Sustainability Financing Options for Grocery and Convenience Stores

In a previous article, I talked about energy efficiency budgeting opportunities for retailers in general. Here I'd like to drill down a bit and talk about those opportunities for grocery and convenience stores in particular.

First of all, when it comes to energy use for grocery and convenience stores, the biggest differentiator from other types of retailers is refrigeration, which accounts for up to 60% of the stores' electricity use.¹ A large commercial refrigerator used in grocery stores can consume up to 17,000 kilowatt-hours (kWh) of power per year, while a large commercial freezer can use up to 38,000 kWh.² The latter is the equivalent of using 1,038 gallons of gasoline, which would power an average size car for two years.³

Although energy represents only about 1% of these stores' total costs, that is approximately equal to a typical grocery store's profit margin. So a 10% reduction in energy costs can mean a 10% increase in profits, which is a pretty good motivator for implementing energy efficiency projects.⁴

Cool ways to save
Energy efficiency can be applied to all types of refrigeration, and as will be discussed below, energy efficiency financing tools make it possible to implement these projects with little to no upfront costs. Areas to consider include reach-in and walk-in refrigerators/freezers, as well as a multitude of food and drink storage and display cases.

One particularly effective refrigeration upgrade is adding pressure controls. These devices control how often refrigeration condensers run based on changes in the outdoor temperature. According to ENERGY STAR, one study showed that adding floating suction pressure controls to a typical California grocery store's refrigeration units can save an average of 30,000 to 60,000 kWh a year and adding floating head pressure controls can save an average of 75,000 to 150,000 kWh. In cooler climates, the floating head pressure controls can achieve even more savings.⁵

Other types of energy saving refrigeration equipment upgrades include installing walk-in cooler or freezer auto door closers, which keep temperature fluctuations to a minimum, and anti-sweat heater controls, which monitor the temperature and/or humidity in the store, running the door heater only when there is a risk of condensation.

The second biggest energy user in these stores is lighting, which accounts for approximately 23% of the electricity consumed. Stores that are still using inefficient fluorescent or incandescent lighting can benefit greatly from a light-emitting diode (LED) retrofit. ENERGY STAR-certified LED lighting lasts 20 times longer than incandescent lighting and two to five times longer than fluorescent lighting and drastically improves the quality of the illumination within a space.⁶ Other lighting upgrades can include installing occupancy sensors in less-trafficked areas and low-heat LED refrigerated case lighting.

Before embarking on an energy efficiency upgrade, grocery and convenience stores need to establish an energy baseline (the amount of energy the business uses) for the building where the energy efficiency project will take place. Grocery and convenience store operators can achieve this by accessing ENERGY STAR's Portfolio Manager. The online tool allows you to measure and track energy and water consumption, as well as greenhouse gas emissions. Use it to benchmark the performance of one building or a whole portfolio of buildings, all in a secure online environment.

Business financing options to consider
For California grocery and convenience store operators who are concerned about upfront costs for such projects, there are many energy efficiency financing options available that can work for any budget situation. Putting the projects off till later decreases operating effectiveness, lowers the customer experience and adds to the likelihood that the business will have to replace equipment on an emergency basis instead of doing it proactively.

Following are popular business financing options for California grocery and convenience stores implementing energy efficiency projects:

• Energy Services Agreements (ESA): ESA is a pay-for-performance financing solution that allows building owners to implement energy efficiency projects without any upfront capital expenditure. Under this structure the ESA provider pays for all development and construction costs and upon installation the building owner uses a portion of the cost savings associated with reduced energy consumption payments to repay the obligation.⁷
• Equipment Leasing: This is a different form of financing that small businesses use to cover the costs of an entire energy efficient project. Leasing and financing via loans help grocery and convenience store operators who are not ready to fund projects acquire the equipment they need to conduct their business operations.⁸
• Property Assessed Clean Energy (PACE): This is a type of financing that allows property owners to fund energy efficiency, water efficiency and renewable energy projects with little or no upfront costs. With PACE, residential and commercial property owners living within a participating district can finance up to 100% of their project and pay it back over time as a voluntary property tax assessment through their existing property tax bill.⁹ PACE financing is better suited to owner-occupied buildings.
• On-Bill Financing (OBF) from PG&E: This is financing through PG&E with no upfront, out-of-pocket investment. PG&E's OBF offers 0% interest loans between $5,000 and $100,000 with up to five years to repay. The monthly loan payment amount appears on the energy bill. It requires no commercial credit check or pledging personal assets. Loan terms and monthly payment amounts are determined based on estimated monthly savings from the project.¹⁰

The most effective type of energy efficiency project is one that aligns with a California business's budget and gets done. That's why it's important to work with a contractor, who will develop an ongoing energy savings plan for the company. To learn more about energy efficiency budgeting and business financing options, download "The Insider's Guide to Financing Energy Efficiency Projects" from PG&E.

1. E Source
2. U.S. Department of Energy
3. U.S. Department of Energy
4. E Source
5. ENERGY STAR
6. U.S. Department of Energy
7. American College & University
8. Equipment Leasing and Financing Association
9. Center for Sustainable Energy
10. Pacific Gas and Electric Company