5.3

For the retail industry

Roadmap milestones

The following milestones indicate good practice measures that will help the industry to reach net zero:

Short-term priorities

Immediate action is required for the industry to begin the decarbonisation of physical sites. While the priorities will vary based on the type of retailer, the type of premises occupied, whether the property is owned or leased and the work already undertaken, the following recommendations offer an entry point for retailers in the creation of programmes to mitigate greenhouse gas emissions from sites.

1)   Whole-building energy efficiency 

In retail, heating, lighting and refrigeration are the largest site-level energy consumers on average, but an individual business’s emissions footprint could vary considerably from the norm. The best way to target investment and effort in pursuit of reduced site emissions is to monitor the footprint of operations. Robust tracking and reporting allows retailers to plot out critical intervention areas. To reduce administrative burden, retail businesses can seize on existing requirements for reporting energy use and emissions – for example, large retailers can leverage Energy Savings Opportunity Scheme (ESOS) reporting requirements to map improvement areas, and retailers that rent premises can request Energy Performance Certificate information from landlords. 

The most dramatic whole-building emissions reductions are available in the planning phase. New builds represent the opportunity to utilise cutting edge low-carbon design and construction practices. The UK Green Building Council offers a specialised framework in their guidance for Net Zero Carbon Buildings. 

Retailers interested in a whole-building approach to emissions reductions should additionally review best practices for energy efficiency. The following guides offer detail on the leading technical and behavioural measures to lower energy demands, cut costs and reduce emissions for various building types:   

• The Carbon Trust’s Introductory guide to energy efficiency
• The Carbon Trust’s Retail energy management guide
• The Carbon Trust’s Warehousing and logistics energy management guide
• The Department of Energy and Climate Change’s SME Guide to Energy Efficiency

This approach also requires acknowledging the complexities of landlord-tenant relationships. Retailers can work with landlords to help ensure their compliance with the Minimum Energy Efficiency Standards, or forge more collaborative approaches to sharing cost and responsibility for energy efficiency improvements.

2)   Heating efficiency and infrastructure 

• Building fabric improvements: To address gaps in energy efficiency, retailers should refit existing buildings with fabric improvements where available and cost-effective. Replacing or infilling insulation, adding draught stripping, replacing leaky windows and doors and mitigating damp all help to retain heat. With up to 75% of heat lost through the building fabric, these measures can help heating systems operate at maximum efficiency, reducing emissions and costs. See the Building Fabric Guide from the Carbon Trust for detail. 

• Installing renewable heat equipment: Low-carbon heat systems will be the primary route to reduced emissions once heating efficiency has been maximised. Low-carbon heat technologies offer considerable carbon benefits by electrifying (and sourcing energy from a greening electrical grid), substituting fossil fuels for renewable alternatives, or distributing heat from a single point of generation to many buildings (referred to as ‘district heating’).
  
  While strategies like district heating will rely on policy guidance, retailers can adopt many low emissions technologies that are feasible now. The Non-domestic Renewable Heat Incentive (RHI) currently allows retailers to claim financial benefits for installing and operating:
  
  

• Biomass boilers
• Heat pumps (ground source, water source and air source)
• Deep geothermal systems
• Solar thermal collectors
• Biomethane and biogas
• Combined heat and power (CHP) systems

3)   LED lighting 

LEDs consume approximately 15% of the energy of halogen bulbs while outputting the same amount of light – see Figure 5.3a. This efficiency improvement indicates the saving available from a technology switch, with further savings possible by optimising when and how lighting is used (e.g. through PIR sensors and timers).

Figure 6.3a: LED energy consumption compared to incandescent and halogen bulbs

While retail was one of the first sectors to invest in LED lighting (because of the significant energy and cost savings), significant further opportunities exist for the industry to transition as a whole.

4)   Refrigeration efficiency and low global warming potential refrigerants 

• Refrigeration efficiency improvements: Generally, the largest source of emissions from refrigeration is from energy consumption during operation. These emissions can be reduced by optimising the efficiency of refrigeration systems. Figure 5.3b offers an overview of current technologies and practices for more efficient refrigeration, as well as the expected energy savings.
  
  Regular maintenance of refrigeration assets should be highlighted as a means of inexpensively reducing the power consumption of cold storage systems and preventing refrigerant leaks.
  
  

Figure 5.3b: Refrigeration technologies for energy savings, from The Carbon Trust

See the Refrigeration guide to energy and carbon savings opportunities from the Carbon Trust for detail.

• F-gas substitution: Leaks of refrigerant gases are the other major source of emissions from cold storage. Aside from the impetus to reduce emissions from refrigeration, the ongoing regulatory phase down of F-gases will require many retailers to substitute refrigerants or opt for new cold storage solutions. Natural refrigerants, including carbon dioxide, ammonia, and propane (a hydrocarbon gas) all have near-zero global warming potential. This makes them attractive alternatives to F-gas in the sense that they are likely to be immune from future regulations.
  
  Retailers using natural refrigerants have generally favoured carbon dioxide systems, due to low flammability risks and the potential for carbon dioxide systems to be configured in a decentralised fashion like existing systems.^[35]
  
  Retailers that need to purchase new systems, whether because of the age of the previous equipment or the desire for low global warming potential refrigerants, should consider equipment from the Energy Technology List that qualifies for an Enhanced Capital Allowance. The allowance offers a tax benefit in the first year after the purchase of certain energy efficient equipment. Refrigeration equipment on the Energy Technology List can additionally offer operational cost savings, thanks to energy efficiency.
  
  

5)   Sourcing renewable energy 

• Renewable electricity sourcing best practices: Retailers should look to decarbonise their own electricity supply to meet carbon reduction targets, even as the national grid continues to green. There are a number of ways that retailers can approach the sourcing of renewable energy, and the landscape and best practice advice is constantly shifting. The methods of sourcing renewable energy can be broadly categorized into 3 options:

Retailers can also source energy from green energy retailers, who can provide energy through a mix of their own generation sites, PPAs and REGOs.

For accounting purposes, all of the options outlined above can be considered zero-carbon, renewable electricity. However, there are varying degrees to which each of them actually results in increased renewable capacity and/or lowered emissions. This is because:

• REGOs do not directly add any renewable energy to the grid – they are a market-based mechanism designed to incentivize generators to build more renewable energy capacity. The problem is that the price of a REGO is currently extremely low – in 2019 REGOs cost 30-50p per MWh, so a typical yearly household consumption of ~3MWh could be ‘greened’ for just ~£1.50.

• PPAs are seen as a better solution, because they provide direct financial support for generators and the long-term contract allows developers to finance the initial capital investment required to build wind/solar farms. The fixed price can also be useful for the investing retailer, as it can be used as a hedge against otherwise fluctuating energy prices. There are however still some difficulties involved in the process – selecting and setting up a PPA can be complex, there are questions of additionality, and if the wrong price is set, a business could be tied into a 25 year contract paying a high price for energy when energy prices are forecast to fall.

• Onsite renewables are generally seen as the preferred option of the three. They are tangibly built as additional capacity to the grid, there are efficiency savings from avoiding grid transmission/distribution, and from a business perspective they are not only a visible marketing opportunity but once they are set up the electricity is essentially free (minus maintenance costs). There are still some issues however such as site availability (some roofs are not suitable, and some locations are not amenable to efficient wind/solar), as well as the capital investment needed to build the systems initially.

Given this, the following hierarchy is currently seen as ‘best practice’:

Figure 5.3c: Hierarchy of energy use and procurement

The RE100 initiative provides the following guidance on the best practice for retailers to consider when sourcing renewable electricity:

• Generation from installations owned by the company (self-generation)
• Purchase from on-site installations owned by a supplier
• Direct line to an off-site generator with no grid transfers

• Direct procurement from offsite grid-connected generators 
• Contract with suppliers (green electricity products) 
• Unbundled energy attribute certificate purchase

Note that this list is ranked from the most impactful to the least impactful procurement method in terms of new renewable capacity brought into the grid.

• On-site solar generation: One of the most prominent options for retailers to generate onsite renewable energy is solar photovoltaics (PV).
  
  From high street businesses to larger supermarket and distribution depots, a growing number of retailers are using solar photovoltaic technology to lower their energy costs or, in some cases, to completely power their retail stores. The ever-rising cost of grid electricity has seen the potential for on-site power generation and energy storage gain much greater acceptance from energy-intensive retailers.
  
  According to the International Monetary Fund (IMF)^[39] prices for solar panels dropped 76% between 2009 and 2017, making them competitive alternatives to fossil fuels and more traditional low-carbon energy sources such as hydropower and nuclear.
  
  Because solar energy is most abundant during daytime hours – the period in which most retail stores are open – it provides cheap, dependable electricity when it’s required most by retail businesses. On larger premises (e.g. supermarkets) the large roof space is the ideal environment for a solar panel installation, very often this will be completely unused and have no form of shading from other surrounding buildings.
  
  

• Sourcing green gas: Green gas generally refers to biomethane, which can be generated from multiple renewable sources, including anaerobic digestion from waste, capture of landfill gas, and gasification of biomass (also called syngas). Currently the only gas that is considered truly green falls under the Renewable Gas Guarantees of Origin (RGGOs), very similar to REGOs for electrical power. RGGOs identify each kWh of biomethane injected into the gas grid. They are registered with either the Green Gas Certification Scheme (GGCS) or the Biomethane Certification Scheme (BMCS).
  
  Retailers can acquire RGGOs from biomethane producers to cover portions of their natural gas use. RGGOs are allocated to match gas withdrawn from the gas grid by the purchaser, and once used, they are retired. RGGOs don’t represent physical consumption of green gas, but purchasers can claim to have consumed green gas. More information on RGGOs can be found on the GGCS website.
  
  Note that the recent Citizen’s Climate Assembly highlighted the ongoing debate around zero carbon heating and the place for green gas. Assembly members were heavily in favour heat pumps, heat networks, and hydrogen fuel as the means to achieve the decarbonisation of heat, but made very few mentions of green gas.^[41] 

Longer term transformation for net zero

For the UK retail industry to hit net zero both the operational footprint of sites and the lifecycle emissions embodied in the construction of buildings will need to shrink rapidly. These changes will need to be supported by the rapid decarbonisation of the UK energy system and systemic changes to ensure the deployment of low-carbon heat. It should also be noted that existing buildings and new builds will face different challenges in the net zero transformation. 

To support long-term progress in decarbonising shops, warehouses and other buildings across the retail value chain, retailers can:

• Incorporate ambitious design guidance for net zero new buildings from organisations like the UK Green Building Council (UKGBC), London Energy Transformation Initiative and International Living Future Institute.

• Conduct a whole life carbon assessment in the design phase to reduce the embodied carbon impacts of new builds. The UKGBC additionally recommends offsetting the residual carbon emissions that can’t be mitigated through design.^[42]

• Look to meet the UKGBC’s requirements for net zero operational carbon.

• Seize emissions reduction and operation efficiency co-benefits in warehouses and distribution centres through innovations like electrified forklifts, cranage, lighting controls (especially occupancy and daylight sensors) and automation. Measures to reduce demand from lighting and space heating – 65% and 12% of typical ambient warehouse energy consumption, respectively^[43] – will have the greatest impact.

• Invest in on-site renewable energy capacity, where conditions and constraints allow, and cover the balance of energy not produced on-site with renewable sources (through a PPA, for example).

• Adopt smart building control systems that provide granular information on energy use and enable demand-side response (i.e. by matching energy use to current energy needs).^[44]

• Consider technologies that have the potential to reduce emissions and lower costs. For example, refrigeration systems that capture waste heat to use for in-store or district heating.^[45],[46]
  

[33] Sainsbury's commits to 100% LED lighting by 2020 (2017). edie.
[34] Sainsbury’s Puts the Spotlight on Energy Efficiency in Stores Across the UK (n.d.) GE Current.
[35] Retail refrigeration: Making the transition to clean cold (2017). University of Birmingham.
[36] Aldi UK stores to get 'natural refrigerants' (2017). The Grocer.
[37] 300th BITZER CO2 unit for Aldi (2019). The ACR Journal.
[38] Dutch Wind Consortium: Successful aggregation of corporate renewables buyers in Europe (2017) Business Renewables Centre.
[39] Falling costs make wind, solar more affordable (2019). International Monetary Fund.
[40] Marks and Spencer Case Study (n.d.). Solar Wall.
[41] The path to net zero (2020). Climate Assembly UK.
[42] Net Zero Carbon Buildings: A Framework Definition (2019). UK Green Building Council.
[43] Warehousing and logistics (2019). The Carbon Trust.
[44] The Enablement Effect: The impact of mobile communications technologies on carbon emission reductions (2019). GSMA and the Carbon Trust.
[45] Surplus heat from Danish supermarkets utilized for district heating (2017). State of Green.
[46] Retail Refrigeration: Making the Transition to Clean Cold (2017). University of Birmingham.