Convenience and grocery stores reduce commercial refrigeration costs with Otter Tail pilot project

There are lots of ways for convenience and grocery stores to reduce their overhead costs with simple energy efficiency and conservation efforts. We spoke with Jon Fabre, Senior Program Design Specialist with Otter Tail Power Company (Otter Tail), to learn about innovative ways that Otter Tail is working with their customers to reduce commercial refrigeration costs.

Joel Haskard: Tell us a little bit about the scope and goals of your pilot project focused on commercial refrigeration.

Jon Fabre: The goal of the project was to pilot a new approach to increasing market awareness and customer participation in our Minnesota Conservation Improvement Program (CIP) Commercial Refrigeration program. The project scope included:

1. Focusing on retail grocery, liquor stores, and convenience stores in geographic areas close to Fergus Falls, MN.
2. We contacted store owners and managers with an offer to conduct a free refrigeration system analysis that would provide cost and energy savings estimates for various refrigeration efficiency measures. We also offered free cleaning of unitary equipment (equipment that is stand alone and plugs into an outlet).
3. If customers were interested in the visit and cleaning, we scheduled a separate meeting with the customer’s chosen refrigeration contractor. The purpose of these meetings was to get an idea of the contractor’s willingness to implement energy efficiency measures, buy-in into these concepts, and any past refrigeration efficiency projects that the customer might have completed.
4. We completed the refrigeration system analyses at nine different stores.
5. We also offered 1.9% financing AND rebates for customers implementing measures in the 4th quarter of 2011. Financing is always available only to qualifying customers—adequate payment history with Otter Tail is a minimum qualification for financing.

 

Joel: What are some of the barriers that you have found that stop store managers from putting energy-saving projects in place?

Jon: We feel that access to capital is one barrier, but we attempted to overcome that by offering 1.9% financing along with a rebate to reduce the capital cost. In all cases, the customers could have implemented the measures, financed the capital cost, cash-flowed the debt payment with the energy bill savings from the measure with additional positive cash flows. This showed a couple of different things:

1. Industry accepted estimates of energy costs for refrigeration estimated at 50% of total electricity use in grocery stores must be accurate for the savings potential to cash flow the debt payments to this extent.
2. Customers are cautious about the energy savings potential, that we see as a barrier to achieving greater market penetration. The pilot demonstrated that the energy savings from the engineering calculations showed that the energy cost savings would have more than made the monthly debt payment on the cost of the system efficiency upgrade. At the same time, it might be safe to say that store managers and owners have NOT been conditioned to think of refrigeration system investments as the first place to cut costs. Often times, store owners (especially small stores) are conditioned to focus on simply keeping equipment running to keep product marketable, and also the revenue side of the business.

 

Joel: How does your project help overcome those barriers?

Jon: There are two key ways the program overcomes these barriers.

1. The financing and rebates will allow the customers to pay for the investments easily with the monthly energy bill savings to overcome the financial barriers. The tougher barrier to overcome is the educational aspect and persuading a customer that spending thousands of dollars (and even tens of thousands of dollars) will pay off.
2. Even without the 1.9% financing AND the rebate, our cash flow analysis for customers indicated that the customer could cash flow at our standard 8.5% financing rate with a rebate. The special deal offered to customers late last fall was at the 1.9% low-interest financing along with the standard prescriptive rebate. The 1.9% financing rate and the rebates are both CIP programs, so we usually only offer one or the other, but for a limited time we tried offering both as an extra incentive.

 

NOTE: Although this pilot project has been completed, there is Otter Tail staff knowledgeable about energy efficiency opportunities in commercial refrigeration, lighting, and other systems. Financing and/or rebates are still available to qualifying customers—adequate payment history with Otter Tail is a minimum qualification for financing.

Joel: We talked with Jon about another program that they currently offer around preventive maintenance of commercial refrigeration systems.

Jon: In 2008 we started offering incentives for preventive maintenance. The goals were to first improve efficiency of refrigeration systems through periodic cleaning (we allow one cleaning incentive every other year). ASHRAE studies have proven that a clean refrigeration system runs notably more efficient than a dirty system. Second, we felt that getting contractors into the door to provide preventive maintenance measures would provide the contractors with a chance to educate store owners about other cost savings opportunities (compressor, condenser, controls, and efficient door and lighting measures, etc).

Any store owner should really take advantage of this incentive. Incentives for preventative maintenance are as follows:

When the contractor completes the preventive maintenance service work at the customer site, the contractor then completes an application form and sends to Otter Tail along with the project invoice. Otter Tail pays the contractor (up to the maximum amount above), and bills the customer for $29.95, $39.95, or $49.95 depending on the size of the refrigeration system on the customer’s next electric service statement. The program is open to convenience stores, retail grocery stores, and other retail stores with commercial refrigeration load above the typical plug-in, stand-alone refrigeration equipment. Other program rules and regulations apply.

Joel: How can people learn more and participate?

Jon: For more information about these programs, customers can contact our Idea Center at 800-493-3299, contact us via our website or contact their energy management representative directly.

You can also learn about a study being done on convenience store energy efficiency by Michaels Energy >>

Related story: Small grocery store fills gap in W. Minn. ‘food desert’

by Julie Siple, Minnesota Public Radio and Kathy Draeger, U of M Regional Sustainable Development Partnerships

CLINTON, Minn. — Nestled in the heart of farm country, the town of Clinton is surrounded by food — fields of corn and soybeans.

Those crops aren’t consumed by area residents though — most are processed into livestock feed or ethanol. Residents have to drive more than 10 miles to get to a supermarket. That distance makes Clinton, in far western Minnesota’s Big Stone County, a food desert. Well, technically.

There is an oasis: Bonnie’s Hometown Grocery. “I like what I do,” store owner Bonnie Carlson said. “You need a grocery store in a small town. The town would go kaput, I think, if we didn’t have a store here.”

• Read and listen to the story and see photos by MPR >>
• Read blog post from Kathy Draeger >>