How to Keep Cool Amid New Refrigeration Requirements
Keeping food cold is a cornerstone of the grocery industry, with billions spent annually on new equipment, repairs and maintenance. This reliance on refrigeration and its associated expense set grocers apart from every other segment of retail, due to a unique combination of costs, combined with unique merchandising and regulatory challenges.
The latter is especially concerning for grocers in 2021 as refrigerant requirements change, and regulators able to extract fines from grocers for administrative record-keeping errors become more vigilant amid the current political climate.
“We have seen standards generally tightening across the board, and grocers are facing more and more exposure as they diversify their services and offerings,” says Grant Salisbury, chief marketing officer with ServiceChannel, a provider of a software solutions platform on which retailers procure, manage and automate facilities services. The company has a unique perspective on the facilities world, specifically in relation to trends in refrigeration, because major retailers operating more than 350,000 locations on its platform spend roughly $8 billion in 74 countries.
“We’re seeing the costs and liabilities continue to climb,” Salisbury notes regarding refrigeration, where the firm’s data shows the cost of an average repair is more than $2,000. “We’re also expecting a lot more diligent EPA action at the national level under the new Biden administration.”
Making an Example of Albertsons
Over the years, large retailers have been a favorite target of California regulators, which Albertsons Cos. discovered recently. The company agreed to pay a $5.1 million fine in July after California Air Resources Board (CARB) inspectors said that it violated the state’s Refrigerant Management Program (RMP). The investigation was conducted between 2016 and 2018, and CARB said that it found such violations as failing to annually audit and calibrate automatic leak detection equipment, repair detected refrigerant leaks within 14 days, and accurately register and report stores’ refrigeration systems, and not maintaining required records for at least five years.
The RMP was adopted in 2009 as part of the California Global Warming Solutions Act of 2006, which makes every grocer a potential investigative target due to dependence on refrigeration systems.
“Most refrigeration systems in retail food use high-global refrigerants that have a high global- warming potential (high GWP), trapping heat in the atmosphere much more effectively than carbon dioxide, the most prevalent greenhouse gas” is how CARB described circumstances in the grocery industry when it fined Albertsons.
California is often the tip of the regulatory iceberg, and officials there seem to relish the state’s status as a trendsetter. For example, in late 2020, CARB approved what it called “first-in-the-nation rules to curb the impact of powerful artificial refrigerants that pose a growing danger globally to efforts to contain the worst impacts of climate change,” and suggested that the rules could serve as a national model.
“Chemical refrigerants are fast-acting super-pollutants and the fastest-growing source of climate gases in the world today,” said Mary D. Nichols, a longtime environmental lawyer who chaired the CARB board at the time, “and as the earth grows warmer, people will need to cool food, medicine and their buildings even more than we do today. We need safer alternatives to be deployed as fast as possible.”
Keep an Eye on California
The regulations now in place in California are designed to reduce hydrofluorocarbon (HFC) emissions 40% below 2013 levels by 2030, and are described by CARB as the most comprehensive of their kind in the world. The new rules affect commercial and industrial stationary refrigeration units, such as those used by large grocery stores, as well as commercial and residential air-conditioning units.
CARB claims that the rules will contribute to reversing the growth trend in HFC emissions that it deems a threat to the planet, and will help California achieve its goal of carbon neutrality. The group further estimates that the regulations will achieve annual reductions by approximately 3.2 million metric tons of greenhouse-gas emissions, with a cumulative reduction of more than 62 million metric tons by 2040.
What that means for grocers is even more accurate record-keeping, and, over time, potentially huge capital investments to ensure that the most advanced equipment is in place to avoid liabilities associated with old units, which may still function properly but present regulatory risks.
“We are seeing compliance costs go up in other ways,” Salisbury says. “For example, the new refrigerant types that the EPA is recommending, like R448A, are often more than twice as expensive as the older types they’re replacing, and they also have really high retrofit costs.”
In addition, Salisbury cautions that the Occupational Safety and Health Administration (OSHA) and the Americans with Disabilities Act mean that every retail location has to be inspection-ready every day of the year.
“The average grocer faces millions of dollars in increased cost and liabilities if they aren’t prepared to keep up with these kinds of regulatory statutes,” Salisbury observes.
What Happens Next
Grocers’ dependence on refrigeration is in for a new set of challenges following the late- September establishment of a final rule related to the American Innovation and Manufacturing (AIM) Act that was enacted in December 2020. The rule establishes a comprehensive program to cap and phase down the production and consumption of HFCs used in refrigeration and air- conditioning equipment by 85% over the next 15 years.
Although described as a “final rule,” it’s really the first milestone in the implementation of the AIM Act, according to EPA, with more rules to follow. While the rule will impose new requirements on equipment manufacturers and retailers, it does alleviate regulatory uncertainty so industry stakeholders now know what they’re up against and can plan accordingly.
“Predictability is a very important aspect of the manufacturing process, and this timely rule ensures that our member companies are aware of this regulatory terrain for the coming years,” says Stephen Yurek, president and CEO of the Air-Conditioning, Heating & Refrigeration Institute.
- EPA Singles Out Good Grocers
Highly efficient refrigeration systems are a great way for grocers to achieve sustainability goals and to get recognized by the U.S. Environmental Protection Agency (EPA). Through a program called the GreenChill Advanced Refrigeration Partnership, EPA highlights grocers whose commitment to reduce refrigerant emissions mean that they maintain corporate-wide emissions rates that are approximately half the industry average. That’s an impressive accomplishment, which explains why only 12 retailers were singled out in September for recognition by EPA as GreenChill partners. The companies were:
- Best Corporate Emissions Rate: Meijer; Cook County Whole Foods Co-op.
- Most Improved Emissions Rate: City Market; Onion River Co-op; Weis Markets.
- Superior Goal Achievement: Cook County Whole Foods Co-op; Food Lion; Grocery Outlet; Hy-Vee; Meijer; Raley’s; Sprouts Farmers Market; Target.
- Exceptional Goal Achievement: Hy-Vee; Meijer
“Many refrigerants are climate damaging, so by reducing refrigerant emissions and switching to ... environmentally friendlier refrigerants, these companies are demonstrating their dedication to a sustainable future,” said Joe Goffman, EPA’s acting assistant administrator for the Office of Air and Radiation, at the time that the GreenChill partners were revealed.
