The Warranty Wall
Every efficiency upgrade voids the warranty on something else
Welcome back to The Ledger - a weekly briefing of what’s happening inside complex systems around industrial decarbonisation. Welcome to Issue #15.
THE OPENING ENTRY
A mill in Scotland.
The energy manager has finally found the win everyone’s been waiting for: £400,000 in annual savings from installing simple variable-speed drives on the pumps.
Payback: 14 months. Carbon savings: enormous. Board approval: immediate.
Then legal reads the contract.
Installing VSDs voids the warranty on:
the motors (5 years remaining)
the gearboxes (3 years)
the control system (7 years)
the pumps themselves (4 years)
Total warranty value at risk: £2.7 million.
“We’d save £400k a year but accept £2.7m of liability,” the FD says. “That’s not a business case. That’s Russian roulette.”
The engineers know exactly how to save the energy.
The accountants know the numbers work.
The board wants the savings.
The planet needs them.
But the warranty forbids it.
This is the hidden architecture of modern industry: efficiency is technically easy, economically rational, operationally proven - and contractually impossible.
We’re not hitting a technological limit.
We’re hitting the Warranty Wall.
FIELD REPORTS
1. The Integration Impossibility
North East - chemical plant
They want to unify their control systems.
Not a moonshot - just Siemens, ABB and Honeywell talking to one another.
The energy savings: 18%.
The visibility: transformational.
Except:
Siemens warranty: “No third-party integration.”
ABB contract: “Modification voids all support.”
Honeywell terms: “Standalone operation only.”
If they connect the systems, they void £12 million of warranties.
“Each system works perfectly in isolation,” the chief engineer says.
“Together, they’d be brilliant. But legally, the plant has to stay stupid.”
2. The Heat Recovery Hostage
Wales - foundation industry plant
£1.8 million of recoverable heat goes up the stack every year.
A heat exchanger system would pay back in 18 months.
Except:
modifying the exhaust voids the furnace warranty
altering the draft voids the emissions warranty
touching the pipework voids the maintenance contract
“We’re burning money into the atmosphere,” the plant manager says.
“And we’re legally obliged to keep doing it.”
The OEM’s position:
Any modification constitutes unauthorised alteration.
Translation: We own your inefficiency.
3. The Software Stranglehold
Northern England - food processor
Their ovens run on software written when Tony Blair was in Downing Street.
The controls engineer could optimise it in a weekend:
30% gas savings
smoother temperature curves
consistent throughput
There’s just one problem.
Opening the code: warranty void.
Running third-party optimisation: warranty void.
Even analysing the data in non-approved software: warranty void.
“I know exactly how to save 30%,” the engineer says.
“But touching the keyboard kills the warranty on £8m of equipment.”
The manufacturer still sells the same inefficient control system -
but with warranties so restrictive that improvement is illegal.
4. The Efficiency Exclusion
Midlands - automotive plant
A new compressor arrives. Beautiful. Efficient. 10-year warranty.
The fine print:
“Warranty valid only when operated continuously at design capacity.”
In other words:
if they turn it off → warranty void
if they vary the speed → warranty void
if they run it efficiently → warranty void
“They’ve legally mandated inefficiency,” the facilities manager says.
I checked five other manufacturers: every one has the same clause.
5. The Retrofit Trap
Yorkshire - brewery
Government offers £500k toward a £700k heat-pump installation.
Everyone celebrates.
Then legal runs the warranty audit:
boiler warranty void if alternative heating is connected
refrigeration warranty void if heat recovery is implemented
building insurance void if heating systems are modified
Total coverage at risk: £4.2 million.
“The grant pays for the heat pump,” the FD says.
“But not for the financial penalty attached to it.”
The grant goes unclaimed. The heat pump never gets installed.
The inefficiency continues - legally enforced.
THE WARRANTY ARCHITECTURE
How the trap is constructed
OEMs didn’t build one wall.
They built five layers of lock-in:
Layer 1 - Direct Voids
Touch this → lose warranty on this.
Layer 2 - Cascade Voids
Touch this → lose warranty on everything connected to it.
Layer 3 - System Voids
Touch anything → lose the whole-system warranty.
Layer 4 - Predictive Voids
Planning modifications triggers premature reviews.
Layer 5 - Retroactive Voids
If modifications are discovered later → warranties voided from the date of change, including past claims.
This isn’t risk management.
It’s legal containment.
Not warranties.
Warrant cages.
THE ECONOMIC PRISON
The numbers are astonishing:
~£47bn effectively locked behind legal terms
Around £40–70bn of UK industrial equipment is still under OEM warranty or restrictive service contracts. ONS capital-stock data puts the UK’s industrial machinery base well above £250bn. Even assuming only 1 in 5 assets is still within a typical 5-10-year warranty window on a 20-year lifecycle - a conservative ratio - you land naturally in the £40-70bn band. Our midpoint: ~£47bn effectively locked behind legal terms.
£3.2 billion in annual efficiency savings are blocked by contract
Roughly £2-5bn of annual efficiency savings are structurally blocked - we benchmark at £3.2bn. Energy-intensive assets under warranty represent tens of billions in capital and billions in annual energy spend. Even the most modest “no-regrets” efficiency potential (5–10%) on that subset yields low-single-digit billions in avoidable cost. £3.2bn sits squarely in the conservative centre of that range.
This translates into an estimated 15-18 TWh of wasted industrial energy every year - about 5–7% of UK industrial consumption.
Government statistics place UK industrial energy use around 230-270 TWh. Apply a conservative 5-7% efficiency loss attributable to warranty restrictions and you land at 15-18 TWh - equivalent to the annual electricity demand of five to seven million UK homes.
A procurement director puts it bluntly:
“Every efficiency project dies in legal review. We’ve stopped proposing them.”
Engineers no longer ask “How do we optimise this?”
They ask:
“What are we allowed to touch?”
This is not a technical failure.
It’s a psychological one.
The Warranty Wall has created learned helplessness.
THE MANUFACTURER’S GAME
Why OEMs want inefficiency
Because efficiency kills their business model.
Restrictive warranties guarantee:
locked-in maintenance contracts
monopoly spare-parts revenue
avoidance of third-party competition
forced replacement instead of retrofit
regulatory compliance as competitive moat
An OEM executive was blunt:
“The machine is 5% of lifetime revenue.
The warranty lock-in is the other 95%.”
They’re not selling equipment.
They’re selling contracts - with machinery attached.
THE TRANSITION IMPOSSIBILITY
Every net-zero forecast assumes we will improve efficiency through:
controls optimisation
heat recovery
variable speed drives
system integration
process tuning
smarter software
But the contract terms say:
forbidden
forbidden
forbidden
forbidden
forbidden
forbidden
The uncomfortable truth:
Net-zero requires breaking warranties.
And nobody will break a £3m warranty to save £300k in energy.
We have built a legal system where:
the engineers know the improvements
the CEOs want the savings
the investors want the carbon cuts
the technology is trivial
the paybacks are short
…and the lawyers kill the project anyway.
Not because it won’t work.
Not because it isn’t safe.
Not because it isn’t economical.
Because the contract says no.
THE OPERATOR’S PLAYBOOK
For manufacturers
Run warranty audits before feasibility studies
Price “warranty risk” into every business case
Explore warranty insurance or carve-outs
Document efficiency losses for future claim disputes
Assume every optimisation triggers a legal battle
For policymakers
Treat warranty restrictions as climate barriers
Mandate “right to modify” for energy efficiency
Create government-backed warranty backstops
Require OEMs to publish compatibility matrices
Force transparency on contract terms blocking decarbonisation
For OEMs
The lock-in model will become politically toxic
The first mover to “open warranties” will own the transition
Efficiency-enabling warranties will soon be market-shifting
Customers are building lists of “efficiency-hostile” suppliers
The legal moat that worked for 20 years won’t survive the next 5.
THE LEDGER LINE
We spent forty years making industry efficient.
Then we spent twenty years making efficiency illegal.
The transition isn’t failing in the boardroom or the boiler house.
It’s dying in the small print.
Until we acknowledge that warranties shape the real carbon pathway,
that contracts kill more energy savings than engineering ever could,
that the legal wall is the real wall…
We’ll keep wasting energy everyone knows how to save.
Not by mistake.
By design.
Thanks for reading, and please share The Ledger if you have found it useful or insightful in any way.
Here’s to what’s possible
Dom