Retail energy management: The $3 billion opportunity

Retail energy management: The $3 billion opportunity

Shopping cart image by Aleph Studio via Shutterstock.

Energy management is one of retail’s biggest sustainability focus areas for good reason: Energy use is a major operational expense. The industry consumes about $20 billion of energy per year, making the opportunity for savings immense. The combined savings potential across the retail industry is a staggering $3 billion dollars annually — along with the important environmental benefit of dramatically reducing greenhouse gas emissions, according to a white paper recently released by Schneider Electric.

To put that energy efficiency potential in terms of sales, consider this example. A retailer’s energy costs could represent 5.5 percent of its store’s operating costs. If the store operates at a 4 percent profit margin, driving a 15 percent reduction in energy costs would increase its profit margin to 4.75 percent — an 18.7 percent increase in store profit.

Schneider Electric’s white paper identifies other energy trends that further highlight the need for a focus on energy efficiency in retail. For instance, the load profiles for food retailers versus non-food retailers differ dramatically. Due to refrigeration and HVAC needs, food retailers consume three times as much energy per square foot (51.3 kWh ft2) as non-food retailers (16.1 kWh ft2). Therefore, food retailers should prioritize refrigeration and HVAC-focused energy use reduction strategies while non-food retailers will find the most potential in HVAC and lighting projects.

To examine the industry another way, the research found that large format stores typically have an energy reduction potential of 20 percent to 30 percent, while mall-based stores have a reduction potential of about 3 percent to 10 percent. These estimates take into account the difference in types of energy consuming systems used in store sizes as well as the degree of control the retailer has over energy consumption, as an owner vs. lessee of the space.

The paper also examines the other variables that contribute to energy use intensity for all buildings, such as the size, age and location of a building. Given the diversity of building types a retailer may operate, such as warehouses, data centers, offices, small and large stores, it helps to consider the entire portfolio and categorize them by certain attributes. Interestingly, small buildings often have the highest per square foot energy costs, and some of the most inefficient buildings ripe for improvements were constructed after 1960.

To act on these enormous opportunities, the Retail Industry Leaders Association (RILA) launched a new Retail Energy Management Program earlier this year. This program will be a multi-year effort to guide retail energy, greenhouse gas and cost reduction by focusing on two main activities:

1. Mainstream leading practices: Develop and administrate a benchmarking program to guide retailers through adoption of the industry leading energy management processes

2. Develop next practices: Initiate pilot projects — with potential to scale across the industry — that demonstrate new technologies, systems or collaborations

As part of that program, RILA has already released a Retail Energy Management Maturity Matrix that serves as a roadmap to help retail energy managers optimize their energy programs. Retailers can use it first to baseline the maturity of their programs, and then to identify the best opportunities for improvement. RILA and Schneider Electric, the program’s sponsor, are looking forward to continuing to raise the priority of energy and cost savings in the industry along with analytics sponsor Wipro. 

Shopping cart image by Aleph Studio via Shutterstock.