After labor, energy has always been the biggest expense that retailers have to pay to run their stores. These days, a faltering economy, rising energy costs, and an unusually hot summer in many parts of the country have combined to raise the stakes for energy management.
Are retailers rising to the challenge?
The good news is that many are. The bad news is that much more work needs to be done, according to executives familiar with the task of managing energy resources in food stores.
"With the increases in energy costs that we've seen, and with our ability to measure and track what we're using, we as an industry can make more of an impact on the protection of resources, while improving the bottom line," said Kathy Loftus, director of energy and environmental management, Shaw's Supermarkets, West Bridgewater, Mass. Loftus will be a speaker this week at the Food Marketing Institute's Energy & Technical Services conference in Bal Harbor, Fla.
"Many companies are doing a good job [of managing energy], but there are many companies that aren't paying attention," observed Jonathan Seltzer, a Minneapolis-based consultant and former executive with Supervalu. "As long as the refrigeration says 'cool' and it's not making hideous noises, it doesn't always get attention."
The U.S. Environmental Protection Agency states that supermarkets are among the most energy-intensive retail spaces -- using more than double the energy per square foot of other retail buildings. They employ almost 55 billion kilowatt hours of electricity each year, and spend nearly $4 billion annually on electricity alone.
But retailers who ignore energy-efficiency opportunities in favor of building and operating "cheap" stores are wasting money and limiting their profit potential, according to the Center for Energy and Climate Solutions. The nonprofit group is a division of the Global Environment & Technology Foundation, Annandale, Va.
"Supermarkets have been very slow to embrace energy efficiency," charged Joe Romm, executive director of CECS. "One can walk into a supermarket and see many opportunities with a one-year payback. But a lot of companies are conservative and reluctant to change."
Supermarkets and other "big box" retailers could save $3 billion on energy costs while cutting 20 million tons of pollution and helping avoid brownouts, according to CECS. By employing energy-efficient strategies and technologies, retailers can decrease their energy bills and increase profits, while improving the shopping appeal of their stores.
Shaw's Leads the Way
That's the formula that Shaw's has been using for its stores in New England. CECS has run ads in the New York Times and the Wall Street Journal highlighting companies that are energy-efficiency leaders in their particular industries. For food retailing, Shaw's was selected for its record in 2000, Romm said, when the retailer netted $3.7 million from energy savings. "Given that the industry has a low profit margin, that represents the equivalent of $150 million of grocery sales," he said.
Corporate energy manager Pat Smith said that Penn Traffic, Syracuse, N.Y., has a common-sense energy policy for its stores that operate in the Midwest under five banners, including Big Bear, Bi-Lo Foods, P&C Foods, Quality Markets and Riverside Markets. The corporate policy is reinforced each month with a checklist for store managers covering equipment functions, refrigeration and lighting.
"We try to keep it simple," he said.
Meanwhile, Giant Eagle, Pittsburgh, has a more formal approach to energy management, explained Cliff Timko, energy manager, who listed these steps:
Evaluate new technology for testing and possible implementation in new stores and retrofits.
Audit utility bills for the entire chain to check for errors and ensure that the right rate structure is applied.
Shop for deregulated gas and electric energy in Pennsylvania and Ohio, looking for the lowest-priced power that meets corporate requirements.
Maintain stores in peak efficiency.
Monitor stores by checking sensors and set points.
"We've had an energy management program -- in one form or another -- since the 1970s with the oil embargo," said Jim Iample, director of conservation for Giant Eagle. "As of late, we've been formalizing it and have been more aggressive. It's economically and environmentally driven. It's one way of reducing our overhead, and we've been very successful at it." While there has been a focus on energy management over the years at Shaw's, Loftus reported that several new programs are in the works.
"We've been able to look at the design of the store as a whole and really come up with life-cycle cost analyses that will allow us to afford certain technologies that in the past we would not have looked at," she said. "And we're able to implement more efficiency upgrades. As long as the returns are there, we're able to do some programs," she said, adding that one is an energy sub-metering and monitoring program.
In 1997, Shaw's tested a program that metered up to 16 of the largest circuits in the store. "Basically, we metered independently each refrigeration rack, the main HVAC unit, lighting panels, and then other smaller panels," she said.
The program was rolled out chainwide in 1998-99. It's budgeted for recently acquired stores, she added, and will be used for all other acquisitions.
"Shaw's has found that by investing in energy efficiency, we are able to more positively impact the bottom line," she said. "Last year, we received an Energy Star Partner of the Year [award] by demonstrating not only our kilowatt reductions and dollar savings, but also a corporate mission that educates our associates and our customers on the benefits of energy efficiency."
Supermarkets that meet certain energy-efficient criteria receive Energy Star recognition from the EPA. If all supermarkets qualified for an Energy Star, their annual energy bills would be several hundred million dollars lower, said an agency spokesman.
Meanwhile, Giant Eagle has leveraged improvements in HVAC such as systems that use a chemically impregnated wheel that absorbs moisture from the air without going through the normal air-conditioning process that cools the air.
"It's a way of reducing the relative humidity in the store," Timko said. "The refrigerated cases are very sensitive to high humidity conditions, which creates frost on the product and condensation on the outside metal of the case, reducing efficiency and increasing refrigeration costs. By running the store at a relatively lower humidity, we're able to eliminate all those problems and save on the refrigeration."
Twenty new stores are equipped with this system, he said, and it's being added to major remodels and building additions.
On the other side of the country, Raley's, West Sacramento, Calif., has reacted to rising energy costs. Ed Estberg, senior director of facilities, said the retailer has focused on designing and purchasing the most energy-efficient equipment and buildings. This year, Raley's published an Energy Handbook for its stores, explaining energy costs and presenting some ideas for conservation.
Said Estberg: "We will continue with white roofs over foam insulation, oversized refrigeration condensers, T-8 lighting, premium efficient motors on refrigeration systems, and full energy management systems controlled from the office."
In Chino Hills, Calif., Stater Bros. Markets, based in Colton, Calif., has installed a solar lighting system (see photo, Page 53) in a store that opened in May and will install it in a store opening next spring in Corona, Calif. The daylighting system, called Solatube, is a network of tubular skylights designed by Solatube International, Vista, Calif.
Stater Bros. had initially retrofitted six stores last year with emergency Solatube systems to provide backup lighting during the rolling blackouts caused by California's energy crisis.
The Solatube system uses a transparent, acrylic dome attached to a supermarket's roof, which filters out UV rays. Inside the dome, sunlight is harvested and conducted through tubes into the store through skylights that look like normal light fixtures. Stater Bros.' Chino Hills store has 164 skylights; the chain expects to cut annual lighting costs there by nearly half.
In Boise, Idaho, Albertsons has set a goal of reducing its annual energy consumption by 480 million kwh/year in its 2,400 stores, "and energy management is going a long way toward meeting and exceeding that goal," reported Glenn Barrett, senior energy manager. For example, he said systems and practices in new stores include energy-efficient controls with cutting-edge algorithms, and desiccant dehumidification systems with enhanced controls.
"We are also increasing operational awareness of energy-saving steps and methodologies at store level," he said. "We have added real-time, energy-monitoring systems to our stores and started to work with energy service bureaus to reduce energy and sustain the savings that were previously realized."
Penn Traffic has also turned to energy service companies to help its stores with their programs, according to Smith. They have assisted with energy engineering, reconditioning equipment and turn-key projects.
Keys to Energy Management
Energy experts and consultants who advise retailers on best practices believe that substantial energy savings are relatively easy to achieve.
And energy savings are bottom-line savings, according to the Center for Energy and Climate Solutions. For example, paring $5,000 a month from operating costs goes straight to profitability. "Depending on profit margins, that $5,000 could be better than a $100,000 increase in monthly sales, which entails increased costs for materials, labor, production and overhead. And, best of all, energy savings are permanent," states the CECS report "Energy Efficiency Opportunities: Big Box Retail and Supermarkets," which is available at www.cool-companies.org.
CECS targets these areas for savings:
Lighting -- Represents 30% to 50% of energy use. Lighting energy can generally be reduced by 40% to 80% by installing more efficient lighting fixtures and better controls, and by taking advantage of daylight when available.
Refrigeration -- Refrigeration load can be reduced with more efficient refrigeration equipment and better controls.
Heating -- Heating energy can be reduced as much as 50% by installing more efficient heating systems and controls, installing heat recovery equipment, and limiting the quantity of outside air entering the facility.
Air Conditioning -- AC can be reduced considerably by reducing heat loads, installing more efficient cooling equipment, using heat recovery, and controlling outside air that must be cooled and de-humidified.
