Manufacturers need to set price points so premiums for more energy efficient equipment are paid back within two thirds of the product lifecycle, it has been suggested.
Research conducted for the ‘Equipped for the Future’ carried out by Hoshizaki UK found that the ‘two thirds’ figure served as the level where an additional premium was acceptable in the right conditions.
Some 50% of operators cite price as the one of main factors for not buying greener equipment, but the results indicate that if manufacturers are to charger higher prices for more efficient kit, the length of time that it takes to see a return on that extra investment needs to be reasonable.
The study found that payback periods were typically dependent on the lifespan of equipment, warranty length and the ROI for premiums.
The interplay of these factors meant it was impossible to identify a standard percentage or payback period as being acceptable.
However, a loose formula emerged which found that additional premiums were acceptable when:
– Payback is achieved before life cycle is two thirds completed and within the warranty period
– Life costings information is readily available, so payback can be demonstrated clearly
One senior procurement executive for a major national chain told researchers: “Generally, the life of a piece of equipment is at least five years. Therefore, as a general rule, pay back in two to three years would be reasonable.”
Operators that incorporate whole life-costings into their procurement process are more likely to see the benefits of investing in more sustainable equipment, the study claimed.
In some cases, this is driving a swerve in focus from capital costs to operating costs.
Kenn Tagg, commercial director of The Space Group, said that most corporates write equipment off after five to seven years, depending on how busy the site is. But when they look at what the overall cost is, they can be taken aback at the analysis between different products or brands.
“We were comparing some combi ovens so we put all the data for water, chemicals and electricity used into a spreadsheet calculator we had created. Over five years, one of the combi ovens we compared would save over £8,000 in operating costs.”
Enlightened operators agreed that budget equipment was recognised as being a false economy due to the high breakdown and replacement rate. This could be especially pronounced with refrigeration where breakdowns can also lead to high spoilage rates, as well as restaurant losses when a lack of food forces closures.
A study by the Carbon Trust, meanwhile, identified that a one-off implementation cost of £1,100 per site to replace refrigerators with those meeting Energy Technology List standards would be rewarded by cost reductions of £700 per site, per year. It would also reduce CO2e by 3.4 tonnes per annum13.