Food and retail players mixed on whether Energy Efficiency Grant will help with high power prices

A NEW grant for the adoption of energy-efficient equipment in food and retail sectors has drawn mixed reactions from industry players and associations, with some saying that incumbents may be deterred by a lack of incentive and perceived low return on investment.

Food manufacturers and food and beverage (F&B) players told The Business Times that new entrants, as well as firms which have not bought new equipment for years, would likely be the biggest beneficiaries of the Energy Efficiency Grant announced on Tuesday (June 21).

Noting that commercial kitchen equipment typically depreciates over 5 to 6 years, a spokesperson for the Restaurant Association of Singapore said a majority of operators will need to weigh whether it will be cheaper to “ditch their fairly new but less energy-efficient equipment, in order to purchase brand-new equipment that tilts the balance, given the high energy prices”.

“Both options are wasteful in different respects. Perhaps the government could consider a relief package for those where it makes no economic sense to switch prematurely,” the spokesperson said.

Woon Tien Yuan, director of Killiney Kopitiam, noted the hassle and potential ancillary costs for F&B operators, who may need to spend on reconfiguring kitchen layouts to accommodate new equipment purchased with the grant.

“If it’s a one-for-one replacement, then it’s straightforward. But if there are major changes, you may need to make adaptions to your current fixtures, or seek approval from the landlord – these are additional concerns for the business owner,” he said.

Given the competitive F&B landscape, there is also uncertainty over how long a business can sustain its operations before reaping gains from the investment, he added. Firms have up to a year after application to purchase equipment and submit claims for reimbursement.

The Energy Efficiency Grant will provide local small and medium-sized enterprises (SMEs) in the food services, food manufacturing, and retail sectors with up to 70 per cent support to adopt energy-efficient equipment in pre-approved categories. It is part of a S$1.5 billion inflation support package to help Singapore businesses and households.

These sectors have been significantly affected by higher electricity prices, in terms of the impact on their overall business costs, the Ministry of Finance said in a statement.

“Limited” range of categories

But Andrew Chan, managing director of The Soup Spoon’s manufacturing arm Souperfoods, said that the grant’s “limited” range of categories did not offer players many options.

Capped at S$30,000 per company, the grant will cover equipment such as LED lighting, air-conditioners, cooking hobs, refrigerators, water heaters and dryers.

“Commercial equipment is not as consumer-centric; most of the time they don’t have a ticking system that says what is more or less energy-efficient. By and large, you’re going to find the pool of equipment you can potentially switch to very small,” Chan said, pointing out that most retail businesses are already using LED lighting.

“I don't see another refrigerator that is going to save me more electricity tremendously, and if there was, I will say that most operators would have already considered buying or have bought it beforehand.”

In addition, kitchen equipment is often customised to meet specific needs, making it difficult for F&B players to find energy-efficient replacements, said Dellen Soh, chief executive officer and chairman of casual dining restaurant chain operator Minor Food Singapore.

“There’s no one-size-fits-all. We have very different needs from domestic households, so we can’t just easily change our equipment as and when we like, as it would affect the current layout of our kitchen.”

It is also unclear if the grant supports the upgrading of existing equipment to be more energy-efficient – which would be more useful – or is limited to new purchases, said John Cheng, director of sugar manufacturer Cheng Yew Heng.

“If you’ve just bought (a piece of) equipment, you won’t buy it again just for the sake of using the grant,” he said.

More direct subsidies could help

David Tan, president of the Singapore Food Manufacturers’ Association (SFMA), said that while the Energy Efficiency Grant is a “positive step in the right direction” in a tough inflationary environment, more can be done as the bulk of food manufacturing’s energy consumption is in the operation process line and storage, such as chillers or freezers.

“We need a more holistic approach to study the entire manufacturing process line, to be fully effective in total energy efficiency. More help is definitely required, (as) the sector has gone through a sudden jump in energy and electrical cost,” Tan said, adding that food manufacturers have seen their electricity costs increase by 50 to 100 per cent since the start of the year.

Rose Tong, executive director of the Singapore Retailers Association, said the grant will encourage smaller retail SMEs to adopt energy-efficient equipment as a long-term measure for going green and coping with increased energy costs.

“As the majority of our retailers are in malls and buildings with centralised air conditioning, we hope that the government can also encourage landlords and building owners to adopt energy efficient equipment, especially older buildings, to increase their efficiency in energy usage and pass on such cost savings to tenants,” she said.

Besides the grant, direct subsidies in the short run could help players cope with electricity price shocks, SFMA’s Tan said. He also suggested larger-scale subsidies for industries to explore alternative energy sources, or more energy-efficient production lines.

The removal of certain taxes on fuel such as diesel and petrol will also provide immediate short-term relief, he added.

Chan said that the government could consider subsidising the cost of energy audits for businesses, or subsiding equipment purchases recommended by such audits.

“There are many ways for businesses to think about how to reduce energy costs. But in terms of just having a S$30,000 grant applicable for fixed categories, I don't think that’s the right way,” he said.