Over the past year, research has been undertaken by the British Retail Consortium to understand what the role of LED lighting could be in driving energy efficiency in retail, one of the most energy-intensive industries in the UK. The research formed part of a Green Construction Board project and the British Retail Consortium worked within a group also involving the Department for Business Innovation & Skills, the Lighting Industry Association, the Chief Construction Advisor, the British Council of Shopping Centres, Sainsbury’s, Marks and Spencer, Philips, and the Retail Energy Forum. The group set out to find out what retailers had been doing already as well as what the benefits and challenges were in switching to LED lighting.
Energy is a key strategic issue for the retail industry today and the research suggests that those retailers that are acting on energy efficiency now will be better able to manage the impact of rising energy costs in the future. Energy is a significant operational cost for UK retailers, so energy efficiency represents a huge opportunity to maximise profitability for the long term as well as achieving social and environmental goals.
Some key statistics on energy in retail
• Retail is the second highest energy consuming industry in the UK;
• Cost of energy to retail in 2013 was £3.3bn – expected to rise to at least £4.4bn by 2020;
• Electricity accounts for approximately 77% of total energy consumption and 90% of overall energy costs;
• Lighting in 2013 used 43% of total electricity, by far the leading source of energy consumption;
• Carbon from retail energy in 2013 was 16 MtCO2e, a fifth of emissions from all businesses in the UK.
Under the Switch the Lights Campaign the group found that Lighting was the highest source of energy use for the retail industry and represented an important opportunity in delivering energy efficiency. Their analysis demonstrated a number of findings that show the benefits that switching to LED lighting in a retail setting can bring:
• Typical savings were around 40% but up to 60% energy reduction could be achieved through switching to LED;
• Retailers could save up to £500m in energy costs and deliver carbon savings of up to 2.48 MtCO2e per year through switching to LED lighting;
• LED offers a better consumer environment and enhances product display resulting in increased sales and improved staff wellbeing;
• Innovation in LED lighting has led to much greater flexibility in design and is enabling bespoke design at much lower costs;
• New LED products support other services in the building, unlocking better store management and helping to streamline maintenance.
So why haven’t retailers rolled out LED across their whole estate?
Although the benefits of LED lighting in retail look fantastic there are a number of very difficult challenges that retailers are facing in making the change to LED. What is well understood is that the capital costs associated with moving to LED lighting, especially in leading retail businesses is a huge blockage. The investment required to completely change the lighting across hundreds of retail stores is very high and the availability of this level of capital is constrained in the current challenging economy. This is especially true in businesses that have already been investing in energy efficient lighting.
There are other financial constraints that retailers face that may also be issues for other industries. Through working with retailers the group found that the technology write off cost was a significant barrier to investment and was slowing investment in LED. Where retailers have historically been investing in energy efficiency, lighting in many cases had already received significant investment over the last 10 to 15 years, moving from high energy use lighting such as halogen to higher-efficiency T5 and T8 lighting systems. Incumbent lighting systems will have a lifetime which would have been factored into the initial investment so, if you are investing in even more efficient lighting part way through a technology’s’ lifetime, there will be a loss of value associated to removing technology prior to its end of life – a double whammy of costs to your rate of return of investment.
Another very difficult barrier to overcome is that many retail designers are still wary of using LED lighting in their store designs. When LED lighting technology initially hit the market in the late 1990s it did not deliver on lighting levels or colour. Many early adopters of LED in retail were finding that it was changing the colours of products on sale and as a result were seeing returns of goods on the basis that they were a different colour when at home. Similarly supermarkets were finding that it would make food look grey and dull and not particularly healthy.
LED technology has moved on significantly since then and that difficult period of innovation has given us much better colours and light levels. The Switch the Lights report has a number of case studies from retailers that demonstrate that LED lighting creates a much better environment than even existing T5 and T8 lighting schemes – in some cases the change to LED has resulted in increased sales. But the myth of LED hasn’t kept pace with the level of innovation of the technology. Many retailers have spoken to say that there are still problems in convincing other areas of the business that LED is a good solution not just in energy savings but in design and environment.
The group found that there are a number of other challenges that retailers are facing in switching to LED.
• Current energy and carbon policy is too complex and is a key barrier to investment. Harmonisation of policies could deliver significant acceleration of deployment of energy efficiency technologies.
• Leases can often have upgrade or improvement works clauses to them, which could impact on the ability to undertake such a project; leases often include dilapidation clauses, which could result in the retailer having to put back in place the old lighting scheme if it vacates the property.
• Store disruption can have a big impact on the overall viability of an LED project as it can result in loss of sales and can damage brand recognition with existing customers unless an effective communication strategy is in place.
• The technology is innovating, and moving so fast that it can be very difficult to identify the right lighting design and may result in choosing a less appropriate design for the intended use at a significant cost.
Whilst these challenges can be significant, retailers have commented that a collaborative approach across the business will often remove them and can deliver much greater benefit in terms of design quality and operations and can help to manage risks associated with store disruption.
LED lighting can be a great driver for energy efficiency in retail and can lead to a much better environment for both staff and customer alike. It can help display products in more flexible and interesting ways and can lead to additional sales. It can also achieve savings on energy use of up to 60% whilst also making a critical contribution to mitigating the carbon emissions of the business. But it is not without its challenges.
• Retailers the group worked with on the project were adamant that a successful project is one that brings consensus across different business areas, so engaging early with the business is critical.
• Being able to create a strong business case was also seen as vital to securing funds to install across your estate and often companies would pilot the project in a few stores first to support their plans for a wider roll out.
• Finally many retailers were extolling the virtues of testing the product in a lighting lab if at all possible to see the product under operational conditions. Whilst it may add cost to the project, being certain about its performance is central to any future LED lighting project.
Retailers are leading the way in LED lighting and are helping their business to not only save money and carbon but also deliver attractive environments for customers. The research conducted has enabled the group to get a good sense of the LED market. The research sent out a very clear message; around 80% of retailers surveyed expected their business’ lighting to be completely from LED by 2020, and speaking with manufacturers, the British Retail Consortium has every confidence this will be achieved.