Save energy, save money
Elsevier Food International Vol.7, No.1, February 2004 Pascal Kuipers
All retailers are confronted with the fact that their industry is a thin-margin business. So, be it out of responsibility for the environment or ‘only’ for the money, efficient energy management does pay off.
The Northeast Cooperative in Vermont (US) distributes organic produce, natural foods and natural products to its members that are primarily natural food stores and consumer buying groups. In 2002, it installed a new environmentally friendly refrigerator system, assisted by Vermont’s energy efficiency utility Efficiency Vermont. Northeast ast Cooperative invested US$415,000 in this and other energy-saving measures. The savings are some 1,250,000 kWh of electricity and a reduction of over two million pounds of CO2 emissions. This cuts the annual electricity bill by US$140,000, so the payback period is three years.
This effort earned Northeast Cooperative a 2002 Energy Star for Small Business Award. It succeeded Beltway, a 10,000 square foot supermarket based in Hemingway, South Carolina, that won this award in 2001 after investing in energy efficiency and thereby reducing energy costs by one third. Bestway converted an open freezer into a closed glass door freezer case, and standard fluorescent lamps into metal halide lamps. It also wrapped up the store’s hot water tank and attendant pipes in new insulation, and it took other measures such as planting trees to provide shade on the store’s forefront to reduce cooling costs in the summer. In doing this, Bestway managed annual cash savings of US$12,000 and energy savings of 9,600 kWh; a worthwhile investment that was earned back within one year.
Millions of savings
These are two of the success stories that can be found on the website of the US Environmental Protection Agency (EPA). Back in 1992, EPA introduced the Energy Star Program, a voluntary initiative to promote energy efficient products and energy management in residential and commercial buildings. “Our involvement with EPA’s Energy Star Program has been a huge success for our company, as well as educational to our associates, vendors and customers about energy conversation,” says Jeff Lowrance, spokesperson of Food Lion, the US subsidiary of Belgian retailer Delhaize who in 2001 managed to meet the Energy Star efficiency requirements. “Over the past three years, through new technologies and continual energy management efforts, Food Lion saved more than 1.2 trillion Btu (352 million kWh) and we reduced our energy consumption by some 20 per cent. In 2003, we saved 550 million Btu (161 million kWh), surpassing our original goal of 300 billion Btu (88 million kWh) which we have set ourselves again as a target for 2004. We have also reduced our natural gas consumption by 8.8 per cent. In 2003, we focused on store lighting, which accounts for 20 per cent of our energy load. Another area of emphasis was our refrigerator systems. At the same time we educate and train associates on energy-saving actions.”
Lowrance estimates that cutting its energy use by 550 million Btu last year, saved Food Lion millions of US$ in reduced energy costs. “The environmental savings are also significant,” he says. “Based on EPA calculations, each of Food Lion’s most energy-efficient stores saves as much as 86,000 kWh per year – enough to power nine American homes for an entire year. The energy savings at each store also prevent 190,920 pounds of CO2 emissions per year, equal to removing the pollution of 19 cars or planting nearly 26 acres of trees. We achieved energy savings equivalent to preventing 404 million pounds of carbon dioxide, taking 40,468 cars off the road, planting 55,435 acres of trees or powering 18,229 American homes. The last two years, Food Lion alone has reduced CO2 emissions by more than 674 million pounds.”
Impacting the bottom line
The cost of energy for large retail chains is estimated at 15 to 20 per cent of total operating costs. Because margins are traditionally low, energy cost reduction can thus significantly increase profitability. The EPA estimates that, on average, reducing costs by US$1 has the same impact on profitability as increasing off-the-shelf sales by US$85.
“No, this is too high a figure. The standard figure in the industry is that one dollar of savings is equivalent to US$35 of sales,” replies Gary Markowitz, president of Kilojolts Consulting Group, a consultancy focused on practicable solutions for effective energy management, facilities cost containment, and lighting design. “With energy waste approaching ten per cent of the typical energy budget, and energy costs spiking, retailers need to make this one of their top priorities,” he says. “With the slim profit margins that exist in the retail sector, retailers must find ways to cut energy costs now more than ever.”
“We don’t put a ‘cents per share’ number on our conservation efforts, since so many variables affect the bottom line. But we assure you the energy contribution is significant,” says a spokesperson of US retailer Albertsons.
“Our current capital energy efficiency programme will deliver simple paybacks well within three years,” says Kate O’Sullivan, spokesperson for UK retailer Sainsbury’s. “The reductions generated impact directly on our bottom line, with a cost impact of £1 impacting around £20 of sales.”
In its 2003 Environment Report, Sainsbury’s states that energy saving projects have saved approximately £1.25 million in 2002 and are projected to save £3.2 million in 2003. In 2002, supply chain efficiency delivered a saving of approximately £7.5 million and reduced CO2 emissions by Sainsbury’s truck fleet by 4,800 tonnes. Sainsbury’s has a corporate target of reducing CO2 emissions per square metre of floor area by ten per cent from a baseline of 1997/98 by March 2005. Progress against this target is reported internally on a quarterly basis. The retailer’s 2003 Environment Report states that in 2002/03 it used 5.8 per cent less energy per square metre than it was using in 1997/98.
In May 2002, Sainsbury’s signed a four-and-a-half-year contract with RWE, a company to which Sainsbury’s outsources its energy management. The target is reducing the retailer’s energy expenditure while improving efficiency. In May 2004 - two years after signing – energy consumption should be reduced by 11 per cent. According to Sainsbury’s 2003 Environmental Report, “(…) RWE are on track to deliver. (…) Sainsbury’s is anticipating a nine per cent energy saving, 1.4 per cent of which has already been delivered through completed works.”
Last year, Sainsbury’s started a £14.5 million investment programme – managed by RWE – focused on energy reduction projects in its stores, changing lighting, refrigeration and supply voltages which should reduce total electricity usage by two to 20 per cent per site.
Outsourcing energy management
Outsourcing of energy management is an option. “An outsourced energy manager with core competency in the retail sector can hit the ground running with little or no ramp-up time,” says Markowitz, who is in this business. “With an outsourced energy manager, the customer typically assigns an Internet resource – a maintenance manager, facilities manager or energy committee – to work as a liaison to the energy professional to facilitate their activities. By minimising ramp-up and developing programmes and projects consistent with the customer’s philosophy and culture, the outsourced energy manager is both cost-efficient and cost-effective for the customer.”
Wal-Mart does not outsource and keeps energy management in its own hands. “A team of associates analyse our energy bills to determine those which may be too high and research solutions,” says Sharon Weber, spokesperson of Wal-Mart Stores inc. “We are also currently beginning to test the use of real time energy data to diagnose inefficiencies without having to wait for a utility bill.”
Energy auditing is one of Wal-Mart’s major initiatives in energy management. “Another initiative is our Energy Control System,” says Weber. “Wal-Mart operates a 24/7 monitoring centre where associates centrally monitor and control the lights, HVAC and refrigeration systems from Bentonville.”
Especially lighting and HVAC (heating, ventilating and air conditioning) are key to a retailer’s energy consumption performance. “We retained European lighting design expertise to design our own light fixtures and reflector technology,” says Weber. “In the past two years we refitted over 900 US Wal-Mart stores with energy efficient lighting, and we will do the same at all Sam’s clubs in the next two years. We also scheduled to do so for 300 older Supercenters and for all our distribution centres. Testing and design results have been implemented in our new store design to maximise energy efficiency. An example of new store design improvement is skylights in all our new stores. This allows us to dim the lights during daylight.”
Behavioural change
Albertsons’ Energy Management and Procurement Department focuses on both the procurement of gas and electricity and the conservation or reduction in the company’s use of natural gas and electricity. “We use a holistic corporate energy strategy, requiring the collaboration of engineering, energy management, IT, construction, architecture, procurement, maintenance, finance, store operations and outside vendors in order to maximise the value to the company and its customers,” a spokesperson says. “In 2001, we committed to reducing our electrical energy usage by ten per cent in our existing store base. We have far exceeded our goal and already reduced our annual electrical energy usage by more than 600 million kWh.”
Albertsons calls it ‘holistic’, Markowitz uses the term ‘comprehensive’. “Retailers have to do more than pay attention. They need a comprehensive approach to energy cost containment that includes elements like: a verifiable programme for employee behavioural change (energy awareness); an energy commodities procurement programme; and energy management projects that result in an attractive return on the investment. These might include occupancy sensors within their rest rooms, designed high-efficiency lighting upgrades, automation controls, recommissioning of equipment, demand management strategies, and HVAC equipment upgrades.”
In his view, the focus is too much on technology only, while behavioural aspects of employees are neglected. “Changing lighting to something more efficient, day/night thermostatic control or even installing an energy management system are all fine opportunities that will reduce operational costs. But many retailers stop there, thinking they've done all that can be done,” Markowitz says. “When the high energy bills come in, they accept it as the cost of doing business, and simply pay them. Retail managers forget – or don't know – that their employees are also a source of energy waste. It doesn't occur to them that altering employee behaviour can be a major source of energy cost reduction. Customised employee energy awareness programmes significantly reduces energy costs. Verifiable, sustainable behavioural shift leads to lower costs, bolsters employee teamwork, and improves the retailer's competitive edge.”
Electric energy at an average US grocery store
Breakdown of use
| Lights | 23% |
| Refrigerations | 38% |
| Cooking | 5% |
| Water heating | 2% |
| Ventilation | 4% |
| Cooling | 11% |
| Heating | 13% |
| Miscellaneous | 4% |
EPA calculates a national average electric energy intensity on 52.5 kWh per square foot per year.
Source: EPA/Energy Star
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