OPINION: Rising electricity costs will focus supermarkets’ minds on refrigeration

Supermarket refrigeration

Reducing energy consumption remains high on the agenda for UK food retailers, not just to meet obligations under the Carbon Reduction Commitment Scheme, but also to slash costs in an increasingly competitive retailing sector. Ian Wood, co-founder and managing director of refrigeration innovator, Adande, examines the impact of rising energy costs, post Brexit implications and the options for food retailers seeking to improve their energy efficiency.

The UK food retailing sector is made up of some 6,578 supermarkets or superstores and a further 50,000 convenience stores. It is estimated that these outlets account for 3% (10.75 TWh) of the UK’s total electricity demand in 2015, which was approximately 358 TWh.

Total national electricity consumption has continued to reduce in recent years, with the final consumption of electricity down by 0.3% to 83.0 TWh in 2016 Q1, compared with 83.3 TWh in the same period for 2015. Alarmingly, during the same period, imports of electricity rose by 16% (0.9 TWh) to a record high of 6.0 TWh, representing 7.3% of UK consumption. This electricity was imported from France (3.9 TWh) and The Netherlands (2.1 TWh).

Our electricity exports fell by 40% for 2016 Q1 compared with the same period for 2015, meaning that the UK continues to be a net importer of electricity.

The post Brexit fall in the value of the pound sterling against the US dollar and the Euro will increase the cost of these imports and further exacerbate the year-on-year rise in electricity prices. The exchange rate situation will also increase the cost of mineral resources, such as gas and coal, which we continue to import for our electricity generation plants.

In the medium term, the UK’s decision to exit the EU has created further uncertainty over the import of electricity and the mineral resources required for power generation. It seems inevitable that we will need to negotiate new trade deals with the EU and its member states, which could have implications on the availability and cost of future imports. One newspaper report claimed that Brexit had created doubts over the future operation of the UK energy market and increased financing costs, which will lead energy companies to demand greater subsidies to build and operate power plants, adding £350m to energy bills.

Around 50% of energy consumption may be attributed to refrigeration in a typical supermarket, illustrating why increasing the efficiency of refrigerated display equipment provides an opportunity to cut costs, writes Ian Wood.

Looking further ahead, there appears to be little good news for large scale users of electricity. Despite investment in renewable energy, including wind, wave, solar, and biomass, these sources still only account for 21% of UK generated electricity and the jury is still out on whether these represent a viable return on capital investment.

The recent announcement that the development of the new plant at Hinkley C will go ahead will increase the UK’s capacity for nuclear energy to meet 7% of Britain’s energy requirements. Currently, nuclear represents just 21% of total electricity generated in the UK. However, it appears likely that power generated at Hinkley C will come at a cost premium. The Institute for Economic Affairs has claimed that Government subsidies mean that EDF will be paid £92.50 per MWh for electricity generated at the new plant, compared with a current wholesale price of approximately half that.

Faced with an inevitable increase in the cost of electricity, what can food retailers do to reduce energy consumption, cut costs and limit their carbon footprints?

Refrigeration may account for between 30% and 60% of a store’s electricity usage, depending upon store format, size, food offering and environmental control systems employed, but it is generally accepted that in a typical supermarket, 50% of energy consumption may be attributed to refrigeration. Therefore, it is clear that increasing the efficiency of refrigerated display equipment provides a significant opportunity to reduce energy consumption and associated costs.

Whilst some retailers and equipment manufacturers have employed glass doors on open front multi deck refrigerated display cases as a means of making energy savings, it has become increasingly apparent that glass doors are not necessarily the solution for all grocery retailing environments. The frequent opening of doors in high traffic areas, especially in convenience retailing outlets, severely limits the efficiency of doors as an energy saving solution and compromises cabinet holding temperatures.

In my opinion there is room for more than one solution for the improvement of energy efficiency in refrigerated retail display cabinets, even within the same store

There is also evidence to suggest that glass doors act as a barrier to shopping and particularly impulse purchases. In today’s competitive grocery retailing environment, it is impractical to introduce barriers, which may negatively impact on sales. In addition, there is the capital cost of fitting glass doors, together with ongoing maintenance and cleaning costs, which bring into further doubt the viability of the glass door option.

Our own solution, Aircell, is an air flow management system, which has been designed to be compatible with most OEM’s open front multi deck cabinets or retrofitted within existing equipment. Fundamental to the Aircell concept are three vertical air curtains, rather than one, which reduce cold air spillage, improving energy efficiency by 30% to 50% and tempering cold aisle syndrome.

In my opinion there is room for more than one solution for the improvement of energy efficiency in refrigerated retail display cabinets, even within the same store. Glass doors are suitable for retailing areas with minimum footfall and low sales, while conventional open front multi decks will continue to be the answer for operations where merchandising flexibility and frequent changes to shelving configurations are required.

Aircell provides all of the advantages of the shopper friendly open front multi deck and is particularly suited for areas with high traffic and large volume sales, whilst delivering significant energy savings, tighter holding temperatures and a more comfortable shopping experience.

I have no doubt that refrigeration equipment manufacturers will continue to develop new and more energy efficient cabinets. It remains to be seen, which products and technologies will be adopted by retailers, but one thing is for certain: the need to address energy consumption is now more important than ever.

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