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Introducing the Integrated Net Present Value Framework
A tool for rethinking value in US light manufacturing investments
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The US light manufacturing sector is on the cusp of a great transformation. Electrification, automation, and smart manufacturing open the door to unprecedented value creation. However, legacy decision-making processes are often ill-equipped to account for the complex benefits of process modernization investments — even though decision makers themselves are aware of these new sources of value.
This report introduces the Integrated Net Present Value (iNPV) framework to bridge the gap between what decision makers know and what they can factor into quantitative hurdle rates to make better informed investment decisions. Traditional cost-benefit analyses consistently undervalue the total benefits of technological transformation because they largely overlook risk mitigation and additional revenue streams. The iNPV framework provides a guide to measuring and monetizing these values.
| Value categories | Value streams | Metrics |
|---|---|---|
| Operational flexibility | Energy efficiency savings | Reduce energy expense |
| Operations and maintenance (O&M) savings, uptime, and reliability | Maintenance cost avoidance; revenue from increased production | |
| Demand response and load management | Electricity cost saving; additional revenue from grid balancing services | |
| Risk mitigation | Fuel price and technology hedging | Reduced energy costs during price spikes; reduced financial services costs to manage commodity price volatility |
| Reliability via DER and storage | Outage cost avoidance; additional revenue from power sales back to the grid | |
| Health/safety and insurance cost savings | Cost savings from insurance premium reductions | |
| Market differentiation | Brand value, consumer preference alignment, and future product value | Additional revenue from the price premium on sustainability branded goods; additional revenue from Scope 3 environmental attributes |
| Reducing regulatory risk exposure | Annual value of avoided emissions |
RMI Graphic. Source: RMI analysis
The iNPV framework can help companies more holistically account for the value of electrification and automation and monetize overlooked cost savings and revenue streams. However, transforming this high-level framework into a directly applicable valuation tool will require action. Interested parties can take the following steps right away:
- To learn more about the iNPV framework, please reach out to Leia Guccione (lguccione@rmi.org) or Christina Pastoria (christina.pastoria@rmi.org)
- To stay in the loop about Schneider Electric’s forthcoming research and forum events, contact sri@se.com to be notified about upcoming papers, webinars, and cross-sector convenings.
RMI developed this framework with Schneider Electric to support transformative decarbonization investments in light manufacturing sectors. Complementing this work, the Schneider Electric Sustainability Research Institute is releasing dedicated research examining how light industry companies can integrate comprehensive value accounting into their investment decision frameworks and operational strategies. The team’s library of papers can be found at https://www.se.com/ww/en/insights/sustainability/sustainability-research-institute/.
About the Authors
Valeriya Azarova
Senior Associate
Nabil Bennouna
Principal
Megan Gross-Wilkinson
Senior AssociateThomas Kwan (Schneider Electric)
Silvia Madeddu (Schneider Electric)
Corey Stewart
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