How Manufacturers Are Cutting Energy Costs Without Spending a Dollar Upfront | Ep. 90 [David Kipling]

What if manufacturers could reduce energy costs, lower carbon emissions, and modernize critical infrastructure without investing any capital upfront? In this episode of Industry Ignited, Dr. Leeanne Aguilar sits down with David Kipling, CEO of On-site Energy Group, to explore how innovative energy financing models are helping industrial companies unlock major savings while accelerating their sustainability goals. David shares his journey from corporate finance and renewable energy development to building a fast-growing energy business with more than $90 million in assets under management.

The conversation covers the biggest challenges facing manufacturers today, including rising energy costs, decarbonization pressures, and capital expenditure constraints. David explains how zero-capex, off-balance-sheet energy solutions allow companies to implement energy efficiency, electrification, and on-site generation projects while preserving cash flow and improving competitiveness. He also discusses winning Ford as an early customer, scaling across Europe, reducing Scope 3 emissions, and the emerging technologies that could reshape industrial energy over the next decade. Whether you're a manufacturing leader, sustainability professional, or business executive, this episode offers valuable insights into the future of industrial energy and decarbonization.

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Transcript

Dr. Leeanne Aguilar 0:06

What if energy-intensive manufacturers could cut costs, lower carbon, and modernize operations without spending any capital upfront? Welcome to Industry Ignited. I'm Dr. Leanne Aguilar, and today I'm joined by David Kiplink, CEO of On-Site Energy Group, a fast-growing UK energy business helping industrial companies deploy fully funded on-site energy and efficiency solutions through innovative power purchase agreements. David, welcome to the show.

SPEAKER_02 0:34

Thank you, Leanne. Thanks for inviting me.

Dr. Leeanne Aguilar 0:36

Now you began your career as a chartered accountant and corporate finance professional. What first pulled you towards energy, renewables, and eventually industrial decarbonization?

SPEAKER_02 0:48

Yeah, um it it's a it's a little bit of an odd journey. Uh one career ended and another one started. I actually ended a career in um factory the property sector and um was hadn't a clue what I was going to do. And this was a ended up being offered some jobs as a CFO in in the um innovative energy sector. Didn't like the companies, but actually liked the sector, and started realizing I could apply my corporate finance background into um into what was the emerging renewables sector then. So actually ended up specializing in um uh corporate finance in in renewables uh back in 2009-10, and then started actually taking the opportunity to combine that with the property skills and developing projects. So I sort of moved into um developing wind and solar projects back in 2010-11, and that's really what launched me into the into the whole space.

Dr. Leeanne Aguilar 1:46

Okay, so opportunity basically presented it itself.

SPEAKER_02 1:50

Opportunity presented, but it was a really interesting sector, and as it happened to coincide, you know, lots of other people we were I've ended up, you know, moving on to join and had seen the same opportunity around that sort of time, 2009-10, that energy was starting to decentralize and there was such a big opportunity. I think we all know it today as the energy transition, probably, but it but it it was this the first glimmers of it really in 2008-9.

Dr. Leeanne Aguilar 2:19

Yeah. Now you spent time working globally across factories in places like Mexico, the US, China, and Malaysia. What did that experience teach you about the real world energy challenges manufacturers face?

SPEAKER_02 2:32

Yeah, um, well, it was it was an interesting opportunity. I was actually working for an American corporate at the time. I I mentioned a few minutes ago that energy decentralizing was just starting to emerge. This particular manufacturer, which is based in Florida, had actually identified that as a sort of mega trend. And um being a contract manufacturer, they were really interested in trying to be um a manufacturer of choice for the energy technologies that were going to be form part of that decentralization revolution. And so I got actually approached to join them in a in a corporate development role, identifying emerging energy technologies that they could effectively bring under their wing into manufacturing. So it was um it was a fascinating time. We did lots of lots of deals, I did lots of traveling, met lots of really innovative, you know, entrepreneurs and people with great ideas and so on. And um, we ended up doing, I don't know, about 25 different deals in three years with all sorts of different types of energy technologies, brought them in under our wing into uh Jable in in in Florida, and um and so it was um I guess it was again it was sort of starting to be in that era where sustainability was becoming a a priority for some of our customers then. Some of the largest American corporates. Um I remember back in 1516, the first glimmers of, you know, you need your electricity to be green, you need to start becoming more energy efficient, started, started percolating through the organization. And and our business directors who were in charge of looking after that business um had to start taking notice because customers were starting to step up in 2015-16. And so it was pretty opportune that we had been investing in all this distributed energy technology at that stage. The question came, why don't we try and apply some of this cool technology in our own factories? And um, I uh I think I must have been less to step backwards. I stood, I ended volunteering to say, I'll do that. I ended up uh having a great time, forming a team, delivering sort of energy efficiency projects across our factories. As you mentioned, the you know, um Mexico, Malaysia, China, across the US and in Europe. So it was it was a great time, a lot, lots of um different experiences, different cultures. You've got to implement projects within. Understanding what drives a project team and a project manager in Mexico versus China is a real key to that, and actually having local representation to liaise with those guys and um make sure you're getting the full a f a full understanding of everything is key. But um, I think one of the things we also learned um across the globe is that our you know our facilities guys were all very well-minded, they were all very busy, but they also had different um skill sets. Not all of them had the skill set you needed to identify savings and opportunities in the factories. Um, some of them were very innovative, some were some weren't, but most lacked the resources to actually do anything locally. And so, you know, the ability to bring resources to the table to actually help implement the project is probably one of the key success factors in making projects happen.

Dr. Leeanne Aguilar 5:43

Right. How fascinating, though. That must have been very interesting times, though, getting to travel aro around the world as this emergent emerging technology was you know coming to be in all the different, you know, energy sectors, like you mentioned. And getting to travel around and as you mentioned, not only to learn about the emerging technology and innovation, but also the culture and seeing how people work and problem problem solve in in different parts of the world.

SPEAKER_02 6:09

Yeah.

Dr. Leeanne Aguilar 6:10

Yeah.

SPEAKER_02 6:10

Yeah, no, absolutely. And and you start to realize in different parts of the world, some people don't want to admit that they've got a problem with uh their their their internal say infrastructure and so on. So it's very uh one of one of I think key success factors is is not just not assuming things. Check things for yourself and make sure they're right. Yeah, the the key to success is making sure you've done your your homework before you start trying to implement the you know what you're gonna implement on is stable and it works. So yeah.

Dr. Leeanne Aguilar 6:40

Yeah. No, that's a good point. A lot of culture is right. Just you know, being able to admit certain things or you know the way they go about things culturally. The key to success is is identifying that and then working with it.

SPEAKER_02 6:52

Good good solid project management. I mean, these those cool skills go a long way anywhere.

Dr. Leeanne Aguilar 6:56

So you've said one of the biggest issues was that great energy projects often got shelved because of payback criteria. When did you realize the real innovation wasn't just technology, but the funding model?

SPEAKER_02 7:10

Yeah, I mean, I I come across it all the time now, Stella. I only last last week I had a company saying, you know, they've got a an internal payback criteria of two years. And it's pretty difficult to actually, apart from really low-hanging fruit type easy, easy quick wins, it's pretty difficult with any infrastructure to get a payback of two years. It really doesn't exist. And um I think what I was fortunate in in J Ball, I was operating at VP level, so I got access into treasury guys, legal guys, all the people who were making the sort of really key decisions around the reporting. We were a New York stock exchange listed company, so you know we it was great to see get um to talk to the people who were really involved in the inner workings. And fun fundamentally, you know, what's behind a two-year payback is actually uh somebody in Treasury probably looking after the um the the the investment rating of the of the corporate and trying to manage the balance sheet within certain parameters. And so almost it didn't matter how good the project was, if how cash rich the business was, often it came down to to um the bond rating or the investment rating of the business and you know comments uh the business had made to investors about capital expenditure, for instance, in the year there might be a cap agreed with investors to that they don't think you're going wild investing in CapEx and so on. And um so it suddenly really really occurred to me that that two-year payback is a simplification often for people who who don't need to know the full reason why why a business isn't spending all those hundreds of millions, billions sitting in the bank. It's about it's about credit rating and it's about bond rating and the and the rates they they borrow money at. Um and and that was what um we had in one of our in our California facility actually, um non-site generation from uh one of a fuel cell company who'd who'd put it in without CapEx for us on a 10-year power purchase agreement. And you know, um I think at that point I became aware of it, and maybe it's the accountancy background in in me, but um suddenly the penny dropped that actually if we could bring in external capital, do it off balance sheet, which was you know a really k critical thing. That was at the time we had very conservative um financial accounting guys in in our accounting team, you know, Enron was five years old or something like this, you know, and so the the people were very, very nervous about the accounting aspect of of these things. But if we could bring third-party capital in genuinely and deliver an off-balance sheets solution, it was a way to allow longer payback uh projects to proceed. And and fundamentally that's what we do today. We uh we often see a fantastic project that delivers really significant energy savings, significant carbon savings, but it may have a three and a half, four, four and a half, five year payback. And that would ordinarily sit on the shelf and not happen. We we enable those things to happen by us funding them and delivering the benefits as a fixed amount of uh price per kilowatt that we deliver, which is actually, you know, I should stress, at a rate that's lower than the the corporates already pay. So so they get savings straight to their PL, and they don't have the financial hit of uh going through CapEx and all the reporting aspects that that relate to that. So off-balance sheet third-party financing unlocks a lot of sustainability projects.

Dr. Leeanne Aguilar 10:31

Right. And so does your ability to create these different funding models uh set you apart? Does it di differentiate you and the industry?

SPEAKER_02 10:39

I think I think we're um they're very common in say single technology solutions. So you often heard about you know free solar on your roof and you know, and and um you know solar solar PPAs. And I think a lot of institutional investors are comfortable with known technologies and a single technology. I think what sets us apart is that we we do multi-technology solutions, where we include energy efficiency solutions, heating solutions, um infrastructure upgrade solutions, you know, around things like electrical infrastructure under the same funding structure. And so, you know, it allows a lot of things to be done that aren't just a single technology. I think from that perspective, we're fairly unique. Uh are also our funding source were a lot more flexible than many because many go back to effective institutional funding for their for them. Um they're often bound by institutional financing terms, and those institutions are looking for 20, 25-year agreements with quite stringent terms on them. My experience is most corporates don't really want to commit more than 10 years. Maybe they'll stretch to 15. So there's a bit of an impasse already between institutions and manufacturers. We try to be on the side of the manufacturers and give them structure they can accept and and make real difference in the way they operate by having much more efficient infrastructure they operate on.

Dr. Leeanne Aguilar 12:02

Yeah. Now, David, when you left Jable and founded On-Site Energy, what was the original vision? And how was that vision or how has it evolved as the company has grown?

SPEAKER_02 12:12

The the original vision was I'd seen the opportunity in in Jable. You know, at the time I I saw an opportunity to potentially cut our energy bill by half. Reasonable size investment, but it wasn't gonna it wasn't gonna happen through a sort of third party, you know, that that scale through a third-party finance option at the time. I think um I you know we'd spoken to a number of other companies and identified the same challenges. I think I think fundamentally where it's changed though is we've maybe got a a little um a little wider. I think we understand the the scope of what's driving companies more today. At the time there were no such things as science-based target initiatives, and many corporates hadn't uh committed to decarbonisation goals when I left 2018, 2019. You know, it was um uh and we've seen the uptake of um commitments to decarbonisation goals since sort of 2022 to 25. So many corporates now are um starting to enter the first real milestones in those in those commitments. Now there's a 2025 commitment, there's a 2020, 2030 commitment coming up, yeah. And many of them, I think, had maybe not appreciated how difficult some of those commitments are to meet, and and they don't have solutions for those commitments. So we're sort of um, I suppose adapting our model to helping recognize more that the sustainability journey people are on, and the fact that we can help them more on that sustainability journey. And I think one of the other factors that's happened in the last uh three or four years is we obviously had the cris the invasion by by the Russians and and what happened to energy prices as a result of that, particularly in Europe, uh we've we've got high and and and sticky high energy prices, much higher than you see in the US. So um, and that's caused a lot of pain. So there's you know a lot of businesses who are in tight margin sectors, a lot of the manufacturing sectors like food manufacturing and chemical manufacturing, particularly sort of commodity chemicals and so on, are really squeezed and are really feeling the pain of energy in Europe. And so, again, one of the key messages we've really adapted our model to is that what we're doing is actually helping businesses become more competitive, actually preserve jobs in the locations they're in, um, rather than jobs having, you know, going off to another country where the energy and operating costs are cheaper. So it's is really resonating with local um local manufacturing sites that actually we can make a real difference to preserving that factory on the site, not just so it's not just sustainability in terms of carbon emissions and so on, it's actually sustainability in having an operation there and preserving the hundreds and maybe thousands of jobs that rely on that particular site. Yeah, that that I think is one of the main evolutions.

Dr. Leeanne Aguilar 14:55

Yeah, yeah, that makes sense. Now you launched the business in 2021 and won forward as an early customer, which is a remarkable you know, accomplishment for a young company. What do you think helped you break through with such a major industrial name?

SPEAKER_02 15:12

Probably I'm a little bit of a smooth talker on occasions. I did not I did the sales pitch on that particular one. Um no, I uh we uh we asked them afterwards. I mean, and I and it was to me it was still unprecedented. I mean, I I got an explanation from Ford, and um to the to this day I still wonder, you know, how how on earth it happened. At the time, I was a one-person business. We were undercapitalized, we had no other track record and no other projects I could show other than what I pointed to I'd I'd done back in Jable. And and yet they took the chance on us. And actually, this was uh this is a Ford site. Um it was quite an unusual project in that um it was it was an established manufacturing site, but they were being disconnected from their utilities within a fixed timescale. They they took their utilities from another adjacent factory, and that factory needed the power back and the gas back and everything like this. So this Ford site was if it didn't hit the project within the timescale, it was going to have no energy, which is a pretty crucial operating issue. So um we the the what they told us after was we were the only company who came up with the sort of innovative solution that we had. And we're the only company that actually met all their um their question criteria. We'd we'd we'd worked hard on the approach we were taking, particularly to the to the use of heat uh in and its reapplication in the facility. So really we the we were the only one who was was prepared to do all of the finance and actually had a technical solution that met all their requirements and exceeded them. And I think that's we still try to do that today. It's very much about being innovative and going the extra mile and um you know trying to think what else we can do to to improve the solution, basically. So that yeah, that's that's where we are. And Ford's been a great customer and partner now for uh for five years nearly. And um, you know, we uh we've we've done four projects with Ford since then, and you know, we're hoping to go on and do a lot more with them.

Dr. Leeanne Aguilar 17:17

Yeah. Well, and I'm I'm thinking as you're you're talking, the the fact that you were new and and small and had a lot of agility, had you know the ability to to create a custom solution for them. And it sounds like you really listened to their specific needs as well. So you know, I think that probably had a lot to do with the the the fact that you were able to adapt to to what they were actually asking for in great detail.

SPEAKER_02 17:44

And and I think we try to do that even today. You know, we're we're nearly 50 people now, which do the same thing. Yeah, it's about listening to the customer, understanding their priorities, and then interpreting the data from their sites to make sure we hit their goals, basically. And um the exciting thing about the energy space is it's so fast moving from a technology perspective. So you know there's there's new there's new ideas and opportunities coming forward all the time.

Dr. Leeanne Aguilar 18:08

Right. Yeah. So smooth talking, yes, but but I think that it was actually value that you can. You're not meant to agree with that one, but it's a on-site energy has grown to more than 90 million in assets under management in just four years. What were the most important early decisions that set the foundation for that kind of growth?

SPEAKER_02 18:29

The main decision has been you've got a we've got an amazing investor uh family who are behind us. I think um we re they recognize at the outset that we um a lot a lot of businesses in our space um maybe focus on say winning the project with Ford, but then then they go out and fundraise. And and actually, you know, Ford actually has a deadline. Corporates, as soon as they make that decision to go, really they wanted delivered yesterday. And so the the ability to go out and or the ability to spend money as soon as they make that decision, or even knowing they're gonna make that decision and committing money to get it get ahead of the program and deliver on the program is really key. So, I mean, actually, we took the decision. One of the inhibitors that uh we'd sort of seen before was just the speed the banks move at. You know, the banks have their own time frames, they actually process things through. Um, and we couldn't wait for the banks. So actually, you know, one of the big decisions was the family capitalized us to be able to build the whole projects with completely with equity, not wait for the banks. And that was probably the foundational thing for me, because we really never looked back from that decision. Delivered, um I delivered three projects in that first year, all with equity. And you know, the bank funding came in six months later. So we'd have missed the deadlines before, you know, the thing wouldn't have happened. And so actually being properly capitalized at the outset and having a mature attitude to find where the finance is going to come was probably the most crucial thing.

Dr. Leeanne Aguilar 20:01

Aaron Ross Powell You're asking large industrial businesses to trust a relatively young company with critical energy infrastructure. How do you overcome the credibility hurdle when buyers naturally lean toward established giants?

SPEAKER_02 20:14

If ever you read Michael Moore's uh book, Crossing the Chasm, it's often used in the software sector. It's I think a classic from Silicon Valley, the the crossing the chasm thing. It was something that was drilled home to me when I was at Jable. Every product goes through an innovation cycle or an adoption cycle. And, you know, the first people who adopted the things are the absolute people with, you know, absolute tech nerds and and innovators who who were willing to try a product even though it's you know untested, unproven. And that's where we are. Energy services and energy as a service is a is a product that's been going through an innovation cycle. We started off, and really what we had to do was identify those companies at that stage that were prepared to take a risk on us and you know and had a had a had a need that they needed to fulfill and couldn't find another way to fulfill it. So that was that was the sort of limited market that we had available to us at that time. What we've done since then to breach that credibility gap is done a lot a lot of things around thought leadership and and um getting articles out there about how companies can address their their energy requirements. We've broken a lot of stories on on new approaches and new technologies. Um and of course, now we've got a lot of reference sites, and so there's nothing better than actually bringing prospective customers to a site you built and them realizing they could have one, and it's it's quite different in their mindset to what they'd expected. And actually, to speak to the facility manager of the place we've we've implemented it and for him to tell them their his experience of working with us and you know how well the system is working and so on is just absolutely invaluable. I think of the first open day we had at Ford, actually, I think we sent out something like 70 invitations, we got 50 accepted. acceptances and I think we got about six new customers straight away from that. So um yeah no I think that's it. You've got to you've got to prove you you're actually not you're you're walking the talk, not just talking it and um it's not just vaporware. So it's about real valid opinions and and the more you build credibility of those sort of things, the easier it is to sell to be honest. So our jobs becoming easier and easier as it goes forward and obviously it's being enabled by the business model we have as well.

Dr. Leeanne Aguilar 22:28

Okay. Now you said a couple of interesting things. For one, you said you're established you establish yourself for your company as a as a thought leader. So are you yourself the one who is out there publishing and and moving that you know conversation forward or do you have experts within your engineers who are creating that conversation around um innovation and in the energy space?

SPEAKER_02 22:50

It started off as be as me you know and obviously I I'd had the background in Jable and and investigating all these emerging energy technologies. So I had quite a good good background to to call upon. What's been really nice is we've actually um we've taken on a lot of engineers in our team now um even some younger younger graduates from universities and so on and it's been fantastic for them to start writing these articles. The team discusses the things we want to put out as themes now. So it's not just driven by me. We see opportunities in the market. We get um briefings on regulatory changes coming our way and things like this. So yeah we we've got a lot more to talk about now but no it's it's about staying topical and and understanding the needs of our customers and giving them advice you know related to that.

Dr. Leeanne Aguilar 23:37

So yeah no it's a a great marketing strategy and and I mean publishing those on you know whether it's uh your website blog press release or or distributing it throughout newsletter et cetera but that's a great strategy to start starting to appreciate the value of podcasts as well. Yeah yeah podcasts and it's all about content these days it's how people find you and it it's that credibility score right it is yeah exactly now you've described your company as more agile and entrepreneurial than larger competitors. In practice how does that agility translate into better outcomes for customers?

SPEAKER_02 24:12

Yeah we we try to pride ourselves on speed of response so ideally you know when and we hear this because we've we've recruited a lot of people from larger companies we can typically turn around data and go back to a customer with a proposition within two weeks uh we often the the the the the stories or anecdotes I'm getting is that could be you know two three months before anybody comes back. And equally we make decisions very fast. So we've got a very short short line of decision making so you know we can we can make a decision to back a um back a company back a back a um a concept we're putting out within a week in terms of you know sign off from our board and and so on. So yeah we we we're out there trying to um I say I think we're trying to develop more innovative solutions still we try to live by sort of speed of response quality response and uh innovation um in in a as our sort of core core principles. In fact there's a there's a fourth we've added on which is actually um um I'm trying to remember it now it's uh it's uh it it's uh about improvement as well so trying to improve the projects we've done during the lifestyle during the life of the projects as well so we're trying to better them so yeah we d we try to live by those principles we actually have KPIs to track ourselves against those principles and um we try to make sure that whatever we're doing in the organizations we grow, we try to stay true to those principles. Yeah it's about it's about speed engagement and quality engagement so that people understand it.

Dr. Leeanne Aguilar 25:40

Speed quality and like you said those KPIs being able to track your your outcome so it's not just you know it's talk, it's actual tangible results.

SPEAKER_02 25:48

Right yeah exactly.

Dr. Leeanne Aguilar 25:50

You mentioned that you have open houses or tour tours that you do like at at a site after and so it's I mean there's not a security issue or companies are open to that.

SPEAKER_02 25:59

Yeah I mean we've generally got a um a secure yeah we've got a compound of something we we are that our host company has allowed us to have um we generally lease that area. So yeah of course the sensitivity about going within the factory and um they don't want you know there's obviously sensitive manufacturing processes can be going on but um generally we're located outside of the main building we have a compound round around the back and um our energy center is usually within a um but it's usually within a secure perimeter that the factory's in so we don't have problems with you know strangers wandering into our facilities we we lock our facilities anyway but um yeah no it it's it's usually by prior agreement you know we're just um for instance doing an event in a week or so at a customer site where we're hosting actually uh the whole of the society of motor manufacturers in the UK coming to a to a to a motor site a manufacturing site and of course there's commercial sensitivities there but we've agreed the program and where they can be taken and what they can be seen shown and so on in terms of the equipment we've implemented. But um we find most of our hosts are quite proud of showing off what we've done actually so okay yeah I guess it it benefits them to show off their capabilities as well.

Dr. Leeanne Aguilar 27:15

I think it's a brilliant market marketing strategy as well to invite people to an event and show them what what you've created and and uh and the capabilities.

SPEAKER_02 27:25

I think often you know company directors or or sustainability don't have a clear mental picture of what it is you're proposing to them. You can put it show it in pictures to them and so on but until they actually visit a facility it doesn't somehow it doesn't become real to them and then suddenly it all clicks into place that actually this isn't this huge commitment, you know, or this it isn't this huge area of land that they need to to commit to this it actually can be quite small and and uh it works pretty well.

Dr. Leeanne Aguilar 27:53

Yeah like show and tell it really connects the concepts to the results and right very very much so for listeners who may not know how the model works how does a zero capex off balance sheet energy solution actually work? Like you were mentioning you know that strategy before and why is that so compelling for energy intensive manufacturers?

SPEAKER_02 28:16

So so um typically the out the output that we present to to a customer with a with the concept is is an analysis showing them um how much electricity they currently consume, how much gas they currently consume or other fuels they currently consume the costs of that and their current their current utility costs as as column one. Column two is basically a column that says this is how it changes if you go down the route of uh you you funding the capex yourselves. And so you know they can see the implications of that they can see the savings in terms of um the energy costs and they can see the capex value and they can see a payback. It's a very straightforward comparison. And then typically we have two other columns to the side and these are the two columns where we fund the the solution and it might be that we give them an illustration over 10 years or 15 years or whatever the right durations are. But they can see side by side the options of stay as you are fund it yourself or us fund it and and so on. And the most notable things are we we we pay for all the maintenance on the site if we do a zero capex solution. So we we fund we maintain our assets we take performance risk in our assets um we take responsibility for that so the only way we get paid is through delivering kilowatts to the customer and also the key point is that those that kilowatt value is known to them. We actually set the price of the of what how we're going to charge at the outset. You might ask you know where do we make money in this because obviously the r the rate per kilowatt is um less than the rate they're paying from the grid and yet we're paying all this money out to spend you know for to fund the capital. And it's really down to the operating efficiencies we're we're we're finding you know to generate say power on site um it's it's a lot it's a lot you know that efficiency is captured on site. You know so if you're putting in a gas engine say it's 88% efficient or thereabouts you deliver that power into the into the facility using gas as a as a fuel source and you still have all the heat to use on the facility which you don't with grid generation that heat gets wasted at the power station. So there's there's opportunities to do that and often when you are generating on site what they call behind the meter if if your viewers look at their energy bills they'll see two sets of charges basically or three three main categories of charges. They'll see a fixed charge sort of standing charge for their for their connection if you like their their capacity they'll see a charge that's rated per kilowatt for the energy they're actually consuming and they'll see a lot of other charges that are also charged per kilowatt which tend to be things like government subsidy recharges third party charges for use of grid transmission and things like this and certainly one of the challenges we have in Europe whether it's the same in the US I don't know but that energy bill could be 60% made of of third party charges and grid grid transmission charges. So if you're doing it behind the meter you avoid it all so you've immediately got a 60% discount on your bill and plus efficiency. And so what we what we do is we use some of that money the efficiency savings to effectively pay for our capex and our return on capital. So it's a great solution you know behind the meter really works for many manufacturers um it gives them control over their destiny it makes them more energy autonomous um it it it solves a lot of problems for people but they don't corporates don't do it. They think the only way to energy is to buy energy through a broker and through the grid. No is the answer. It's much more efficient to take control of your own destiny and and generate as much of your own energy as you can on site. It's it's a way to reliable operating costs is a and so on. So there's a lot of other advantages to doing it through through a PPA like like this. You know, it avoids capital replacement cycles when you've got the equipment is wearing out you know steam boilers become gradually less and less efficient and the older they get you know see a lot companies say working with a you know a 30-40 year old steam boiler is probably only 60% efficient so that 40% of this inefficiency is going up as wasted heat that they're getting no value for and yet they're paying for all that gas. You know just replacing it suddenly get a 30% efficiency gain. There's a lot of things like that that people don't spot and yet it can be funded through a zero capex PPA in the same way. You know we we can charge for kilowatts of electricity or we can charge for you know kilograms of steel steam or pounds of steam in the US I guess it's um that's how it works.

Dr. Leeanne Aguilar 33:00

Yeah. So do you think there's a lack of awareness for this type of model?

SPEAKER_02 33:05

Yeah I think so and it I think it's it's becoming more and more understood now. I think there was a reticence of doing these things I think um I think again there was a very common understanding or um view that a PPA is just 25 years solar PPA and doesn't really apply to us because it's it's solar solar has very little impact and 25 years is too long. Now I think people can appreciate you can do pretty much any energy technology any energy efficiency technology investment any electrification investment through a PPA. And you know the shortest PPAs so far we've actually done for Ford and we did an eight year PPA. So Ford um and I explain why eight years with it's actually a better deal for most manufacturers. They don't take as much savings because we've got to recoup the capital investment over a shorter period at the front end. Yeah. But at the end of eight years they step into full ownership and so it's like they've stepped into the capex benefits of of the the assets from year nine onwards and so it's a much it's a huge boost to their you know their energy costs at that point so their opex costs dri you know drop off a cliff. And so they've seen that as a real benefit. So yeah sure short term is actually better than long term even though you don't take as many short-term savings depends on the corporate whether they want to maximize savings in the short term and take a longer perspective to earn that but yeah that's that's a decision they have to take it yeah David you work across sectors including automotive food manufacturing chemicals pharma semiconductors and building materials what makes a company the right fit for on-site energies model energy intensive usually you know they're the high energy consumers on the side both generally both electricity and gas um that might mean they they particularly obviously energy intensive processes um or there's a there's a there's a particular climate they have to achieve within the building so air conditioning and humidity management and so on is is is a critical part of what they do. And it's often one of the things you walk into a building and you you don't appreciate you feel comfortable in a building but the infrastructure that goes into making you feel comfortable or making the machines operate in the right climate is is usually one of the biggest energy loads. But I mean no a a a a great right fit customer for us is generally a um a a multinational multi-site operation essentially with lots of different e each site can be different. Each site usually is different you know they're all laid out physically different they've done slightly different things they um have different utility costs different profiles different climates and so on so so we love that challenge. There's no one one size fits all but a multinational multi-site customer is the ideal for us and somebody who's spending a lot of money on energy.

Dr. Leeanne Aguilar 35:53

Yeah. And like you mentioned you're not just helping with solar or generation you're also supporting electrification efficiency and broader decarbonization strategy.

SPEAKER_02 36:02

How do you decide which mix of solutions will create the biggest impact for a given customer data we I think one of the things that sets us apart when people understand is we're not a product business. We're not tasked with selling X amount of solar panels each month and you know trying to maximize the amount of solar we put on a roof or or whatever we look at what is the best answer for the customer. And that's usually it's it's delving into not only the quantity of electricity or gas they consume, but understanding why it's being consumed and what is going on. So once we understand particularly on on um say heat that is going on I don't know producing steam at a particular pressure or or it's going into ovens or is going into healing processes or tempering processes or whatever we can start to to understand the potential solutions we can have to mitigate that that fossil fuel load and on and alternative ways to generate the power. If we we almost look at each factory as a as a black box and the black box tends to be supplied with grid electricity uh a steam boiler house or some of those facilities we try to look at ways we can actually generate those inputs much more cost effectively or with lower carbon. You know our challenge becomes that we we try to look at the physical layout and the data to to understand what we can do with the impact. So you know often in a large in a large um manufacturing site you might cover it with solar and yeah it would meet four or five six percent of the energy demand on the site it really doesn't doesn't move the needle. We're generally looking for something that really moves the needle and makes it an interesting project for the company as well.

Dr. Leeanne Aguilar 37:38

Yeah but you have a lot of tools at your disposal and so like you mentioned so you're customizing each um project according to the needs of the customer. Now you've also mentioned helping major customers work into their supply chains, especially around scope three emissions. How big of an opportunity is that and how does it change the role you or your company can play?

SPEAKER_02 37:58

Aaron Ross Powell maybe some of you might not be totally familiar with scope one, two, and three scope one is generally sort of um fossil fuel gas-based type emissions where where you build you're burning, I don't know, fuel fuel oils and gas and so on to in in your factory physically on site. Scope two is sort of bought in basically grid electricity and so on the the quantities and the carbon intensity of that that is being supplied. Scope scope three is basically the emissions from your shall we say non-site activity so typically it's transportation but it's also supply chain. So many corporates define I think it's one of the the the the scopes and uh is it's maybe less defined than others and about how far you you go and depending on the corporate policy some of them take a lot of responsibility for the carbon footprint of their entire supply chain some of them limit it to movements or whatever. But certainly a lot of our automotive clients take the supply chain emissions quite quite uh seriously but it's also uh many people's um uh sort of decarbonisation so far has been uh focused on scope two and scope one either buying buying offsets which is not a great long-term strategy or or or actually doing energy efficiency projects on scope one and two generally scope three they're at a much earlier stage in terms of their um their decisions on what to do and you know the challenge you've got there is you've actually got to measure it first of all so actually you've got to get the collaboration of your supply chain to report in a particular way you've then got to start tracking it and also you're not in a position to make the supply chain make changes quite often. You know it's down to that that company in the supply chain to make the investment decision to do something or or to identify something. So certainly some of our larger customers now who have very mature sophisticated supply chain programs so things like in the automotive sector they have supplier days now where they bring suppliers in and maybe run them through all their sustainability goals and you know explain the support they'll give them towards achieving sustainability goals and some of those are now starting to refer us in because you know we can actually we're effectively a free a free method of putting innovation into the supply chain and us funding the measures for the supply chain to adopt as well. So I think that's that's how we're um we're starting to be recognized and used as a as a really valuable partner for decarbonizing supply chain as well and doing the same job we do with the principal customer but actually just a level down.

Dr. Leeanne Aguilar 40:34

Yeah. Okay. Yeah that's very interesting that was all all new to me learning about the different scopes and yeah it's like okay how do you become responsible for you know reducing the the emissions of of your supply chain but I that makes sense you bring them in and you educate them and you offer them resources and and services like yours.

SPEAKER_02 40:55

Yeah and an ex an example also I mean we worked with a bakery client recently and um and we suddenly we spotted some temporary refrigeration units on site so they were actually freezing goods that are coming out of the factory, putting onto pallets, freezing them and then there's a constant stream of lorries coming in and out. And it turned out you know they had a they had a tiny capacity on site for storage and and yet they were shipping they had something like 11,000 pallets in cold storage about you know 15, 20 miles away. An example of scope three emissions is all those lorry movements that they're going backwards and forwards and and all that third party cold store energy emissions cost is part of their scope three. So as an example we actually came up with an alternative strategy which was to build them a bigger cold store themselves on site. And so which actually gave them much more production flexibility and ability to hold you know key ingredients which they otherwise couldn't. So we actually could save them 97% of their scope three emissions and save them a couple of million pounds in cold storage costs. So that's that's an example when you start thinking a bit more laterally about the sort of the things that can be done to improve business but also reduce scope three emissions.

Dr. Leeanne Aguilar 42:09

Yeah no that's very significant. Now on site is expanding into Ireland Germany and wider Europe. What are you seeing in those markets and what has to happen operationally and strategically to scale successfully beyond the UK?

SPEAKER_02 42:21

Aaron Ross Powell I mean we see we see similar patterns in those markets. They're all they're all generally high energy cost markets. We look at the regulatory support for the sort of things that we're doing you know are we allowed to do PPAs legally is there support for energy efficiency or or renewables and and so on in those markets and all all of them support that. I mean Europe is a is a is a good platform for that they're very you know progressive from that perspective. But I mean you know the key to operating strategically is to have good people good people experienced and know the local markets. We've been fortunate enough to do that we've got a very experienced um a very well connected head of Ireland similarly we're starting off in June in Germany as well we've got some experienced guys we've taken on there we're looking at recruiting experienced operational people into the into the to support them and we look for I guess one thing that's different from the US is we obviously have different languages to cope with in Europe as well. So we're looking for for the language skills but it's it's an understanding of as I alluded to back you know on the Jable days you know it's about understanding culture in those countries that's that's a little different as well. So we always try to learn lessons we try to partner in those countries as well. So it's really about trying to find strong local partners we can work with maybe with people with established operations that um we could we're already aligned with maybe in our domestic market that we're we're we're we're trying to move in with and we've got customers in the UK who have operating facilities in Germany and in Ireland and so on as well. So we try to go through our existing customers and to win projects in their facilities in those Countries. The same crossing the chasm analogy emerges in those countries. You know, we're right back at the beginning of the curve in Germany. We have no operating sites, nobody's heard of us, we've got no thought leadership in Germany. So, you know, we have to go through the same cycle again of building credibility in Germany, showing them operating facilities. Of course, you know, in principle, you can bring them over to the UK and show them the sites. But I think generally most people don't believe it until they see it in their own backyard, in their own industry, in their own backyard. So we've got to go right through that cycle. We've got to be patient, we've got to build again. And I'm sure that yeah, I don't think the cycles will be as long as the first time around, but that's exactly what we've got to do. We've got to recognize we're the newbie on the block and nobody's heard of us, and we've got to build trust again.

Dr. Leeanne Aguilar 44:46

Yeah. But you have your playbook and you have the experience and the awareness. And so yeah.

SPEAKER_02 44:52

We have customers who are recognized now as well. So it's much, much easier.

Dr. Leeanne Aguilar 44:57

Very true.

unknown 44:58

Yeah.

Dr. Leeanne Aguilar 44:58

So you're also watching and adopting emerging technologies, including high temperature heat pumps and other innovations. How do you balance being innovative with managing performance risk for customers?

SPEAKER_02 45:08

Aaron Powell It's something we did at the outset. I I'm quite passionate about trying to break new technology and give new technology a lift. And effectively, this is where many corporates, if they see a high temperature heat pump, they'd want to see it operating in the field for years before they take the risk of investing in it themselves. You know, I guess we're able, we we're we're fairly experienced people at systems integrating and spotting technology risk and so on and things. We also now have to do technical DD on a lot of these technologies as well, whether, you know, see whether they've been through, some sort of accelerated aging sort of testing and that type of thing there as well. But one of the things we've done for years now is we actually um engage external technical diligence, so uh external consultancy, the likes of people like uh DNV and so on to go in, we pay for them to go in, do a deep dive on the technology and the company as well, and and write a report for us. And so we also use DNV to extensively report on our projects. And so it gives our our funders a degree of confidence that we've got a third-party cooperation as well as our own view on the technology, and and actually DNV, um, we can also effectively uh our lenders can take reliance on DNV's report. So there's an element of a bit of a professional indemnity cover on the line from DNV as well. We we're always looking for innovations and technology breakthroughs and so on, but um whereas equally realistic, we've got to get warranties that are they're worth something. And um and uh um when you don't have that, you've got to get some additional comfort from, I say, the likes of working with a with a DNV.

Dr. Leeanne Aguilar 46:44

Right. Yeah, mitigating that risk. I think that's essential as well.

SPEAKER_02 46:47

Aaron Ross Powell, our business is all about mitigating risk, you know, whether that's financial risk or or commodity risk or or have you or performance risk. That's the business.

Dr. Leeanne Aguilar 46:56

Yeah. So David, finally, you hinted that your team is working on a potentially new form of renewable energy. Without giving away anything confidential, what excites you most about where energy solutions are headed over in the next three to five years?

SPEAKER_02 47:11

Uh yeah, I I mean I think I think there's there's a lot of you know boundaries being pushed now. Um energy technology is is probably changing faster than it's ever done in the you know 15 years or so. I've been tracking the sector now, seeing seeing tremendous things. But I I'm suddenly more thinking of integration, sort of end-to-end solutions. So um you know, a great example of that is something like carbon capture. You know, people talk about carbon capture as an end solution, yeah. But the reality is what do you do with the carbon once you've captured it? And I think I'm see I'm seeing lots of now technical breakthroughs in that as well. It's not about just storing it indefinitely and um which I think is a really bad idea, by the way. But it's um so I'm sort of seeing more integrated solutions, end-to-end solutions, and and I think that's one of the things that it we're in a fortune position to do because really there's not many people integrate and and look at it from one end to the other. It's trying to find a completely new new way to to view to view something. We've got something like that at the moment. We we see the opportunities to completely hit net zero in a large manufacturing site now with a solution that had been largely discounted, actually, which is bizarrely. It's because it's like looking at a headline in a newspaper. A lot of people look at the headline and think they understand the article, but they they don't read the article. And and and you know, and I think what's happening in energy is you know, we're reading the article, but we're also reading the book. It goes in. People at the the there's a bigger picture and systems coming together, you know, so things like microgrids are gonna become more common. There's gonna be multiple solutions to to address businesses. You might find them actually taking something out they put in because they realize it's actually constraining them to do a better solution overall. And I think that's that's where what's gonna happen in the next probably five to ten years, but certainly the innovation is gonna continue to happen in the next three to five.

Dr. Leeanne Aguilar 49:05

Yeah, well, exciting times. I guess we'll we'll see how things evolve.

SPEAKER_02 49:10

Brilliant. Thank you for your uh questions, Leanne.

Dr. Leeanne Aguilar 49:12

Yeah, David, thank you for joining me and sharing your insights. Great conversation. How can listeners learn more about on-site energy?

SPEAKER_02 49:20

Uh come and have a look at the website. You know, we're at um um www.on site site, that is, dot energy. And um and hopefully you see some a lot of our case studies and the things we get up to on there. Um you know, if anybody wants a wants a conversation, then please get in touch. We're we're we're pretty easy people to talk to.

Dr. Leeanne Aguilar 49:41

All right. Well, thank you, David. And to everyone listening, thank you for tuning in to Industry Ignited. Be sure to subscribe and join us for the next episode. Until next time, stay bold, stay curious, and keep igniting industry.