reducing long-term operating costs.

Key Takeaways:

• Improving energy efficiency can help manufacturers reduce operating costs by identifying where energy is being wasted or used inefficiently across their operations.
• Understanding how and when your site consumes energy is an important first step, helping identify where improvements could deliver the greatest value.
• Opportunities can exist across production machinery, compressed air systems, heating and cooling, lighting, and everyday operational practices.
• Technologies such as commercial solar, battery storage, and energy monitoring can complement efficiency improvements by giving manufacturers greater control over how electricity is generated, stored, and managed.
• The greatest long-term value often comes from treating energy efficiency as an ongoing part of your wider energy strategy, rather than a one-off exercise to reduce costs.

Want to save up to 25% on your manufacturing electricity bill in 2027? Check your eligibility for the British Industrial Competitiveness Scheme before the deadline:

Why Is Energy Efficiency Important in Manufacturing?

Manufacturing sites can have particularly complex energy requirements. Electricity and gas may be supporting multiple processes at the same time, from production machinery and motors to heating, cooling, compressed air, refrigeration, lighting, ventilation, and other supporting equipment.

When these systems operate for long hours or across multiple shifts, even relatively small inefficiencies can add up. Equipment running when it isn’t needed, inefficient settings, poor maintenance, or energy losses elsewhere in the production process can all contribute to unnecessary consumption.

Improving energy efficiency can help manufacturers identify and address these areas, reducing the amount of energy required to keep operations running effectively. This can help lower operating costs while giving businesses greater visibility and control over how energy is being used across the site.

There can be longer-term benefits too. A more efficient operation can support sustainability and decarbonisation objectives while helping manufacturers prepare for increased electrification and changing energy requirements.

For manufacturers, energy efficiency is therefore about more than reducing consumption. It’s about using energy more effectively while maintaining the operational performance the business depends on.

Where Do Manufacturers Use the Most Energy?

Where energy is used most will vary considerably between manufacturing sites. The sector, production processes, equipment, and operating hours all influence the energy profile, so there isn’t a single breakdown that applies to every manufacturer.

However, there are several areas worth looking at when assessing energy consumption.

Production Machinery and Motors

Machinery, motors, pumps, and drives can account for significant energy use, particularly on sites operating for long hours or across multiple shifts.

Older or inefficient equipment can increase consumption, but so can machinery that’s oversized for the job or left running when it isn’t needed.

Heating, Cooling and Ventilation

Manufacturing processes and large industrial buildings may require significant heating, cooling, or ventilation. Controls, operating schedules, equipment performance, and regular maintenance can all influence how efficiently these systems use energy.

Compressed Air

Compressed air can be another energy-intensive part of manufacturing operations. Leaks, unnecessarily high pressure settings, and equipment running when it isn’t required can all result in energy being consumed without providing additional operational value.

Lighting and Supporting Systems

Lighting and other supporting systems may account for a smaller proportion of consumption on some sites, but that doesn’t mean they should be overlooked. More efficient equipment and better controls can still contribute to reducing overall consumption.

Before deciding where to invest, manufacturers need visibility over where, when, and why energy is being consumed across the site.

How Can Manufacturers Improve Energy Efficiency?

Improving energy efficiency doesn’t necessarily mean replacing machinery or making major changes to your production processes. Often, the first step is understanding how energy is currently being used and identifying avoidable waste before deciding where larger investments could provide value.

Measure and Monitor Energy Consumption

Energy bills can show how much you’re spending, but they don’t always explain where or when that energy is being used.

Monitoring consumption can help identify patterns, periods of peak demand, unusual usage, out-of-hours consumption, and particularly energy-intensive processes. Establishing this baseline gives manufacturers a clearer picture of where improvements could be made and makes it easier to measure whether those changes are delivering results.

Improve Machinery and Equipment Efficiency

Production equipment doesn’t always need to be replaced to become more efficient.

Regular maintenance, better controls, optimised settings, and reducing unnecessary running time can all help improve performance. Manufacturers can also review older equipment and consider whether more efficient motors, drives, or machinery could deliver worthwhile long-term savings when replacement becomes appropriate.

Reduce Compressed Air Waste

Compressed air systems can consume significant amounts of energy, making unnecessary use particularly costly.

Checking for leaks, reviewing pressure settings, and ensuring compressed air isn’t being used where it’s not required can help reduce avoidable consumption without affecting production.

Optimise Heating, Cooling and Ventilation

Heating, cooling, and ventilation should reflect the actual requirements of the building and its processes.

Reviewing temperature settings, operating schedules, controls, maintenance, and equipment performance can identify opportunities to reduce consumption while maintaining the conditions required for employees and production.

Improve Lighting Efficiency

More efficient lighting can contribute to wider energy savings, particularly across large manufacturing facilities.

Upgrading inefficient lighting and introducing controls such as occupancy sensors or daylight-based operation can help ensure electricity is only being used when and where lighting is needed.

Engage Operational Teams

Energy efficiency isn’t purely a technology issue. The people working with equipment and production processes every day can often identify machinery running unnecessarily, inefficient working practices, or opportunities to improve how energy is used.

Small operational improvements may seem minor individually, but repeated across multiple machines, shifts, and an entire year, they can contribute to meaningful reductions in energy consumption.

How Can Commercial Solar Reduce Manufacturing Energy Costs?

Once manufacturers have identified opportunities to use energy more efficiently, the next step is considering where that energy comes from. For many manufacturing sites, commercial solar can provide an opportunity to generate more electricity on-site and reduce reliance on the grid.

Manufacturing facilities can be particularly well suited to solar. Large factories and warehouses often have significant roof space available, while high electricity demand means there may be plenty of opportunities to use the electricity being generated. Many manufacturers also operate during daylight hours, allowing solar generation to coincide with production.

Electricity generated by commercial solar panels can be used directly by machinery, production equipment, lighting, and other building systems. This reduces the amount of electricity that needs to be purchased from the grid.

It’s important to distinguish solar from energy efficiency. Energy efficiency reduces how much energy your site needs, while commercial solar changes where some of that energy comes from.

Combining the two can create a stronger overall strategy. Understanding and improving consumption first can help manufacturers make better-informed decisions about the size and role of a solar installation.

Where solar generation and energy demand don’t fully align, battery storage can also provide an opportunity to store surplus electricity for use later.

What Role Can Battery Storage Play in Manufacturing?

Manufacturing energy demand isn’t always consistent throughout the day. Production cycles, machinery starting up, shift changes, and technologies such as EV charging can all create periods when electricity demand increases significantly.

Battery storage can give manufacturers greater flexibility over how they manage these changing energy requirements.

For businesses with commercial solar, surplus electricity generated during periods of lower demand can be stored and used later rather than immediately exported to the grid. Batteries can also discharge during periods of higher demand, helping reduce the amount of electricity the site needs to draw from the grid at certain times.

This can help manufacturers manage peak demand and provide greater control over when grid electricity is used.

However, battery storage isn’t automatically the right solution for every manufacturing site. Its potential value depends on factors such as consumption patterns, electricity tariffs, solar generation, operational requirements, and how the system is designed.

That’s why energy efficiency and battery strategy should work together. Understanding when, where, and why your site consumes electricity can help determine whether battery storage could provide genuine commercial value.

How Do You Identify the Right Energy Efficiency Measures?

Improving energy efficiency shouldn’t mean working through a generic checklist of upgrades. Every manufacturing site operates differently, so the right measures should be based on how your business actually uses energy.

The process starts by understanding your current consumption. Reviewing half-hourly or other available energy data alongside operating hours, production patterns, peak demand, and existing equipment can help identify where energy is being used and where opportunities for improvement may exist.

Future requirements should also be considered. Increased production, new machinery, electrification, EV charging, or site expansion could all change your energy needs over time.

From there, manufacturers can begin to prioritise opportunities using a logical approach:

Understand → Reduce Waste → Improve Efficiency → Generate → Store → Optimise

Some improvements may be relatively straightforward, such as changing operating schedules or reducing unnecessary equipment use. Others, including new machinery, commercial solar, or battery storage, may require greater capital investment.

The right priority depends on the expected savings, investment required, operational requirements, and your longer-term plans. Rather than focusing on a universal payback period, each measure should be assessed against the needs and objectives of the individual manufacturing site.

Make Energy Efficiency Part of Your Long-Term Energy Strategy

Energy efficiency shouldn’t be treated as a one-off project. Manufacturing businesses continually evolve, and changes to production volumes, machinery, operating hours, EV fleets, or site infrastructure can all affect how and when energy is used.

That’s why efficiency works best as part of a wider energy strategy. Alongside reducing unnecessary consumption, manufacturers can use energy monitoring to understand performance, generate electricity through commercial solar, store energy with battery systems, and review procurement to manage how electricity is purchased.

Future requirements, including EV charging and wider electrification, should also form part of that planning.

Ultimately, manufacturers have several ways to take greater control of energy costs. They can consider how much energy they consume, when they consume it, what they pay for it, what they can generate themselves, and how stored electricity could be used.

Looking at these areas together can create a more effective long-term strategy than approaching each technology or energy contract separately.

Could Your Manufacturing Site Also Benefit From BICS?

Improving energy efficiency is one way manufacturers can reduce their energy costs. From April 2027, eligible manufacturers may also be able to reduce certain electricity policy costs through the British Industrial Competitiveness Scheme (BICS).

For qualifying sites, BICS is expected to be worth roughly 4p per kWh, or up to around 25% of the electricity bill. However, being a manufacturer doesn’t automatically make a business eligible.

Eligibility is assessed site by site and depends on three tests: whether the site operates within a qualifying manufacturing sector, whether it produces a qualifying product, and whether it meets the relevant electricity intensity threshold.

The National Energy Hub can help manufacturers understand where they stand. Use our BICS Eligibility Checker to see whether your site could meet the scheme’s eligibility requirements.

Build a More Efficient Manufacturing Energy Strategy

Improving energy efficiency starts with understanding where, when, and how energy is being consumed across your manufacturing site. With greater visibility, businesses can identify unnecessary consumption, improve efficiency, and make more informed decisions about future energy investments.

Reducing waste is only one part of the opportunity. Commercial solar, battery storage, and the right energy procurement strategy can give manufacturers greater control over how the energy they still need is generated, purchased, stored, and used.

At The National Energy Hub, we look at the whole energy picture. That means considering your consumption, operating requirements, existing infrastructure, commercial objectives, and future plans before identifying the solutions that could deliver the greatest value.

Get in touch with The National Energy Hub to discuss your manufacturing site’s energy requirements or use our BICS Eligibility Checker to see whether your site could meet the scheme’s eligibility requirements and find out what your next steps could be.

Frequently Asked Questions About Energy Efficiency in Manufacturing

What is energy efficiency in manufacturing?

Energy efficiency in manufacturing means using less energy to achieve the same or improved operational output. This can involve improving equipment performance, production processes, controls, maintenance, and everyday working practices. The aim isn’t simply to reduce activity, but to use the energy your operations require more effectively.

What uses the most energy in manufacturing?

It varies considerably between sectors and individual sites. Production machinery and motors, heating and cooling, compressed air, refrigeration, ventilation, and other industrial processes can all contribute significantly. Monitoring your actual site consumption provides a more useful picture than relying on general industry averages.

What is the first step to improving manufacturing energy efficiency?

Start by understanding how your site currently uses energy. Reviewing consumption data, operating hours, peak demand, and individual production processes can help identify unnecessary usage and highlight where efficiency improvements could deliver the greatest commercial value.

Can manufacturers reduce energy costs without replacing equipment?

Yes. Depending on the site, manufacturers may find opportunities through better equipment controls, regular maintenance, optimised operating schedules, reducing compressed-air leaks, or switching off equipment when it isn’t required. Larger investments can then be considered where the potential savings justify them.

Can commercial solar help manufacturers reduce energy costs?

Yes. Where suitable, commercial solar can generate electricity on-site for use by production machinery and other systems, reducing the amount purchased from the grid. The potential benefit depends on factors including available roof or land space, electricity demand, and operating patterns.

How often should manufacturers review their energy efficiency?

Energy efficiency should be reviewed regularly rather than treated as a one-off exercise. Changes in production volumes, machinery, operating hours, electricity tariffs, EV charging, or site infrastructure can create new opportunities and change how existing energy measures should be managed.