A more efficient use of energy in retail buildings can significantly enhance retailers’ economic competitiveness. For instance, a 20% cut in energy costs achieves the same bottom line benefit as a 5% increase in sales.
Despite the substantial savings that can be made, the initial investment in energy efficiency can be difficult for retailers to bear. This should not, however, be seen as a barrier to energy efficiency as financing schemes are available which link the expected savings in energy costs and/or income from energy generation to cost of the technology, negating an initial capital expenditure. And, although the sector has made great strides towards increased energy efficiency, changing legislation and rising fuel prices mean energy saving is becoming increasingly important to retailers.
It is estimated that most UK businesses can reduce energy consumption by 10% to 40% every year by implementing measures such as energy efficient lighting and heating or investing in modern technologies. The retail industry is no exception. A report from the British Council of Shopping Centres (BCSC) shows average energy costs can be reduced by 55% when 20 year old equipment and technology is upgraded. Retailers can also make significant savings on maintenance costs, anywhere between 20% and 37%, if key energy consuming equipment such as lighting, heating and ventilation is replaced.
These potential savings are particularly pertinent as the government has predicted significant energy price rises – electricity prices in the services sector will increase by 66% and gas prices will rise by 31%, when compared with 2013 levels.
Retailers will also be mindful of government plans to implement Minimum Energy Efficiency Standards by 2018, legislation that will render the leasing of buildings or units with low energy performance unlawful. Some buildings could be considered unfit for purpose if improvements to meet minimum standards cannot be made in a cost-efficient way. Therefore, the need for retail businesses to realise carbon savings is increasingly urgent.
For many retailers, the main drawback to implementing energy efficient technology is the initial cost. The financing issue, however, does not have to render investments in energy efficient technology unfeasible. Viable financing options for energy improvement measures are available in today’s market.
One such example is Siemens Financial Services (SFS) Energy Finance. With the aim of providing alternative financing for organizations looking to acquire energy efficient, green equipment or technologies, SFS Energy Finance makes a practical connection between the expected savings in energy costs and/or income from energy generation to the financing arrangement’s monthly payments. Effectively, through SFS Energy Finance, organisations can benefit from a financing solution that can make the investment zero net cost or even be cash positive if the savings are greater than the monthly financing payment.
This helps retailers make carbon-friendly investments while keeping their existing lines of credit intact and preserving their working capital for other business activities. SFS Energy Finance works with a range of suppliers and manufacturers of energy efficient technology to integrate finance into energy solutions. The convenience of combining technology and finance removes the need for customers to seek funding for equipment acquisitions externally.
A wide range of technology including heat pumps, LED lighting, solar PV, biomass heating, anaerobic digestion, biogas facilities, combined heat and power (CHP) facilities and wind power can be financed. Payments can be customised to suit each client’s requirements and budgets, meaning that retailers can focus on finding the best solutions for their premises without capital budget restrictions.
Investments like these not only have a positive impact on a company’s budget, but also on the reduction of its carbon footprint. At a time of rising energy costs, and with Minimum Energy Efficiency Standards being implemented soon, failing to prioritise energy efficiency will inevitably have a negative impact on a retailer’s business. As a consequence, companies need to work with trusted financing providers to eliminate the barrier of a large, up-front capital investment.
Jo and Cass, founded in 1996, has established itself across the northwest of England as a leading salon group that offers hair and beauty treatments from experienced stylists and beauty therapists. The group consists of four salons that pride themselves on their luxurious surroundings and exceptional customer service. In light of inexorably rising electricity prices, the business recognised the need to implement energy efficiency measures to reduce its electricity bills. It therefore contacted Solarlec, a solar PV specialist, to explore the feasibility of installing solar panels at its largest salon based in Preston.
Following an initial assessment, Solarlec confirmed that the installation of solar PV panels on the south facing roof of the Preston salon would yield considerable economic benefits. Being a recognised supplier in the Energy Efficiency Financing (EEF) scheme, Solarlec recommended the EEF specialist facility as a source of funding to the salon group.
Through the EEF scheme, Solarlec was able to organise a seven-year financing solution on the £15,000 solar project for Jo and Cass, which encompassed the deployment of 40 mono crystalline panels covering an area of around 65 m2 . Taking into account the upward trend of electricity prices, the initial evaluation showed that the green investment could save the salon over £35,000 in electricity costs over a 25-year period. Adding in the expected payments from Feed-inTariffs (FiTs), the total savings could be up to £73,000.
Graham Cass, Director of Jo and Cass, commented, “We actually could have afforded the investment using our own cash reserves, but given the competitive interest rates of the EEF scheme, we decided to make use of this financing arrangement in order to free up our cash for other business-driven activities. Saving money is no doubt our primary objective, but it’s equally important for us to run an environmentally friendly business. The investment is therefore a win-win situation. Many of our customers are very environmentally conscious, so it has been great marketing for us to be able to say that we can reduce over 4.5 tonnes of CO2 emissions per year with our solar panels. It also demonstrates that we are an ethically minded business that takes action to reduce its carbon footprint. Our green investment has helped us a great deal in drawing customers in as they appreciate having their hair washed and blow dried using renewable energy.”
Ged Rowbottom, Director of Solarlec, commented, “The EEF scheme ticks a lot of boxes for us. Firstly, we gain credibility through the association with Siemens and the Carbon Trust, which are both trusted brands. Prior to finance being approved for potential projects, Carbon Trust conducts an independent energy savings assessment to verify that expected energy savings will match equipment finance payments, so our customers can have the additional assurance that our projected figures are accurate.
“The second major benefit to us is that we can use EEF as part of our initial pitch to secure new customers. They understand straight away that this funding option can help get their desired projects off the ground. Despite the continuous rise in electricity prices, people are still rather cautious about making energy efficiency investments in a slow economic climate.
“Our business figures illustrate the clear benefit of being able to offer our customers an alternative financing solution such as EEF. Since becoming an EEF-recognised supplier, we have already increased our business with commercial clients by 20%.”
Richard Baker is Sales Manager at Siemens Financial Services Energy Finance