With energy prices still sky high and government support being scaled back, how will cold store operators address this challenge? Dan Jenkins finds out
Soaring electricity prices place a bigger burden on energy-intensive cold stores, while the threat of blackouts poses a risk to the cold chain’s operational capabilities. Against this backdrop cold chain companies are due to see much of the current support from government fall away.
Government support From 1 April this year a new Energy Bills Discount Scheme (EBDS) will come into force, replacing the current Energy Bill Relief Scheme (EBRS). As Cold Chain News went to press the full details were yet to be revealed but it is believed the scheme will offer significantly less support than its predecessor and that most cold storage businesses will not qualify for the biggest discounts. (See CCF policy director Tom Southall’s analysis on page 17 for more details.)
Put simply, this demonstrates the government does not value the cold chain enough, says Mark Burrell, chief executive of Moran Logistics, a cold chain company that delivers to nearly 10,000 locations nationwide every day and has 250,000sq ft of temperature-controlled storage around the country.
He says: “If the government doesn’t recognise the importance of the cold chain to the food supply chain, it will ultimately increase costs for everyone and continue to drive up inflation. We’re talking about products that people use every day like chicken, milk, butter and cheese.
“It’s quite scary. My energy expert’s current estimate is that our costs could increase by up to 200% from May. The entire cost increase cannot be absorbed in logistics and warehousing because the margins don’t allow it.”Burrell says it is vital to have good partnerships and contracts in place with customers because the pain of this increase will have to be shared.
“These costs are things we can’t control and it’s important our customers know in advance so that they can plan any cost increases into their budgets.
“Our customers have their own costs to bear as well – the price of fuel remains relatively high, labour challenges continue after Brexit, the poultry sector has just had avian flu and the cost of animal feed has skyrocketed due to the war in Ukraine. In fact every cost appears to have gone in the wrong direction over the past two years.”
Proactive steps
However, cold chain companies are taking steps to mitigate the pain of energy cost increases. Peterborough-based JS Davidson Ltd (JSD) – formally Chiltern Cold Storage Group – had already taken several proactive steps to reduce its reliance on the grid before energy prices rose dramatically. “We need to take our business reliance off the grid and we have been working on that for the past two years,” says John Davidson, owner and managing director.
JSD is installing a wood chip biomass boiler system which will integrate with an absorption chiller. Absorption chillers use heat to power the cooling cycle – essentially the heat from the boiler operates the chillers to cool the air. This only requires a small amount of electricity to power the pumps. “Thanks to this system, probably about 70% of our energy consumed will be off grid,” adds Davidson.
The company has also invested in new cold store doors and deployed thermal curtains to keep temperature gains to a minimum. “We tend to sit around -20 but at weekends this can drop to -23 so we have also been looking at how to reduce energy use on weekends to maintain it closer to -20,” says Davidson.
Moran Logistics’ Burrell highlights the importance of demonstrating to customers that in the areas where costs can be controlled, they are finding operational efficiencies with people and processes, and continuing to collaborate on other ways to reduce costs in the supply chain.
Data driven
Fellow operator ACS&T has been working on energy efficiency for several years. “Using less has been part of the agenda for many years through initiatives such as the Climate Change Levy,” says managing director Jon Stowe.
ACS&T has installed rapid roller doors and LED lighting along with other energy efficiency measures, which means most of the obvious and easy steps have been taken already. Now it is about the hard yards, Stowe says, in terms of bigger investments and longer pay back periods. The low-hanging fruit has all been picked.
“With it being such a critical cost line, you have to start with the data. We work with an energy broker on the analytics and have found that very useful. We record half-hourly meter readings and the broker crunches those numbers to find the sweet spots for energy reduction. You would be surprised at how accurate this can be compared to your energy bills.”
He says the most extreme example is blast freezing, which has a heavy consumption. By monitoring the temperature of the products at half hourly intervals you are ensuring that you are not running the blast freezer for longer than necessary. By using probe sensors throughout the load it is possible to pinpoint exactly when it is hitting the required temperature, meaning you are not overspending on energy to freeze it. ACS&T also works hard to make sure air flow around the pallets is optimised.
“Aligning all of those operational elements and processes means the end result is a significant reduction in electricity used for blast freezing,” says Stowe. “We are still making gains there even though this time of year is when power consumption increases in cold store operations.”
Blackout risk
At the end of 2022 National Grid was warning of higher risk of blackouts this winter, and cold chain companies have been looking at short term solutions.
“We have installed a new high/low voltage system,” says JSD’s Davidson. “If we are put into that situation, we can bring in diesel generators that can plug straight into our system to keep the warehouse cold.”
As energy intensive businesses, cold stores are also targeted by energy companies during Triad season. According to energy provider EDF, Triads are the top three half-hourly peaks of national energy demand across the grid, between 1 November and 1 March. To manage increased demand on the network over the most energy intensive period of the year (November to February), the National Grid imposes a surcharge during Triad periods.
This means that cold stores are incentivised to turn off the fridges and freezers during peak times. “We are working with our energy brokers on this,” says Davidson. “Historically it has been focused on the 4-7pm period when domestic energy usage is high. But this year we are being asked to look at 7-11am as well.”
ACS&T is also looking at on-site energy generation. “With the current high energy prices, the payback periods look very attractive, but it is also very hard to forecast what energy prices are actually going to be in five, 10 or even 15 years,” says Stowe. “Solar panels could deliver a return on investment in under three years or up to 10 years depending on what numbers you use for future energy pricing.
“We have been working with the DNOs (district network operators) for each of our warehouse locations and have applied for priority status with them as far as blackouts are concerned. In theory this should mean that operations such as cold storage are given priority and should be exempt from blackouts as we are a critical part of the food supply chain. Beyond that we have business continuity plans in place such as using generators on site.”
Planning for the long term
Looking further ahead, higher prices are set to stay according to Kath Chapman, managing director of energy experts Ameresco UK. She says: “Energy resilience will get addressed over next two or three years. There will be more renewables, more LNG and more nuclear,” she says. “But longer term we are seeing prices well north of £100 per megawatt-hour. Against that backdrop it is advisable to decarbonise and invest in on-site renewable generation.
“There is still some support out there such as the Energy Intensive Industry (EII) scheme and one more round of funding for the Industrial Energy Transformation Fund (IETF) if you are thinking about investing in capital projects.”
Moran Logistics’ Burrell says the key is gaining greater control over energy use. He says: “The most important thing is to use less energy where possible and look at opportunities to take control of our own destiny to secure our long-term future. We continue to explore the possibilities of solar panels on roofs and wind turbines and have already invested heavily in alternative fuel vehicles. To sum it up we want to take as much control of our energy use as possible.”
