There are two types of retailers out there, according to Jeff Dummermuth: those who have plans for how to reduce the amount of energy they consume each year, and those who have nothing.
Dummermuth, director of energy and engineering for Columbus, OH-headquartered Big Lots, works for a retailer that falls into the former category. This makes business sense. He says that since Big Lots first launched a pilot program with Siemens in 44 stores in 2006, those locations equipped with energy management systems (EMS) have seen their annual energy consumption drop by 15–17%, resulting in big savings for the retailer. There are added savings through a sub-meter requirement generated by participation in utility demand response programs, as well as Web-based reporting tools and measures provided by Siemens in approximately 1,500 Big Lots stores across the nation—all of them, in fact, except those with short-term leases.
“We started out as a retailer that had no energy-savings plans in place,” says Dummermuth. “Then we started asking people to turn out the lights when the stores weren’t open. We moved on to programmable thermostats. We thought that because we had already put those measures in place, we wouldn’t be able to save much more money with a full-scale energy management program. Well, we were wrong.”
Before Big Lots began working with Siemens to develop an energy management plan that focused on both the demand side (reducing the amount of energy individual stores consume each year) and the supply side (buying energy at the right time and in the right amounts from approved energy suppliers), Dummermuth says company officials discovered an unsettling truth: the energy management plans that the company had already introduced left room for improvement.
Yes, programmable thermostats can be an effective way to reduce a store’s energy consumption. But Big Lots found that 9 out of 10 stores weren’t following the written or manual energy management programs that the corporate headquarters had put in place. Employees and managers at these stores were, instead, overriding the thermostats and causing equipment to run at all times, Dummermuth says. They were turning on the lights in their stores and never turning them off.
“When we saw that, we knew it was time to go for a full energy management program,” he explains. “We needed centralized controls of all lighting and HVAC activities. We needed a meter in place that is linked to the equipment, giving complete visibility to the load profile that can show you when someone at an individual store has overridden the system. We wanted sensors and exception reports that told us when someone at an individual store bypassed the controls, so we could proactively stop the equipment from running 24/7. Once we installed that system, we saw our energy use fall dramatically.”
Dummermuth is not alone. A growing number of energy specialists at retailers across the country are learning that they can improve their bottom lines by installing energy management systems that include everything from demand response measures, to automated thermostats and Web-based data reporting and analysis tools.
And as the economy continues to be a challenging one for retailers, expect more leaders in this industry to reach for energy savings as a way to boost their yearly profits.
There are already plenty of success stories out there, such as this one of Dummermuth and Big Lots. But retailers face plenty of challenges, too, when it comes to reducing energy consumption. Retailers—especially large ones—are unique. They come with different energy needs than do even large-scale office buildings and industrial locations.
Recognizing these challenges remains the key for retailers ready to embrace large-scale energy management programs and watch their annual energy bills fall.
Dean Lindstrom, general manager with Cleveland-based Novar, a Honeywell company that provides energy management systems for clients that operate multiple sites, says that the biggest problem that retailers face when trying to reduce energy costs is the high number of sites that so many operate.
This sets retailers apart from other users. Some commercial clients of Novar might operate more than one building. Some might run more than one industrial site. But few of these clients operate hundreds of locations spread out across the country. Big-name retail clients do.
“Typically, these retailers have a large portfolio of buildings. That fact by itself creates unique challenges,” says Lindstrom. “The question becomes: ‘How are we going to manage that portfolio of buildings more effectively?’”
Often, the stores that these retailers are operating boast different layouts, sizes, and footprints. Some might consume massive amounts of electricity, while others might already be operating efficiently. Retailers, then, can’t just implement a one-size-fits-all system at each of their locations. They instead need to install energy management measures that are a good fit for each individual store.
Retailers are also dealing with an issue directly related to today’s still-sluggish national economy, Lindstrom says, and they are struggling to do more with less. Retailers may have grown their number of locations during the years, but, for most of them, their internal staff has not grown at the same rate. “That is a real challenge,” says Lindstrom. “Retailers are saying, ‘We now have a bigger asset base. We have to do something with it, but we don’t have the internal bandwidth to figure out what we are going to do.’”
Retailers often have to deal with last-minute scheduling changes, too, something that can considerably alter the amount of energy they consume. The CEO of a retailer might, at the last minute, decide that a chain’s stores should be open 24 hours a day for the four days before Christmas.
That can make life difficult for whoever is in charge of energy efficiency at these retailers. After all, these energy pros might have been planning for normal hours on those four days. Now, depending on the size of the retailer, they have to account for a sudden switch to 24-hour service at 1,000 stores or more.
And, as Lindstrom says, these schedule quirks happen frequently as retailers today try to squeeze as many sales into their high-profit times of year. “You have to make those changes. And sometimes you have to make those changes in 24 hours or less,” says Lindstrom. “That is a dramatic difference in terms of what kinds of issues retailers deal with when they are trying to manage and reduce their energy consumption.”
Finally, retailers need to make sure that the energy solutions they put into place won’t lessen the shopping experience of their customers. Reducing energy consumption won’t matter if these same retailers are chasing away consumers because their stores are too dark or cold.
“They don’t want to have the lights go off,” says Ty Peck, technical manager with Golden Valley, MN-based Honeywell Smart Grid Solutions. “They don’t want it to look like the store is dark and not open for business. The challenge for them is to be able to curtail their load without having their customers notice. They don’t want to give the impression that something is wrong, or that their store is dark. That could turn the customers away.”
Officials with national office supply retailer Staples recognize this.
Bob Valair, director of energy and environmental management in the Framingham, MA, office of Staples, says that the retailer has worked with Novar since 1993 to reduce its energy costs. This relationship has paid off with big savings. Staples has Novar energy management systems in all 1,800 of its locations in the United States and all 350 of its stores in Canada, he says.
The technology Novar has installed allows the retailer to control the HVAC equipment at these locations. It also allows individual locations to monitor and control their lighting, so that employees don’t accidentally leave the lights on when their stores are closed.
Staples has also installed electrical metering systems provided by Novar in their stores. These meters report, on a real-time basis, exactly how much energy individual locations are using. Staples officials can then determine whether a specific location is consuming more electricity than usual. They can then search for what might be causing this problem.
Under the retailer’s arrangement with Novar, Staples’ staffers perform the basic analytics of the energy management systems at individual stores. They can then see instantly when a store is consuming too much energy, Valair says. Staples, though, will often request that Novar technicians perform a deeper analysis of the data generated from the EMS. This happens when Staples wants to take on special projects to reduce the company’s energy bills by an even greater amount, he says.
“We are very proactive with reducing our energy costs,” explains Valair. “Instead of waiting for someone to call and complain, we want to see any problems when they first happen. That’s the best way to manage and reduce your energy bills.”
“Staples is aggressive in how it manages its stores when it comes to energy consumption,” says Lindstrom. “We work with them on a professional-services basis. We are looking for stores that are outliers.”
Novar has developed an energy profile for each store that Staples operates. By watching the data from their meters, Novar technicians can instantly see when a store is operating outside of that ideal energy profile. “We can then take corrective measures right away,” says Lindstrom. “Why is the store operating outside the profile? Let’s get the problem corrected. Staples is very proactive in terms of using this tech.”
And, although Staples officials were happy with the results from these improvements, they still wanted to reduce their energy consumption by an even greater amount.
That’s where Honeywell Smart Grid Solutions came in.
Staples wanted to invest in an automated demand response energy management program as a way to further slash its yearly energy bills.
Consider demand response programs as another tool that retailers have to reduce their annual energy costs. Under such systems, providers—such as Honeywell—connect clients more closely to electric utilities. The clients, which can include retailers, office owners, industrial sites, and others, can then determine when they can purchase energy from their public utilities at the cheapest rates.
Demand response systems might also automatically dim the lights or slow a location’s heating or cooling efforts during predetermined times, times that won’t result in a negative shopping experience for consumers.
If done right, these short reductions in power consumption won’t even be noticeable to consumers.
End users are not the only fans of demand response systems—utilities are also big supporters. These programs can make sure that utilities’ grids are not overwhelmed during times of peak demand. That means fewer power outages and customer complaints.
Honeywell Smart Grid Solutions started its relationship with Staples with a modest pilot program. That program was successful enough that Staples requested a bigger rollout. In total, Honeywell Smart Grid Solutions hooked 28 Staples stores in northern California, and 83 in southern California, to its automated demand response system.
“We are seeing more retailers becoming interested in these types of programs,” says Peck. “Some retailers immediately say that they’re not interested. They think that they are going to have shut off lights during the day when customers are there, or that they’re going to have to keep their stores darker than they’d like. That is not how this works at all. More retailers are coming on board to embrace demand response programs. They are starting to understand the impact these programs can have on their bottom lines.”
Honeywell officials expect interest in demand response energy systems to only increase on the part of retailers—and all users. This will only be a boon to the companies that provide this service.
In a press release announcing the formation of its Smart Grid Solutions division, Honeywell cites a report from Pike Research. The report estimates that revenue for demand response services will grow from nearly $1.3 billion in 2011 to $6.1 billion in 2016.
The key to selling energy management solutions, though, is the same as it’s always been. Manufacturers need to first show retailers that they’ll recover whatever upfront investments are required quickly, and that their energy management procedures and systems will immediately save them money.
For this to happen—for the return on investment to be a quick one—each retailer needs to install an EMS created specifically for its store. For some stores, programmable thermostats and lighting controls could result in big savings. For others, they won’t be worth the investment cost.
Other retailers might see their energy usage plummet, thanks to an automated demand response program. Also, others might not realize enough savings to make such a system a worthwhile investment. “We walk them through the process,” says Lindstrom. “It’s like a fitness program for buildings. Say you decide to go on a fitness kick. First, you need to measure your weight, your body mass index, and your blood pressure. You need to go to a physician, get your blood work done, and create a baseline. Where are you today, and where do you want to go? We do the same thing with our retail clients. Let’s put a fitness program together for your building. Where are the buildings operating at today, and where do they want to go?”
When it comes to selling an EMS, today’s manufacturers can point to a solid history of success stories. Just consider the relationship between national fitness chain 24 Hour Fitness and Siemens.
24 Hour Fitness has installed the Siemens Site Control Energy Management System at its locations. Adam Vanderyacht, manager of process and systems in the facilities management division of 24 Hour Fitness, says that the system allows the company to determine which of the HVAC units at its stores are not running efficiently. The company can then replace the poor performers, saving the chain a significant amount of money.
The system also allows 24 Hour Fitness to program the proper temperatures at their locations. This, Vanderyacht says, is a better solution than relying on each club operator to maintain the right temperature.
Temperature is important at 24 Hour Fitness. He says that locations must be cool enough to satisfy club members who are lifting weights, running on treadmills, and climbing stair-steppers. “Having hundreds of members and guests performing high-intensity cardio workouts at the same time puts a strain on our HVAC systems,” explains Vanderyacht.
That’s why the Siemens Site Controls system has been so important to the fitness chain. The company, relying on data from the system, is investing money to replace the worst-performing HVAC systems in its clubs.
Vanderyacht says that 24 Hour Fitness isn’t done with energy management work, either. The company will continue to explore other ways to drop its energy bills, such as retrofitting clubs with efficient LED lighting. “24 Hour Fitness is regularly looking at additional opportunities to save energy.”
More Big Savings at Big Lots
As mentioned earlier in this article, the partnership between Big Lots and Siemens has resulted in big savings for the retailer. Marcus Boerkei, general manager of Siemens Building Technologies Retail & Commercial Systems (RCS) group, says that the key is that Big Lots and Siemens continue to work together, searching for ways to constantly reduce the amount of energy that the retailer consumes each year. “We have a very proactive system going with Big Lots,” says Boerkei.
Siemens collects and analyzes data from the 1,500 stores that Big Lots operates across the country. They can then quickly discover which stores are consuming more energy than expected. Armed with this knowledge they can make changes quickly, saving Big Lots a significant amount of money each year.
“We are aware of the energy issues even before the store personnel is aware,” says Boerkei. “Our system identifies that there might be an issue. Big Lots can then take the initiative to mitigate whatever the problem might be.”
This ongoing partnership and monitoring is the reason for the success at Big Lots, agrees Dan Kubala, director of business development for Siemens Building Technologies RCS. Big Lots had tested other energy management systems over its history. But these systems didn’t generate the energy savings that Big Lots is enjoying now with Siemens.
“The savings with their other investments didn’t materialize, mainly because those vendors had a set-it-and-forget-it approach,” says Kubala. “Someone would show up with the hardware, install it and then disengage. They didn’t provide the tools to manage those systems and analyze the data. Without that, you won’t see the savings you expect.”
Retailers today are moving toward a more analytical approach to reducing their energy costs, Kubala says. With Big Lots, Siemens meets with the retailer to analyze their energy consumption trends at regular intervals.
Big Lots can then see which stores are outliers. And, as Kubala says, with nearly 1,500 stores, there are always going to be some that are gobbling more energy than expected. “Big Lots can prioritize them by how much energy they are wasting,” he says. “You can focus on those stores and institute a process. We can help all of our customers do that. Big Lots, though, has been a key partner in pioneering these techniques.”
Success stories, like the one with Big Lots, are inspiring more large retailers to look at demand response systems, where the company gets paid to curtail usage during peak times, and other energy management programs to reduce their own energy consumption.
This isn’t a surprise to Boerkei. Once retailers understand the savings they can enjoy, it makes sense to take on the upfront cost of installing an EMS, he says. That’s because it takes a relatively short time for most retailers to see a return on their investment.
But he says that the industry has an opportunity to further leverage these energy management systems by focusing on another cost savings that is too often ignored: a reduction in maintenance costs.
“An energy management system is the gift that keeps on giving,” says Boerkei. “The return on investment, the reduction in kilowatt-hours, are all benefits that we promote heavily. There are secondary benefits, too, regarding sustainability. Further, there are potential savings on maintenance that come with these systems, and those savings are often overlooked and hugely untapped. It’s harder to document them, but they are real. It’s easier to look at kilowatt savings, and that’s why the industry typically focuses on the reduced energy cost and less on reduction in maintenance costs.”
Overall, retailers like Big Lots can expect to see their energy bills drop 15% to 30% once they’ve installed energy management systems like the ones offered by Siemens, Kubala says.
“It is easy math,” says Boerkei. “Every dollar that they save in energy goes straight to the bottom line. Retailers would have to make $20 in additional sales for every dollar of energy savings to have a similar effect on their bottom line. We are not talking about dollars here, but millions of dollars in energy savings. These numbers are not insignificant.”
Dummermuth, with Big Lots, says that his company has reduced its energy consumption on average by 14% to 17% every year since working with Siemens. That, he says, is such a big number that Big Lots was able to pay back the costs of installing its energy management system in less than two years.
“We thought our individual stores were all complying with our internal energy savings plans. But they weren’t,” says Dummermuth. “We quickly found out through monitoring that the majority of stores were not following the written plan. We have been putting the energy management system in new stores since 2010, and we continue to see savings from it. We’re very impressed with the results.”