controlling operations costs

Kwik Trip is maximizing efficiency by combining business intelligence with energy intelligence.

Kwik Trip is maximizing efficiency by combining business intelligence with energy intelligence.

By Mark Kortkamp, Contributing Editor

Kwik Trip Inc. was chosen "Chain of the Year" in 2004 by Convenience Store Decisions largely because people are the heart of their company, and technology is its lifeblood. This winning combination keeps the LaCrosse, Wis.-based chain efficient and growing.

Now Kwik Trip, which operates 320 stores in Wisconsin, Minnesota and Iowa, is uniquely combining business and energy intelligence to save dollars, time and the environment.

The Retail Dilemma

Fifteen percent of all electricity produced in this country is wasted. Meanwhile, demand for electricity is growing 4% annually. With demand outstripping supply, utilities predictably are building more power plants at a conservative cost of $2,000 per kW of capacity. Billions of dollars will be invested over the next 10 years. This vicious cycle will increase rates and emissions.

Convenience store operators must realize that from now on, energy decisions will affect margins as much as retail decisions. Energy inefficiency and waste must be curtailed or margins will disappear. Poorly designed buildings; failure to specify energy requirements for new equipment; endlessly adding plug loads; shoddy maintenance; ignorance of energy issues—all of these things will eventually eliminate competitors.

Retail traditionally steers the car. But if the energy wheels fall off, it will be a short ride for everyone. Kwik Trip management understands this. For that reason, energy efficiency improvements are being planned.

"If we can find a way to make us more profitable, we’ll find a way to make it happen," states Steve Loehr, vice president of operations support. His philosophy applies to retail and energy decisions.

Kwik Trip + Technology + Utility = Test Project
Ed Kondracki, special projects coordinator, is a technology birddog for Kwik Trip. Tenacity and vision accentuate his character. Two years ago, his search for energy-reduction technology took him to Dakota Electric Association, a Touchstone Energy Cooperative located near Minneapolis. Here he learned of a device known as a "digital control system" (DCS).

The DCS reduces electrical consumption by operating store equipment more efficiently. It’s uniquely coupled with the utility meter so it can determine when and how to stagger the run time of equipment that is connected to it. It’s an "intelligent" energy management system with an installed price that is 50% less than other brand-name building automation systems.

"Any technology we adopt must be cost-effective and bring value to the company," said Kondracki. Would a DCS measure up? Kondracki wanted to know, but he didn’t want just another sophomoric, vendor-driven project to oversee.

"With other things, Dakota Electric has gone above and beyond to objectively research alternatives for us," said Kondracki. "Their values and goals are similar to ours. They have our best interests at heart."

So Kwik Trip and Dakota Electric teamed up to evaluate a Dencor DCS in a La Crosse, Wisconsin store. The project would determine the following:

  • If a DCS will effectively reduce electrical costs;
  • What the process for installation and operation entails;
  • If there are any additional, value added benefits available;
  • If the DCS would operate transparently to employees and customers; and
  • How cost-effective the technology would be

The installation took about seven hours and involved connecting low and line voltage circuits to relays in the DCS and connecting a communication line. Temperature sensors and back-up thermostats were installed in the walk-in freezer and cooler, and the POS area. The local utility installed a pulse meter that would send real-time energy (kWh) and demand (kW) data to the DCS.

The initial goal was only to reduce monthly billing demand (kW), which comprises about 40% of the monthly bill. This store averaged 70 kW. At a winter rate of $6/kW and a summer rate of $9/kW, monthly billing demand averaged about $500/month.

By intelligently operating two water heaters, an electric duct heater and compressors for the walk-in freezer, walk-in cooler, ice machine and HVAC, it was estimated that billing demand could be consistently reduced 10-15 kW.

The DCS was conservatively programmed to maintain billing demand at a level of about 60 kW. Whenever store demand approached the predetermined limit (which occurred only a few times per month), the DCS would direct the operation of equipment in an organized, prioritized manner.

Initial Findings
After more than a year of monitoring, tweaking and testing by Dakota Electric and the manufacturer, favorable results were obtained. Electrical costs could be reduced about 10% ( approximately $100/month); the need for intervention was minimal; and operation of the device was generally transparent. The payback, however, penciled out around three years for the Rose Street project and cost-effectiveness was considered marginal.

Norm Harold, an energy and power efficiency expert for NKS Consulting, was asked to evaluate the Rose Street project and make recommendations for optimizing the DCS and maximizing savings. As a result of Harold’s investigation, significant untapped potential was discovered.

It was determined that by controlling more equipment; customizing and optimizing the programming; and more fully utilizing inherent monitoring and reporting capabilities of the device— further reductions in operating costs could be obtained. The payback and ROI could be significantly improved. As a result, Kondracki and Loehr agreed to install additional DCS units and do further testing and evaluation. This time, NKS Consulting would manage the projects for Kwik Trip.

Better Results
Five more stores in the Minneapolis region were equipped with digital control systems. Some had car wash systems, and others did not. The team was expanded to include appropriate HVAC and refrigeration contractors, as well as Kwik Trip’s Erik Peterson, director of engineering, and Lyle Antony, one of their top engineering coordinators. Phase two was launched.

Prior to installation, Harold conducted a comprehensive energy audit on each store. Under the microscope, additional controllable loads were identified and recommended O & M improvements were documented. Reductions in demand and energy would be targeted this time.

"The audits revealed better ways of doing things. The projects were more organized and everyone was very enthusiastic," Harold concluded. "Peterson and Antony provided advice and insight, and their coordination proved invaluable."

All five digital control systems have been operable since fall, 2005. NKS implemented customized programming and testing protocols for each site. Monitoring was stringent. Every effort was made to wring out additional energy and demand savings, and identify value-added benefits. The results exceeded expectations.

Results of Phase II
By enhancing the system and optimizing the programming, NKS was able to reduce electrical costs by about $3,000 per store per year. For 350 stores, that compares to additional margins of $1 million annually—without increasing retail sales.

Many additional benefits were uncovered. For example, real-time data for in-store equipment can be accessed remotely. This enables maintenance watchdogs like Antony to evaluate equipment performance and malfunctions; identify n
eeded control modifications; plan preventive maintenance that will extend equipment life; utilize over temperature alarm notification; digitally control and stage lighting; and customize programming—from the office.

Also, stored data can be graphed and disaggregated to identify specific operating costs associated with car washing, HVAC, domestic water heating, outside lighting, and general base load.

Factoring in current value-added features and benefits, the total measurable reduction in operating costs will exceed $1 Million. Future planned modifications will nudge this even higher.

Gaining Utility Support
NKS is leveraging the results of Phase II to convince other electric utilities that they should support businesses that install energy and capacity reduction equipment like the DCS. Each DCS used in a convenience store provides $11,000 of value to the electric utility serving it. The value increases to $22,000 for a utility that is facing construction of new power plants and transmission lines. Clearly, it would be cost-effective for utilities to provide incentives that would encourage businesses to install DCS. After all, a regional chain with 350 DCS equipped stores would reduce load on the serving utility grid by 5,300 kW. That’s worth about $10 million in deferred costs to them.

The average turnkey cost for installing DCS in the Kwik Trip stores was $7,600. Utility rebates averaged $4,500 per store. After factoring in utility rebates, paybacks were reduced to 12-18 months with ROIs of nearly 40%. This sort of energy intelligence is good business sense.

Energy efficiency projects compete with all other capital expenditures. It seems all projects must meet this universal requirement: Earn more—now. Retail items may produce ROIs of 2-10%. But investment in digital building control systems can provide ROIs that are four times higher. In essence, energy intelligence can turn the energy department into a "profit center" rather than a "cost center."

"Even if the ROI for a particular energy efficiency project is low, we do what we can to be long-term, good stewards of the environment," Loehr said. "But with things like the DCS, the return is good and the environment will benefit. It’s an ethical and financial win-win."

Demand kW Reduced 12%
Energy kWh Reduced 7%
Outside lighting control w/adjustable lumen sensor Precise, staged digital automation control
Control of more equipment More savings, quicker payback
Operations & maintenance Preventative maintenance reports and documentation
Programming & Monitoring Can be done by Kwik Trip

Cost Increment
Cost Reduction
(on a scale of 1-5)
N/A 3 out of 5
Low 4 out of 5
Low 2 out of 5
Low 3 out of 5
N/A 2 out of 5
N/A 2 out of 5