The energy crisis

THE MAJOR feature of the cold chain’s year has been the challenge of the energy crisis. The scale of the problem for the cold chain was demonstrated clearly in our Cold Chain Report 2022, which we published in July to set out up-to-date quantitative information on cold storage and temperature-controlled distribution. New analysis in the report showed that electricity spend for the UK’s cold storage facilities was forecast to at least double between 2021 and 2022, growing from £560.6 million in 2021 to an estimated £1.1 billion for 2022. 

Having navigated to this point, the key question for the cold chain is how will the energy crisis play out from here? Costs remain high and there is a great deal of uncertainty but there has now been a major intervention from Government: the Energy Bill Relief Scheme in September, a subsidy that means that all businesses that buy electric and gas will pay no more than a set rate per kwH for that supply. At an eyewatering cost to the public purse, Government’s commitment to a price cap for businesses is only for an initial six months. There could be sectoral extensions beyond March 2023 and we will be making the case to Government that this should include the cold chain, not least to help tackle food price inflation.

The Energy Bill Relief Scheme is welcome but it’s not simple for the cold chain. Not all companies pay the same for their energy and crucially everyone structures their purchasing differently. Inevitably, the cap has brought a new wave of discussion about pricing and cost of cold chain services but cold chain operators need to consider the uncertainties around extensions to the scheme beyond March 2023 as well as the unpredictable market. 

Looking to the longer term, our energy-intensive industry will remain at the mercy of market volatility until operators are able to gain more control over how they use, generate and store energy. The technologies and opportunities to do so through energy efficiency and on-site generation are developing apace, and operators are increasingly integrating new technologies and energy-efficient systems as core features of new cold storage facilities. 

Red diesel

The dramatic hike in energy costs for cold storage operators this year has been reflected in fuel costs for temperature-controlled distribution operators. Our Cold Chain Report 2022 showed that the rising cost of full duty diesel alone means major increases in fuel costs to run TRUs (Transport Refrigeration Units), and this is in addition to the ending of the red diesel exemption for TRUs in April 2022 which sees cold chain hauliers paying more than double to power their fridges. 

We are calling on Government to provide proper support for the trial and uptake of alternatives to diesel powered TRUs, currently the UK risks falling behind other countries where infrastructure grants are bridging the affordability gap and driving uptake of emission free technology.

The hard-won progress that the industry has achieved this year in both energy efficiency in cold storage and the transition away from diesel in TRUs are central to the industry’s journey towards a net zero economy, the challenge that will define the cold chain over the next 30 years and beyond.

Recent crises

While addressing the energy and fuel cost crises which have dominated 2022, the cold chain has continued to adapt to the lasting impacts of the multiple crises of the past two years. Over the course of this year, a number of the pandemic-driven effects on the cold chain have turned into permanent change. This includes a shift in consumer priorities, customers placing greater value on supply chain resilience, the challenging economic climate on the back of huge public spending, and the impacts on the cold chain workforce. 

Employee recruitment and retention will require continued focus and we are supporting the collaborative Generation Logistics campaign which aims to help attract, identify and develop a new and diverse generation of talent to fill vacancies industry-wide and future-proof the logistics industry.

Due to the Government’s decision to delay post-Brexit checks on food imports from the EU, the effects of Brexit were less dramatic in 2022 than the cliff edges of the three previous years.  This year we have moved on from the cycle of stockpiling but new routes, processes and relationships are evolving and uncertainties over future changes still persist into 2023.

Investing

In response to historic under-investment and growing demand, over the past decade significant foreign, private equity backed investment has been driving growth and consolidation in the cold storage market. This year our industry has seen welcome benefits deriving from this trend.

Our Cold Chain Report 2022 showed that the UK cold storage capacity of Cold Chain Federation members now tops 40 million cubic metres, the equivalent to the bowl volume of 35 Wembley Stadiums. This represents a 10% increase in capacity in a year (up from 36 million cubic metres last year), reflecting the strong investment in building new cold stores and expanding existing facilities as well as our growth as a Federation. 

Our industry has been investing in building pioneering new buildings and facilities designed for our industry’s future, making use of new technologies such as automation and renewable energy and new approaches to improving efficiency, increasing productivity and minimising environmental impact. 

This level of future-facing expansion in cold storage will benefit our food supply chain partners looking to secure space, increase resilience in the food supply chain and support our industry’s journey towards net zero. 

Cold Chain Live!

The cold chain’s net zero future was one of the central themes at our Cold Chain Live! conference in Birmingham in September, where debate and discussion with 300 cold chain colleagues, alongside the perspectives and insights of experts from outside our industry, gave us all the chance to take a step back and think differently. 

Getting our industry together face-to-face was so valuable and welcome – not only were the expert speakers inspiring and thought-provoking, but the discussions and connections off-stage throughout the day and the evening dinner were energising and instructive too. There was widespread recognition that although this year has been extremely challenging, we are a strong and resilient industry moving in the right direction. There was a great sense of anticipation for our industry’s future, full of possibility.

Cold Chain Live! 2022 created a unique forum for our common issues to be discussed, knowledge to be shared, ideas to be exchanged and new relationships to be established. Cold Chain Live 2022 was a major milestone in our Federation’s evolution into a future-facing, productive and proactive asset for our industry and we’re looking forward to building on this year’s success at Cold Chain Live! 2023 in Liverpool.