The transition to renewable energy can be overwhelming, particularly for those operating in multiple markets. You’re balancing the financial case with carbon targets, and the first thing to recognise is that there’s no ‘one-size-fits-all’ technical solution, says Jeremy Parsons, Head of Carbon and Renewables at Kingfisher plc. The international home improvement business wants its 1,200 Europe-wide stores and customers’ homes to be either zero carbon or generate more energy than they consume.
A crucial starting point, says Jeremy, is a consistent basis for decisions. For this, Kingfisher’s Group Finance and Group Property agreed a hurdle rate for returns slightly above the cost of capital. “As long as a solution exceeds that, I know I’m ticking the commercial box.”
But even with this box ticked, convincing the individual financial directors who head up each of Kingfisher’s retail brands to invest proved difficult.
“Quite rightly they want to be convinced about returns. A business case always includes an element of risk: it models paybacks over multiple years and has to include assumptions about energy price inflation. Yield guarantees and maintenance cover from renewables suppliers helped me provide peace of mind.”
Screwfix, Kingfisher’s UK retail brand for tradesmen, was its first mover in the onsite renewables space, investing a quarter of a million pounds in 2015 to put solar panels on its call centre and head office. It’s been a success story, with more than a third of the contact centre’s power now generated by its photovoltaic installation, and returns of 3–4% above the hurdle rate.
This success unlocked what Jeremy believes was the biggest obstacle to Kingfisher’s renewables journey – securing a central pot of money. A £50 million sum from the group’s central budget was ring-fenced for renewables. “Instead of banging on the doors of our operating companies, I was invited in.”
The £50 million question was, which technologies to prioritise? Substantial investments (the most recent photovoltaic installations in two UK distribution centres came in at £4 million) raise the level of accountability, Jeremy points out, and there tends to be a suite of a few common things you could do – such as solar, heat pumps and biomass. Market dynamics affect them all.
In the company’s warmer operating countries, where the sun strength is strong (Spain, Turkey and in the south of France, the UK and Romania), solar is currently the technology of choice, although roof strength and length of the building lease can be major prohibiting factors. In Poland, which is prone to big temperature variances, air source heat pumps that cool stores in summer and heat them in winter make more sense. France has a little subsidy but its grid is heavily dependent on nuclear: “That makes buying renewable energy almost impossible for our Catorama and Brico Depot brands there. We’ve got more than 200 stores in France, so progressing towards our renewables ambition there is important, but it means we need to be doing a lot of the heavy lifting ourselves. We’ve already taken a big step by designing a new store in Antibes that is 77% less energy intensive, and we are already looking at how we can put solar onto another 30 French stores as part of our initial renewables roll-out.”
Across the border in Spain, it’s almost the polar opposite, and the government has already invested heavily in renewables. “The carbon footprint of our Spanish Brico Depot brand is fantastic simply because they are buying 100% renewable energy straight from the grid. There’s an ambition to go further though, and this is probably our most innovative renewables business unit right now. In partnership with Barcelona University they’ve been developing, and are about to trial, a combined solar thermal gas absorption and air source heat pump, which will substantially reduce the energy consumption of the Granada store where it will be installed.”
Jeremy explains that he’s looking strategically at the breadth of Kingfisher’s portfolio in moving towards the company’s ambition to get its store estate to zero carbon: “You can be limited within a country by the history of its energy industry. It would be easy to get disheartened in a country like Russia, where, as far as I’m aware, there isn’t a renewables market. It will take time for us to figure it out. In the meantime though, adding onsite renewables to our stores in Spain will enable us to over-deliver there, which could help us offset more difficult countries like Russia.”
Jeremy is confident that this approach is just a stepping stone though. “We will continue to work in all our markets, particularly those with no subsidy, because they help us to understand renewables investment and deployment at a whole new level. Those learnings will enable us to do things in our more difficult markets much earlier than we would have otherwise because we’ll have the confidence, the knowledge and good relationships with suppliers. Once we start to procure at scale, our costs come down and the economics get more attractive, even in more-difficult countries.”
It’s still early days on Kingfisher’s renewables journey. Part of its Net Positive commitment has been to share its sustainability learnings, and Jeremy has found that others happily reciprocate when he’s needed help. “I’m continuously looking at what others are already doing in a particular market. Being able to demonstrate that is actually quite powerful for getting buy-in. There are some other leading retailers in this space, like IKEA and Sainsbury’s, which are a couple of years ahead of us on their renewables journey, so I am particularly learning from their experiences.”
How would Kingfisher look, in an ideal world, 10 years from now? Jeremy’s eyes light up: “The investments we make now will be consistently delivering return on investment, enabling me to secure further financing. Every new and refurbished store will have renewables on site as standard, delivering about half its power. That would be fantastic and, I believe, achievable. Then I’d want to start looking at off-site renewables – but that’s for another interview ...!”
Alex Duff is Corporate Affairs and Communications Manager, Kingfisher plc