Outsourcing refrigeration could improve bottom line

By Dawie Kriel, head of Energy Partners Refrigeration

We take a look at why South African companies are moving away from owning their own cooling systems.

Refrigeration represents a substantial cost to companies operating in South Africa’s food and beverage industry. Additionally, the operation and maintenance of modern refrigeration systems often diverts precious resources and time away from a company’s core activities. Businesses are also losing a lot of money through wasted electricity costs by using inefficient refrigeration systems. This is why some of the country’s major industry players have started to consider outsourcing their refrigeration.

EP001A large-scale ammonia refrigeration plant providing 24-hour cooling for an ice rink.

The simple truth is that many businesses in the food and beverage industry are operating poor performing and expensive-to-maintain refrigeration systems. Ideally, more efficient and reliable systems should be installed, but the capital outlay required for a state-of-the-art refrigeration system is often high.

For many companies, sourcing the funds or diverting cash for a new refrigeration system is often a challenge, and businesses that do install their own refrigeration systems tend to keep initial expenditure as low as possible. The problem with this is that the initial cost of a system generally only constitutes a quarter of the system’s entire life cycle cost while the energy cost is likely to be 50–70% of the cost over the life of the plant. Therefore, if you cut costs during the initial installation, operation and maintenance costs are likely to be more expensive later on.

Outsourcing your refrigeration can be a more viable option for companies that want to focus on their core business. Most businesses already rent or outsource a number of their functions, including logistics and equipment. This makes sense since they are paying for the use of those assets, while not having to worry about maintenance. In line with global trends, the same can be done with refrigeration systems, which require the appointment of high-level skills to maintain their efficiency.

EP002Some clients are starting to see the advantages of outsourcing operation and maintenance, since this saves them both time and money in the long run.

Energy Partners Refrigeration has created a unique business model that allows companies to pay for refrigeration as a utility without owning the system. Basically, we install, manage, and own the refrigeration system on site, while the client only pays for the amount of refrigeration that they use, at an agreed-upon Rand-per-kilowatt-hours-refrigeration (R/kWhR) rate. Operation and maintenance are no longer the responsibility of the client, who can then focus on their core business.Outsourcing your refrigeration can be a more viable option for companies that want to focus on their core business.

To do this, we first had to overcome one significant hurdle before we could offer refrigeration to clients as a utility: measuring the refrigeration that a client actually uses is one of the trickier parts of an endeavour such as this. The only existing systems that were accurate enough were too expensive, so we first had to develop an affordable, accurate meter to accompany the systems we install.

Added to this, the installed cooling systems are also equipped with access to a Web-based dashboard, enabling clients to keep track of performance, key temperatures, billing, and the energy consumption of the plant 24/7, while also allowing remote monitoring and operation of the system as required.

Clients maintain the right to assume ownership of the plant at any time.

EP003Refrigeration represents a substantial cost to companies operating in South Africa’s food and beverage industry.

Energy Partners Refrigeration already has a number of these projects under its belt. These include the installation of refrigeration plants for cold storage at a large dairy processor and an abattoir. New energy-efficient refrigeration systems have also been installed at four Pick n Pay and Spar supermarkets. In all cases, the systems have already achieved substantial savings for the clients, on top of the added peace of mind that their cooling is in the hands of experts.

Large corporates are also gradually moving towards this way of thinking. Yet, we have found that the large players in this industry still prefer to own the refrigeration systems themselves. Many of them, however, have begun to see the advantages of outsourcing operation and maintenance, since this saves them both time and money in the long run. GWK’s abattoirs in the Northern Cape are currently being provided with low-cost hot water from our high-temperature heat pumps on an outsourced basis, and there is a project in the planning phase to outsource their refrigeration as well.

By understanding the fundamental dilemma our customers face in trying to reduce the cost of cooling, we could identify opportunities to reduce technical and financial inefficiencies in the energy industry and invest in these opportunities.

Credit: Photos by Energy Partners


Click here to read the July/August 2018 issue of Cold Link Africa. 


 

 

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