A major shift shaping the retail landscape is the move by supermarket giants towards powering operations with renewable energy.
In the past year we’ve witnessed Tesco announce plans to install solar panels on stores across the country, Iceland partner with Octopus Energy to see solar energy power 150 of its sites, and Sainsbury’s open its flagship supermarket that runs on 100% renewable electricity, writes Phil Thompson, CEO of Balance Power.
The biggest and most influential industry players are making fundamental changes to how they do business, carving out a new path for the sector.
But what’s driving this shift and how can others navigate the often-complex energy landscape to follow in their footsteps?
Why the sudden shift towards renewables?
The answer lies in a combination of factors that are reshaping the landscape of modern commerce. First and foremost, retailers are facing mounting pressure from stakeholders, including governments, investors, and increasingly discerning customers to green their operations. Supermarkets are no exception, particularly as the harmful impact of the food system on worldwide emissions is becoming increasingly well documented, and supermarkets are some of the most energy-intensive businesses.
Governments worldwide are implementing stringent regulations to curb carbon emissions. In the UK, the government has committed to reaching net zero emissions by 2050, requiring the decarbonisation of all sectors. As a result, retailers across the spectrum have pledged their own targets, including Tesco – which has itself committed to reaching net zero by 2050. This inevitably encourages retailers to adopt more sustainable business practices and ramp up efforts to transition away from using fossil fuels towards cleaner sources of energy.
Investors are also driving the push towards renewables, recognising the financial risks posed by climate change and the opportunities presented by the transition to a low-carbon economy. In recent years, sustainable investing has surged in popularity, with billions of pounds flowing into ESG (Environmental, Social, and Governance) funds. With this, major institutional investors are pressuring companies to disclose their environmental impact. As shareholders demand greater transparency and accountability, companies are under increasing scrutiny to demonstrate their commitment to environmental stewardship.
Furthermore, consumers are becoming increasingly conscious of the environmental footprint of the products they buy, with surveys consistently showing that shoppers prefer eco-friendly brands. Millennials and Gen Z in particular are driving demand for sustainable products, with 66% of 18-24 year olds in the UK being more likely to buy from a retailer or brand that has strong ethical and sustainable credentials. As sustainability becomes a key differentiator – and perhaps even a non-negotiable in the marketplace – retailers are coming under increased pressure to demonstrate a commitment to sustainability.
The ongoing energy crisis has further fuelled retailer motivation to transition to renewables. With energy prices skyrocketing and traditional energy sources becoming increasingly volatile, businesses of all kinds are seeking more reliable and cost-effective alternatives. Retailers, and particularly supermarket giants, consume huge amounts of energy, making them acutely vulnerable to price shocks within the global energy market, and soaring bills have eaten into their bottom line. In 2023, Iceland reported £17.1m in losses, attributing this to a staggering £94m increase in its annual energy bill. On top of this, Aldi dimmed its lights across all stores last year to soften the blow of its sky-high energy bill – a trial that Morrisons and Co-op have also undertaken. This demonstrates the difficulties that the current system creates.
What benefits do renewables offer?
In this context, transitioning to renewable power not only aligns with sustainability goals but also offers tangible benefits in terms of cost reduction, enhanced operational resilience, and lower carbon footprints. By sourcing their own clean energy through solar, wind turbines, or other renewable sources, retailers reduce their exposure to volatile energy markets. This not only reduces operational costs dramatically, as renewables are cheaper than fossil fuel alternatives, but it also provides retailers with more stable and predictable sources of power.
It’s also worth considering how renewable energy gives retailers a competitive edge in an increasingly eco-conscious market. We know that consumers have started to prioritise sustainability when making purchasing decisions. Retailers that embrace renewable energy can differentiate themselves from competitors, attract environmentally conscious customers, and enhance brand loyalty. Studies have shown that consumers are willing to pay a premium for products that are perceived as environmentally friendly, making sustainability a valuable selling point for retailers, too.
How does a transition to renewable energy work in practice?
One approach is the adoption of a ‘behind the meter’ energy generation project. This normally entails a partnership between a retailer and a clean energy developer, who will identify the most effective method for generating renewable energy on-site. This is typically through installing solar panels or wind turbines on the retailer’s premises or in a field nearby.
The power that is generated by the renewable energy source is provided directly to the retailer, avoiding third-party costs and other charges are added to a normal energy bill, slashing it significantly. Additionally, excess energy can be stored in batteries or fed back into the grid, providing additional revenue streams and enhancing stability of supply.
At Balance Power, we help energy-intensive businesses identify the right solution for their individual needs, finance and build a dedicated renewable energy project, so all they need to do is buy the energy they use – simple!
One of the greatest benefits of the ‘behind the meter’ model is that it can be tailored to unique energy requirements. Whether it’s a small grocery store or a sprawling supermarket chain, renewable energy solutions can be customised to suit the scale and needs of any retail business.
A strategic shift that’s here to stay
The shift towards renewable energy among major food retail giants isn’t just a trend, it’s a strategic response to the combination of regulatory, economic, and consumer pressures that characterise today’s retail landscape.
By embracing renewable energy, retailers not only reduce their environmental impact but also bolster their bottom line, enhance their competitiveness, and future-proof their businesses in an increasingly uncertain world.
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