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7 Key Retail Energy Management Strategies
Introduction
Multi-site retailers are under tremendous pressure to increase sales, cut costs, and provide
shareholders with consistent revenue and earnings growth year-over-year. They are expected
to deal with competitive, political, and socio-economic conditions that threaten margin by
reducing differentiation and affecting costs. At the same time, they must also create and
maintain a superior customer experience. The only way to succeed in such an environment is
to take control of those aspects that can be controlled.
Energy management plays an increasingly significant role in determining both energy costs
and a retailer’s ability to maintain a comfortable store environment for customers. Retailers
who have taken the time to develop a good energy management strategy know that their
energy program can be a rich source of savings.
The concerns of generating energy cost savings are very real. How does a multi-site retailer at
a corporate office get employees at sites around the globe to conserve energy? How do
retailers know they are paying the best price? Can energy usage be controlled? This
document outlines seven key strategies that retailers can use to optimize their energy spend
while maintaining a customer-focused retail experience.
Design for Energy Efficiency
An energy-efficient facility is the product of an energy-efficient design. The objective of the
design should be to create an attractive and comfortable shopping environment that operates
at the lowest possible cost. The positive or negative effects that the design has on a multi-site
retailer’s bottom line are compounded when the retailer replicates the design with every
facility added to the chain.
A successful, energy-efficient design should be based on three fundamental philosophies:
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Use only the most appropriate energy-consuming equipment.
Base decisions and selections on total life-cycle costs.
Allow for operational flexibility.
Before selecting air-handling and lighting equipment, retailers should examine mechanical
designs and the space available and review energy usage data from existing stores. This
information will help them select the right types and quantities of equipment and decide
where to place it.
Initial equipment costs are important but, if considered alone, can be misleading. When
selecting HVAC and lighting systems, retailers should think in terms of total life-cycle costs—
the costs involved in purchasing the equipment and operating it over a period of years.
Reliable equipment that runs efficiently might cost more up front but can produce energy
savings from Day 1 of operation—savings that reduce the overall cost of the equipment in the
long run.
It is impossible to predict what the store layout or operation will look like in a few years.
Retailers are constantly changing their image and operation to react to the market. A smart
design accommodates change by providing enough flexibility so retailers can respond
appropriately to their changing market.
Upgrade for Increased Energy Efficiency
Age is the primary cause of reduced energy efficiency. Equipment suffers wear and tear
simply from operating over time. Its efficiency can also be affected by catastrophic events
(hail storms, water damage, etc.). Retailers who upgrade their systems, incorporating new
equipment with new, cost-saving technologies, reduce their energy spend and realize quick
paybacks on their investment. The key is knowing what to upgrade and when.
Retailers should have a monitoring system in place that provides data about their equipment’s
operational efficiency. The system can be as simple as a manual inspection with information
recorded on a spreadsheet or a more complex real-time monitoring system that automatically
collects and stores data in a centralized database. The data collected and stored can be used
to identify equipment that needs to be upgraded to achieve acceptable levels of operation
and savings.
Retailers can also determine what equipment needs to be upgraded by examining new store
designs and the cost-saving equipment incorporated in them.
The right equipment upgrades will vary in cost (depending on what is required), but they can
produce energy savings and a quick return of the initial investment with minimal to no
interruption on store operations.
Use an Energy Management System
An Energy Management System (EMS) is a powerful tool with a proven track record for
producing energy savings based on the following factors:
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Retailers can establish operating parameters for the energy systems at their facilities.
The EMS provides automated control based on the established parameters.
The EMS collects and stores data that can be used to identify energy savings
opportunities.
When energy-related issues arise, an alarm system within the EMS notifies a
designated person or people. Issues can be resolved quickly, at minimal cost.
EMS technology is widely used in the retail market because it ensures that a store operates as
it was designed. It reduces maintenance costs, increases flexibility, facilitates centralized
management via the use of corporate Ethernet networks, and allows retailers to manage
more stores with fewer personnel.
Retailers who are considering installing a particular EMS or using an EMS supplier should
consider the following points:
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What features are critical to achieving energy savings? Which are simply niceties?
Do you have the staff and expertise to maintain and operate the EMS and associated
supervisory/reporting systems or should you outsource? What training would your
staff need?
How will the EMS be installed and what are the scheduling requirements? Which
contractors will install the equipment and are they trained?
When retailers select the right EMS and EMS supplier, they can focus their attention on
other areas of their business.
Use Energy-Saving Strategies
Energy usage reduction in retail space can be accomplished via many proven strategies. All of
them can be easily applied to retail designs, operations, and upgrade projects and have
documented successes to back-up their projected savings. The following are just a few of
these strategies:
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Scheduling and occupancy detection
Continuous commissioning
Daylight harvesting
Demand ventilation
Load shedding
Information about these strategies and additional ideas for saving money can be found on
the following Web sites:
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US Department of Energy (www.doe.gov)
EnergyStar (www.energystar.gov)
Alliance to Save Energy (www.ase.org)
Applying these proven strategies is a low risk way to reap quick savings. In addition, retailers
who apply these strategies should take advantage of rebate programs that can further lower
their installation costs and provide faster paybacks. Rebate opportunities exist for both future
projects and prior projects since some rebates can be applied post facto.
Measure, Measure, Measure
The saying “You can’t improve what you don’t measure” definitely applies to energy usage.
Energy usage data collection and analysis is a critical part of any successful energy costreduction strategy. Collecting and analyzing data allows a retailer to:
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Set a baseline based on normalized data.
Evaluate and prove the success of a strategy.
Recognize an abnormal situation.
A baseline identifies outliers, both positive and negative, across a portfolio of stores and
allows retailers to target specific sites for energy usage reduction programs. To create a
baseline, retailers should collect at least twelve months of energy consumption data as well as
square footage, operating hours, and weather information and normalize the data so that
stores can be compared. The International Performance Measurement and Verification
Protocol (IPMVP) is an internationally accepted industry standard for creating baselines. With
it, the weather and other operational changes that affect energy consumption are
normalized, thereby taking them out of the equation. The resulting data can then be
compared month to month and site to site. Retailers who depend on strategic partners to
manage their energy program should make sure that their partners use the IPMVP standard.
Another point to consider is unnecessary data (i.e., data that will not be used in the analysis).
Such information only clutters the picture; it should be omitted from the data collection
scheme. Retailers can build a concise and usable data set by determining what the baseline
normalization calculation should include and what other factors are important to identify and
remedy energy issues.
With the baseline in hand, retailers can determine what specific energy-reduction strategy
should be implemented and calculate a theoretical savings to be realized. After implementing
the strategy, they can check the theory against reality. These calculations can be simple rules
of thumb or based on the actual expected physics of the technique applied. In either case,
the measurement system will prove or disprove the expected savings. The data collection
system is used to test the hypothesis, and successful strategies can be rolled out without
additional testing.
Finally, on-going measurement allows retailers to identify deviations from the norm quickly
and investigate and respond. Some deviations are expected (for example, store hour
variations for special events); others come from unexpected failures (for example, a fault in a
mechanical system). Continuous monitoring and comparison of data with the baseline allow
retailers to react more quickly before the energy bill for an entire month has been drastically
affected.
Know the Supply-Side
Deregulation and energy market volatility create both opportunities and risks in relation to
energy costs. The best strategy for reducing that risk and keeping costs low is to use less
energy, but an effective supply-side strategy is also critical to overall success because it
frequently determines which demand-side strategies are used. Such a strategy involves:
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Buying smart.
Verifying the accuracy of bills.
Ensuring that bills are paid on time.
These may seem like trivial items, but when faced with hundreds of invoices per month from
various energy suppliers across the nation, this task becomes much more difficult. Retailers
should take steps to ensure that their bill payment process is timely and that there are
safeguards in place to avoid costly late charges and interest penalties. The process should
also include a rudimentary check to make sure the number is reasonably accurate. Mistakes—
such as incorrect meter readings, calculation errors, or even including a meter for another
company—can (and do!) happen. Knowing what to expect for a monthly cost per site and
having a quick check in place can help catch these mistakes. Retailers might also consider
outsourcing this service to companies that can find the best rate available for the retailer and
reduce the invoice processing cost.
More advanced supply-side strategies can help lock in energy pricing and lower risk in energy
procurement. These strategies are all built on knowledge of how a retailer uses the energy,
making baseline data even more critical. Going after the absolute lowest energy price will
always increase risk; retailers must know how much risk their company is willing to take
before selecting a procurement strategy.
Sustain the Effort
A truly successful overall strategy for optimizing an organization’s retail energy spend must be
sustained over time and become part of the organization’s standard operating procedures.
Energy management is not a one-time event. Programs that are not maintained quickly lose
their energy cost savings. Retailers need to incorporate individual parts of their energy
management program into their organization’s daily routine. For example, instead of
designing and reviewing energy strategies for individual store designs, change the store
design review process so that it includes a review of energy efficiency strategies.
Conclusion
Although there is no silver bullet for obtaining energy savings, the seven strategies described
herein are important components of any successful energy cost-reduction strategy. Novar
hopes that its concise presentation will help retailers take those first steps toward developing
or further refining their strategy. For a more detailed, technical explanation of some of the
items, please refer to Novar’s white paper entitled “Proven Success Strategies for Controlling
Multi-Site Retail Energy Costs across the Enterprise,” available on the Novar Web site
(http://www.novar.com).
Copyright © 2011 by Honeywell International, Inc.All rights reserved.
Published in the U.S.A.
No part of this document may be reproduced in any form or by any means
without prior written permission from Novar.
Novar; 6060 Rockside Woods Blvd.; Cleveland, OH 44131
Tel.: 800.348.1235??www.novar.com