Significant investment in the development, upgrade and expansion of industrial manufacturing facilities is anticipated in the coming years. COVID-related material shortages revealed to many industries how overly reliant they were on external intermediaries and supply chain processes over which they had little control.
A future emergency, however, (e.g., another pandemic or natural disaster), could again leave them vulnerable. This has led to companies focusing on reshoring or nearshoring their production closer to where they have demand.
The United States provided a wave of stimulus to aid future expansion in advanced manufacturing industries (e.g., Inflation Reduction Act, CHIPS Act and Science Act of 2022). Industrial manufacturers in these sectors now have an unprecedented opportunity to take advantage of government incentives to build new or optimized facilities to be more energy efficient/independent and resilient.
This paradigm shift will require a high degree of planning on multiple fronts. For example, permitting, engineering, construction, workforce development and utilities — all while ensuring consistency with corporate environmental, social and governance (ESG) commitments. More than a third of the largest companies in the US have some form of net-zero target, with regulators looking to implement disclosure rules requiring documentation of progress.
Achieving sustainability requirements and targets such as net-zero energy, net positive water, and zero waste to landfill does not mean compromising on production or operational output. It’s more a matter of where to invest resources in both the short and long term in order to do both optimally.
What companies should start asking
As companies begin to shift their thinking in this direction, these are the questions they should be asking themselves:
- What if a facility’s utility infrastructure — energy, water, wastewater, compressed air, etc. — could be designed to have minimal environmental impact and operate as or more efficiently ten years from now as it did on day one?
- How much energy efficiency savings could be realized if all processes and equipment were optimized from day one and performance was guaranteed?
- What would it mean in terms of cost savings if a facility never faced an unplanned shutdown or had a compliance issue related to poorly run or maintained equipment?
Below are four tangible strategies industrial manufacturers should consider before entering into the planning stages of facility upgrades and expansion.
1. Design with energy independence, sustainability and efficiency in mind
Think long-term about your power needs both in terms of how much you’ll need and how to use energy as sustainably, cost-effectively and reliably as possible.
For example, electric buildings fueled by renewable energy sources, such as solar, wind, or geothermal, are a great way to reduce both scope one and two emissions while also eliminating reliance on fossil fuel and the price volatility that can accompany it.
Additionally, the implementation of microgrids can not only increase your energy independence, but also your facility reliability and resiliency — protecting you from unnecessary downtime related to power outages.
2. Incorporate water reuse and circular economy technologies
Water and valuable byproducts from a variety of industrial manufacturing processes are often prematurely disposed of because the initial equipment installed and processes in place were not designed for them to be reused and/or repurposed. New facilities should be designed to cost-effectively use every scrap of material and drop of water to its fullest potential for long-term savings.
Circular economy initiatives may even help with energy efficiency as some industries produce biogas as part of their industrial process. Systems can be designed to use the gas-to-power parts of their operation — in some cases making the facility eligible for additional tax incentives.
Finally, part of future proofing means planning for newer and better technologies that will likely come along in the coming years. Make sure to leave physical space to implement technologies that could more effectively and efficiently enhance reuse abilities.
3. Outsource utility operations & maintenance and consider third-party finance
Industrial facilities should be focused on what they do best and not worry about the many utility-related elements that can slow them down and cost them money. Staffing shortages and the need to develop and train the next generation have also placed a strain on companies that are looking to expand.
Partnering with an operations and maintenance (O&M)
company from the beginning ensures facilities have access to best-in-class operators who are skilled at streamlining operations processes, mitigating safety and compliance risks, and operating a variety of equipment and building technologies.
When selecting an O&M partner, first ensure they offer performance guarantees as part of the contract including but not limited to key performance indicators (KPIs) such as uptime, safety, energy production, and water treatment compliance.
In addition, consider tapping into third party financial structures and models such as Design-Build-Finance-Operate-Maintain (DBFOM) to monetize your industrial utility assets so you can fund critical infrastructure and asset upgrades.
4. Partner with companies who understand how to help you take advantage of government tax incentives
Subsidies and tax credits can vary by industry with special attention given to heavy industry and semiconductor manufacturers, but there are still billions of dollars available to incentivize industrial facilities to build new or expand their facilities and invest in sustainable energy practices.
Below are just some of the many incentives that can be explored:
From the Inflation Reduction Act
- $5.8 billion is available to help energy-intensive industries such as iron, steel, cement and chemicals reduce their emissions through retrofits etc., running until September 2026.
- Extensions of Investment Tax Credits (ITCs) and Production Tax Credits (PTCs) for qualifying clean energy generation projects, which commence construction prior to January 1, 2025.
- Clean hydrogen creation will be incentivized by providing for a base credit of $0.60 per kilogram of hydrogen produced, as long as the carbon intensity is within the range of 0-0.45 kilogram of CO2 equivalent (CO2e) per kilogram of hydrogen (H2). Where taxpayers comply with prevailing wages and apprenticeship requirements, they are eligible for a tax credit of $3/kg of hydrogen.
From the Infrastructure Bill
- $750 million in the Advanced Energy Manufacturing and Recycling Grant Program will support small and medium-sized manufacturers (must gross less than $100 million/year and employ fewer than 500 employees) to produce or recycle clean energy products or deploy cutting edge greenhouse gas emissions reduction equipment at facilities in coal communities.
- Hundreds of millions of dollars will be put toward workforce training in the electric grid, clean buildings, and industrial sectors like metal or electrical equipment.
- More than $10 billion for carbon capture, direct air capture and industrial emission reduction, providing skills-matched opportunities for fossil fuel workers.
From the CHIPS Act
- $39 billion will be available in grants, cooperative agreements, loans and loan guarantees available to companies working to advance US semiconductor and supply chain security interests.
- $24 billion in tax credits for companies engaged in domestic chip production.
- Service and cover any projects that start construction between Jan. 1, 2023, and Dec. 31, 2026.
- $11 billion for companies conducting chip-related research.
As industries begin facility upgrades and expansions, they should find partners who can help them optimize every facet of their facility and make the most of incentives to achieve their operational and sustainability goals.