Leveraging Technology to Reduce Energy Consumption for Retailers
I’ve been analyzing a study from GreenBiz, which estimated that US manufacturers have a $3 billion opportunity to save on energy costs if they manage their energy performance. Given the size of the Canadian retail market relative to the US market this translates to roughly a $300 million opportunity for Canadian retailers. The first question you must be asking is how do I get my portion of that $300m opportunity? You need to understand your energy consumption before you can begin to save on energy costs.
This week, I had the pleasure of presenting a webinar to the members of the Retail Council of Canada on challenges retailers are facing with managing their energy consumption and how data and technology can help them get control of their energy costs.
Mandatory reporting is going to necessitate that you collect and report on energy consumption soon. It’s starting with the larger facilities (≥ 250,000 square feet), with the intention of rolling it out to those ≥ 50,000 square feet in the third year. You’ll be relieved to hear that Bill 135, which covers mandatory reporting, has been pushed back to 2018. (You can find more information on how mandatory reporting will affect the retail sector here.) Nevertheless, I am going to show you the value of collecting your energy consumption data now; in addition to being ready for mandatory reporting. I’ll show you how you can get access to your data and how you can derive some true business value from it. But let’s get back to that $300 million opportunity to save on energy costs.
Small Energy Savings Can Make a Huge Impact
The average retail profit margin tends to be about 5%. That means that if you can identify a $1 energy cost reduction, that’s equivalent to a $20 increase in sales. If you look at one store location that consumes about $50,000 of electricity per year, for example one shop in a large coffee franchise or a small box store, and if that location can save 10% (or $5,000) on electricity, that’s the equivalent of making an additional $100,000 in sales. I repeat, an additional $100, 000 in sales from a 10% decrease in energy costs. That’s like selling 40,000 additional cups of coffee, or 2,000 additional T-shirts or 1,000 additional cordless drills per year.
Finding the Opportunity
When I talk to clients, they often say, we can’t control our energy costs – we don’t see the cost component in our bills that we can manage. If you look at your energy bill, there are 2 components (see below): there’s your consumption based charges, the kWhs, that make up between 80-90% of your bill. And then there’s the fee that your distribution company charges you to deliver electricity to your facility in KWs, which can make up 10-20% of your bill. The key thing to note here is that you are in control of both of these two factors: KWs and kWhs. And how well you can control these depends on where you are in an energy management perspective and the data you have at hand.
At Bruce Power Direct we assist Ontario business to identify and prioritize ways to reduce their energy costs. We do this through The Bruce Power Saver, which allows you to save time on tracking and reporting on energy use, enables data-driven decisions, and leads to energy conservation and cost savings.
In order to understand and reduce energy costs, we recommend our clients follow what I call the Continued Path to Excellence, which is four simple steps:.
1. Capture and Store ALL Your Billing Data in a Single Source
It all comes down to data. In order to begin to analyze and understand your energy consumption, you must first acquire and store all your billing data in one place. This means capturing your cost and consumption information from your energy bills. You’ll eventually need to do this for mandatory reporting anyway, so it’s good to get ahead of the game. Make sure you capture data from at least the past 24 months so you can get a clear picture of your energy usage over the seasons. There’s lots of business critical information to be found in your energy consumption patterns, so capturing and storing your information in one place should become a habit.
2. Ensure What You Pay is Correct and the Data is Accurate
Make sure that the costs you pay are accurate and that the data is verified. If you’re using an Excel spreadsheet, there is the risk of human error. There are also billing errors to the tune of 1-5% in this Province, so you need a system in place to verify your data. Energy management systems, like The Bruce Power Saver, allow you to drag and drop pdfs of your bills into the application to collect, store and verify your data. This allows you to save time while still maintaining a high quality of data integrity.
3. Establish an Internal Benchmark for Comparison and compare apples to apples
Once you’ve captured your data into a single source and verified its accuracy, it’s time to establish internal benchmarks to make comparisons. This will help you prioritize your efforts and identify cost saving opportunities in your portfolio. Begin by looking at your energy consumption over a fixed point in time; say 12 months. Sort your bills from highest to lowest energy consumption per location. Your biggest dollar opportunity is in the location that uses the most kWh. In the example below, that’s the location that used 227,000 kWh in the past year. If you can identify a way for that store to reduce their energy consumption by 10%, then you can reduce your energy consumption by 20,000 kWh and deliver $2,000 in savings every year.
Next, you want to compare apples to apples to normalize your data (like kWhs/sq ft.). This is called an intensity comparison (see below). In our example, if you can find the location with the highest intensity and reduce it to the average, you can generate $3,500 in annual savings.
4. Perform simple comparisons based on the data
We also used data based comparisons to help identify why a warehouse facility was using peak energy between at 6:00 pm – two hours after their shift ended and the warehouse cleared out. Upon further investigation, we were able to determine the problem. The electric forklifts used in the warehouse were plugged in to charge at the end of every day, causing a spike in their demand. Within a month of our initial conversation, timers were installed on the chargers that delayed the charge cycle. This lowered their peak demand by 20% and reduced their total costs by 4%. In a world with energy costs rising 8 – 10% per year, this client just eliminated half of that cost increase. Read more about it here in our case study.
Whether you’re already doing a good job managing your energy consumption, or you are just getting started, there are opportunities for you to save significantly on your energy costs and this simple data based tactics are a great place to start. The Bruce Power Saver can make the task much simpler. It can aggregate your energy information from various locations into a single cloud-based management system, help you set your benchmarks, normalize your data to help you compare apples to apples, and even verify your bills. Regularly analyzing your data can help you eliminate wasteful energy use, identify anomalies and develop a continuous plan for improvement.
Want to see the Bruce Power Saver in action? Watch this short video for a quick tour and see how easy it to get started on the path to energy savings.