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Profitability of Supermarket Energy Efficiency Projects

By Chris Recine
Sales Engineer at Fairbanks Energy Services

Supermarkets are a staple in our society, some of the most important and most frequently visited commercial locations in the country. They also make up one of the most energy dense industries. From constant refrigeration to lighting large facilities, supermarkets and grocery stores can benefit significantly from increased energy efficiency. And, as it turns out, money invested into a supermarket energy efficiency project directly affects the store’s bottom line.

 

Coins and money illustration, representing efficiency and profitability in grocery stores

Efficiency and profitability

One of the primary benefits of an energy efficiency project for grocery stores and supermarkets is the direct impact it can have on profit by lowering operational costs. Any energy efficiency project, small or large, is an easy way to cut overhead costs significantly, and a little-known secret is that these projects don’t have to be prohibitively expensive.

I’ve worked on supermarket energy efficiency projects in Connecticut where up to 75% of the total project cost was covered by CT state utility incentives. A well-planned energy efficiency project by an energy service company that hits multiple custom measures can result in a relatively inexpensive out-of-pocket cost with large annual savings and a rapid return on investment (ROI).

As the online publication Supermarket News reports, “…every dollar saved in electricity costs yields the same profit impact as boosting sales by $18.” With savings this high, grocery energy efficiency projects tend to pay for themselves quickly, many within less than a year if you take advantage of the proper utilities.

The added benefit of such large impact on annual spend is that even the smallest updates to your energy usage matter. Money-saving supermarket energy projects can involve small changes to existing equipment, with large savings, at a low investment.

Of course, as technology becomes older and more outdated, a complete equipment overhaul will become more and more necessary – and that’s fine, because the project will have huge savings effects as well. However, even small updates or fixes can make a noticeable difference in revenue and profit.

 

Working with engineering firms to obtain utility incentives

Supermarkets and grocery stores can obtain utility incentives to help cover project cost. It’s easier said than done, so one way to make grocery energy efficiency projects more manageable is to hire an outside company that can do the heavy lifting for you. Besides developing the financial scope for the project, engineering firms specializing in energy projects will:

  • Audit your facilities for energy opportunities, preferably at no-cost
  • Work within your business’ unique needs and ROI requirements to develop the right project
  • Engineer a solution that will save you significant amount of money with a short payback period

An obvious benefit is that this work, which can be overwhelming and time consuming, is handled by someone else. However, the most important benefit is that these companies have a better understanding of utility programs available to you, and they have experience maximizing the incentives from utility companies. This means receiving higher amounts of incentive dollars, spending less on efficiency projects and getting a shorter payback.

 

For more information on utility incentives, check out “4 Key Insights for Understanding Utility Incentives” »

 

Illustration of a srewdriver crossed over a pair of pliers, representing supermarket store improvements made possible with energy efficiency

Store improvements

Clearly, the direct effects of a supermarket energy efficiency project on profit can be huge. However, this doesn’t take into account the other ways that these improvements can help the overall store and, in turn, profit again. 

Lighting, refrigeration and HVAC improvements don’t just cut down overhead costs – they also better the overall in-store experience, for both shoppers and workers. The key to this is comprehensive engineering and controls integration. Improving your energy usage and equipment isn’t just cutting utility costs through the cheapest update to efficient products or equipment – the right supermarket energy efficiency planning (from the right energy service company) can both reduce costs and provide smarter technology. From temperature sensors and humidity controls to programmable LED lighting, an energy project can both save costs and provide better equipment for you and your store.

 

Why grocery energy efficiency improves the shopping experience

Lighting is one of the most important energy factors for a shopping experience because it is the most easily noticeable for customers. Immediately, lighting can create a welcoming or unwelcoming environment for consumers, which can affect how much time they’ll spend in your grocery store or even if they choose to enter it at all.

A supermarket with dim fluorescents or dead lights makes a shopper want to move through the store more quickly, meaning they’ll look at fewer offerings and potentially limit their in-store spend. These problems are common with outdated or inefficient lighting fixtures. An upgrade to LED lighting provides more stable, longer-lasting lighting and results in better light levels with clearer LED lighting color temperature on products too.

Additionally, with the right lighting upgrade, lights can be programmable and adjustable. This provides not only better overall lighting, but the ability to specifically design lighting to present your offerings. As Ecology Action writes, LED lighting can “[bring] out true colors in the presentation of food,” helping supermarkets’ “apples to look truly red, their lettuce to look green and their oranges to look orange.” Overall, the result is food that just looks more appetizing, encouraging purchase. 

Similarly, refrigeration upgrades keep frozen or chilled goods appealing and help them last longer on the shelf. Through dehumidification upgrades, supermarkets can maintain more steady temperatures within coolers and work to prevent the glass doors to these units from fogging up. In addition, the ability to fine-tune these internal temperatures prevents thawing and refreezing of frozen goods, which preserves food longer and works against the formation of icy crystals that may make items less appealing.

HVAC updates in supermarkets also function similarly to lighting, specifically by creating a more welcoming environment. Just as lighting may encourage shoppers to stay longer or to leave quicker, overly hot or cold store temperatures may make shoppers rush to leave the store. When shoppers are more comfortable, they’re much more likely to continue shopping, increasing their purchasing, which will directly affect the bottom line.

The recurring benefit here is that these efficiency measures, that will save supermarkets and grocery stores significant amounts of money, improve the shopping experience for guests and make them want to purchase more.

 

Why grocery energy efficiency improves your workplace

Just as a comfortable shopping environment is key for customer satisfaction, a comfortable workplace is key for increasing employee productivity and retention. In a 2016 Riptide/Intel study, research found that employee satisfaction is intrinsically linked to the workplace environment. With a more comfortable workplace environment, employees become more productive. This can mean quicker check-out lines, consistently stocked shelves or better inventory management, all factors that will clearly influence your bottom line. Finally, a comfortable workplace is key to employee retention.

While work environment is not the only factor affecting retention, it does have a huge impact on it. Higher retention cuts down on training costs and time spent searching for new employees, and it helps keep those employees who are best for your store.

 

Silhouette of man pushing grocery cart illustration, representing the urgency needed for supermarkets to pursue energy efficiency project options

Efficiency project options for supermarkets

Grocery stores can benefit from upgrades to three major areas in the store with high energy usage intensity: refrigeration, HVAC, and lighting.

While upgrades in any of these fields individually can result in large savings for a building, when combined these upgrades can work together to propagate decreased energy usage, increased profits and utility incentives. Through a project that hits these different factors, many supermarkets can take advantage of the three measures of gas, lighting electricity and cooling electricity to receive the highest amount of incentive dollars available to them.

 

  • Refrigeration

As refrigeration typically makes up 50% of all grocery energy usage, this line of your utility bill has the most to gain from an energy efficiency project. Refrigeration upgrades include installing anti-sweat technology to prevent humidity buildup and keep products visible, as well as installing high-efficiency motors beneath coolers to maintain stable temperatures, evaporate liquids within coolers and save on energy usage.

 

  • HVAC motor and mechanical upgrades

Updates to heating and cooling in a supermarket are another essential part of an energy efficiency upgrade. Aside from the benefits for customers and employees, these can affect the money spent on refrigeration and ensure that you remain in code with your ventilation. HVAC projects can include anything from boilers and chillers to fan motors, CO2 detectors, VFDs (Variable Frequency Drives) and other updates to AHUs (air handler units) or RTUs (rooftop units).

 

  • LED lighting

As previously mentioned, lighting is an important part of any grocery energy efficiency project. For a grocery store or supermarket, lighting upgrades involve:

  • Upgrading existing lighting fixtures to LED
  • Providing lighting controls and allowing for unique programming for individual store layouts
  • Installing occupancy sensors to turn off fixtures during off hours

 

Energy efficiency tips for grocery stores »

 

Maximizing your supermarket energy efficiency project

Ultimately, grocery energy efficiency upgrades provide some of the best returns I’ve seen in the energy industry. From short payback periods to large profit impacts, grocery stores everywhere are realizing how essential efficient energy usage is to increasing their bottom lines. At this point, the question for grocery stores isn’t whether to work on energy efficiency, but rather how.

With the continued strength of the grocery industry throughout the COVID-19 pandemic and the increased strain on grocery energy usage, now is the time to make these updates by finding an energy service company that can work around your schedule while upgrade your building.

There are many routes to take, but through an energy engineer or energy service firm, a supermarket can realize the energy changes necessary while taking advantage of the best cost saving options available to them.

 

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Post categories: Financing, Energy Efficiency, Grocery & Retail

Originally published on August 31, 2020 | Last updated on 08/31/2020

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