THE CURRENT SITUATION

Our research delves into the current energy efficiency issues within retail, the case for change and why retailers are struggling with energy costs.

THE REAL IMPACT OF ENERGY COSTS

Energy costs have now become a Board issue for UK retailers. In Q3 last year, non-domestic gas prices for large businesses were 180% higher than the previous year.[1] As a result, Iceland halted plans to open new stores last autumn after their energy bill rose by £20m, with Managing Director Richard Walker saying the business was “fighting to keep the lights on”.[2] Meanwhile, the John Lewis Partnership forecast an overspend on power by £18m.[3]

With over 12,000 supermarkets and 500 shopping centres in the UK, retailers are estimated to spend over £3bn on energy annually. At a time when sales growth has slowed and inflation is squeezing margin, retailers are urgently looking for solutions to reduce their energy costs.

MAKING THE SWITCH

Businesses are looking at switching to more efficient devices, but commercials are challenging.

Businesses have embarked on programmes to install LED lights. This is an easy win, reducing lighting costs by over 50% with a short payback on capital invested of between 1-4 years. Additionally, many retailers recognise untapped opportunities switching from gas boilers to more efficient heat pumps, powered by on-site solar with predictable costs, rather than drawing from volatile energy market prices.

But cash is king and capex is tight for retailers - and these are high cost items. We found payback within 2-3 years was typically required for investment in energy efficiency solutions, compared to 5-10 years for solar rooftops[4] and over 12 years for heat pumps which is limiting deployment of these solutions.[5]

[1] Quarterly energy prices 2023 | Gov.uk
[2] Iceland boss halts store openings as energy costs soar, calls on No10 for help | Retail Gazette
[3] John Lewis and Waitrose to dim lights and cut temperatures to save energy | The Guardian
[4] What is the average payback of a solar PV installation? | Centrica
[5] Study shows payback times for heat pumps could plunge by 2030 |PV magazine

ENERGY SAVING OPPORTUNITIES

There are plenty of energy saving opportunities in optimising how and when existing devices are used.

There are many examples of wasted energy in heating, cooling, lighting and refrigeration. Take supermarkets for example, which pump cold air out while HVAC produces heat to maintain a comfortable building temperature for customers; leave loading doors open, leaking heat from service areas; keep lights on in stores and car parks that are not adjusted for shift patterns; leave air handling units running all day even in areas of low or no occupancy, a legacy from Covid; and have refrigeration units that are not optimised for external weather.

Savings can be made in avoiding stock loss through better predictive maintenance of fridges and chillers and adjusting settings to respond to heat waves or cold snaps. Many of these could be addressed with software, analytics and some behavioural change, unlocking short-term savings and releasing cash to invest in new assets such as heat pumps and solar PV.