In conversation with SmartParc

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Did you know food production accounts for round about 26% of global greenhouse gas emissions created throughout the entire food cycle. That means decarbonising the food industry is therefore, an imperative to ensure a future in which food production can actually sustain global populations. Well, Veolia, working in partnership with SmartParc, is doing just this with the UK's first low carbon food manufacturing community. With one award win already achieved in December 2023, we're now nominated for the Energy Efficiency Award at the Decentralised Energy Awards, and I'm here with Phil from SmartParc to talk about these accolades and what they're all about.

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So I'm Mark Dainty. I'm Business Development Lead for local Loops of energy. And joining me now, Phil, introduce yourself. 

Hi Mark. Yes I'm Phil Lovell, the COO for SmartParc Europe. I joined the business about 18 months ago, but I spent all my career in the food industry that you just introduced.

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Fantastic. Well, I've spent most of my career in the energy industry. But we show our age just a little bit there. So thanks for travelling all this way on a kind of wet and windy Tuesday to come and see us. Obviously SmartParc, quite revolutionary, the first of its kind in the UK. And I'm sure you can expand on that so what exactly was the mission behind SmartParc? 

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So SmartParc at its heart is about clustering food businesses together. It's not a new concept, actually, clustering businesses. If you go back to the industrial age at the back end of the 19th century, all the cotton mills were linked together.

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And when you cluster businesses together, they can share in the economies of scale that you would get from doing so. Another key bit, when we cluster businesses is getting them to collaborate together and share that connectivity. Some can supply each other but when they start to collaborate, there's all sorts of things they can share.

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I think that goes for all kinds of things like logistics and supplies, etc., but also the natural resources we use to actually power and energise these plants, is that correct? 

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Exactly right. You know, when you start to think a bit broader and this is why, you know, some industries do clustering - the automotive guys have done it for a long time as well. Some of these businesses can supply each other next door. They can share trucks across this large space as well. So you think for all the trucks coming in and out. Reducing this is good for food miles, it's good for cost. It makes a huge, huge difference and equally, they can share all the things that really aren't competitive.

00:03:01:05 - 00:03:22:05
So there are many things around a food factory that aren't really that competitive. All the way from laundry to energy, you know, which I'm sure we'll get onto. There's a unique energy system at the park, and all the things around that: maintenance, you know, forklift truck contracts, all the things that aren't actually competitive. When you share them, you not only get a better price but you get a better service.

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Absolutely, absolutely. Yeah. And it's not just happening in the UK. You're doing this globally as well. 

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The first park is in Derby. We're just about to do a second one in Canada, we're just closing the deal on that, but we plan to build a hundred of these around the world.

00:03:34:22 - 00:03:59:18
So we think this is partly what the food industry needs. When you look at, you know, the assets the food industry has, most are pretty old, actually. Around the world, there are very few new food factories getting built. They're expensive which is part of the reason. But equally that, you know, food hasn't really had much focus on it. It got a bit more focus I think in the pandemic.

00:03:59:18 - 00:04:08:05
Yeah, there was a food shortage. We started to see those supply chains were stretched. People started to wake up to the fact there's a lot of waste in the food industry.

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We mentioned changing the way that food is manufactured not just in the UK, but, as you say, across 100 sites around the world as well. So why is it important then? 

So a number the reason why I think it's important. One is the population of the world is still growing. So actually we're going to struggle to feed everybody in the world if we don't sort some of the supply chains, to take some of the waste out. Equally, we've probably seen, for the first time in my lifetime, some real inflation in food costs in the last couple of years.

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Yes, I think we've all felt that. Which everyone will have felt. That will carry on if food becomes scarce. It's a classic commodities and markets thing. Supply and demand. Yeah, absolutely. Unless we reduce some of that waste, make food manufacturing more efficient. We'll continue to see prices rise globally and food factories use a lot of energy. Absolutely.

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Now we are changing, obviously, to a more sustainable country. Our infrastructure is not quite there yet but that should, should I say, help kind of stabilise those energy prices a little bit. It should do. They've stabilised a bit.

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We've got a lot of wind now in this country. On a windy day, maybe 50% of the country gets powered by renewables. On a day like today, you know, where it's miserable and there's no sunlight for all the solar panels. We're burning a lot of gas still. 

00:05:27:24 - 00:05:49:02
For if the sun doesn't shine and the wind doesn't blow, we're reliant on that gas. So going back to, SmartParc in Derby. What can you tell me about the hub in Derby? 

So Derby is our first SmartParc. We have started to build out on that site. It was a brownfield site with a rich manufacturing heritage in Derby, but it hadn't been used for 20 years.

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It was previously used for chemical manufacturers. So we spent the first year cleaning the site up, you know, in September 2021, we cleaned all the land up. That took about a year to do that. And we were fortunate to get a government grant for that, which is really helpful. Otherwise, the project might have struggled.

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We had a lot of support from Derby Council as well. And then early in 2022, we started to build. We got our first tenant HelloFresh and it's great to have them on the park.

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We built a smaller building about 120,000 square feet for them because they were desperate for space, their sales doubled in the pandemic. They were one of the winners of the pandemic and good luck to them. So we built that building very quickly, but knowing full well they were in need of a bigger building, which we started to build immediately.

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So their bigger building, which is now 450,000 square feet, kind of three times the size, a little bit more than three times the size. We've literally just finished and their now commissioning. So they're moving out of that smaller building into the big one. And we're going to re-let that smaller one. 

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Effectively we build food ready shells. So one of the real challenges for food businesses is they use a lot of power and we'll come on to that and they use a lot of water, again, we will come on to that in a bit. But the buildings themselves, you can't just go and rent one or find one.

00:07:08:05 - 00:07:27:08
They don't exist, they need to be insulated. Most of the food businesses are chilled or frozen; they have drains in the floor; they need to have very large steel work to hang all the various bits of kit and frames off. And most standard sheds don't have that. So if a food business wants to rent a standard shed, the first thing they do is dig up the floor, put drains in and put bigger steel frames in to hang things off.

00:07:27:08 - 00:07:43:07
They have to put a box inside it, chill it, and spend an awful lot of money on it. Actually, we build the shell. ready. You get a food-ready shell straight away. And you can also get linked into the various systems on the park, like the energy center again, which we'll, we'll come on to.

00:07:43:07 - 00:08:05:05
So effectively, we're creating a new asset class for food with our partner SEGRO actually, that didn't exist before. So it allows food businesses to, in a capital light way, improve their assets, get a new factory, because they're renting it and SEGRO is paying for a big chunk of the fit-out. 

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So it's going to drive, obviously, interest in the park itself.

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But of course, obviously we're here to talk about the nomination, the joint nomination, for the energy efficiency category, at the Decentralised Energy Awards.

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I mean, you know, for SmartParc and for Veolia working together, it's not our first award. We won one back in December last year, December 2023. And that was the Energy Systems Project of the Year at the Energy Savings Awards. Which is fantastic to win that. I think it's great. And hopefully the start of absolutely loads and loads more to come as well.

00:08:31:23 - 00:08:45:18
And I know that you and the team at SmartParc and the team at Veolia have been working very hard on SmartParc as well to kind of make it exactly what it is today and deliver the promise that it's got, Of course, from an energy perspective, at its core, there is the district energy system.

00:08:45:18 - 00:09:10:03
The decentralised energy system, which for those of you that don't know, decentralised energy or district energy or district heat is where heat is centrally generated and then distributed along a series of pipes to multiple buildings that actually need that. So instead of having each building firing up its own individual boilers as it used to be, etc., it's now all produced, or should I say generated and stored centrally and drawn off at the same time.

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And that is effectively the heat, the hot water, and also in the case of SmartParc, cooling as well.

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Which was us working together. We also have a construction company, TSL, as part of our business. So we could pretty much move at speed. That goes to show, I think you said, construction started in 2022, and HelloFresh moved in in 2023, early 2023. They did. 

00:09:36:10 - 00:09:56:24
So I mean having worked on many schemes, construction generally always moves to the right somewhat and I think that is absolutely fantastic. The amount of speed, that you worked with Veolia on that to get that up and running. You mentioned obviously the potential capital sales or so should I say, OpEx savings in terms of, running costs for your clients and residents there.

00:09:57:01 - 00:10:13:16
But carbon saving is also pretty significant as well, isn't it? Yes it is. So as you build out the site, we'll save a huge amount of carbon again because we're not wasting energy. When you think about net zero, the biggest single thing you have to do is be energy efficient. Absolutely.

00:10:13:16 - 00:10:34:02
It's the energy bit that really drives down net zero calculations. When you look at how efficient we are and how efficient the buildings are, all of those tenants are going to save an awful lot of CO2 versus where they would be if they were standalone. 

00:10:34:02 - 00:10:54:00
The figures that we saw were 27,000 tonnes between 2024 and 2030. Yeah, 27,000 tonnes of, cooling CO2 and about 3,500 tonnes of heating CO2, which is absolutely phenomenal. And you know, we go back to that earlier stat that I mentioned earlier about food production accounting for 26% of global greenhouse gas emissions so that's huge. Exactly right. And the food industry does disproportionately affect the whole climate change emergency we're all in.

00:10:54:00 - 00:11:10:20
Yeah, and for cooling, you're using ammonia based chillers there, which, as you mentioned, has zero greenhouse gas emissions. You know, it takes some skill to run them and actually, the Veolia team are running that building for us, having helped build it, which is great.

00:11:10:20 - 00:11:29:15
But again, that's something, if you were building a food factory yourself, you'd have to do all that yourself. You'd have to spend all that capital. You'd have to run that ammonia plant yourself. Actually, we're doing it centrally and the other real beauty of that is that it's future proofed, in the sense that if a newer technology comes along, that's better than ammonia.

00:11:29:17 - 00:11:41:02
Let's say hydrogen power, we can build that next to it, link it to the pipes under the ground, nothing in the buildings have to change, which is absolutely fantastic. It's very, very well future proofed from that point of view.

00:11:41:02 - 00:11:56:14
So, some great messages there about what you've done in terms of, changing how food manufacturing is in the UK, in how you're enticing new customers and new tenants to site about the massive carbon savings and the OpEx savings they can get on there.

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And all that sounds great, but what does it mean in the long run for the manufacturers who are going to come and be part of SmartParc?

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So for the guys that do want to come to the park, they're going to get a new building. It's going to help their journey towards net zero. It's going to drive their ESG strategy, which is important.

00:12:09:19 - 00:12:31:23
And equally, I think the park is right for some of the newer technologies. So one of the buildings that I haven't talked about in the park is the Innovation and Technology Center. So that is a shared building, specifically set up for SMEs. So smaller businesses with unique products that are trying to get themselves off the ground. Could be a smaller niche supplies for one of the bigger tenants on the park.

00:12:32:00 - 00:12:50:13
And some of those guys are the future of food. Yeah. Because there's lots of these small businesses figuring out how to use waste streams, which is really interesting. There's lots of new technologies coming through, like vertical farming, cultured meat. I know some people may or may not disagree with some of that technology, but actually I think that's all part of the mix of the future of food.

00:12:50:21 - 00:13:09:15
It's not just changing how manufacturing happens in the UK and how we reduce our carbon impact from a manufacturing perspective across all sectors, but also people's perceptions, consumers' perceptions. Yes. Exactly right. As I said, I think things like vertical farming are a part of the mix for the future.

00:13:09:15 - 00:13:24:19
It's not everything, agriculture is still really important. What we grow is still really important. But I think some of those new technologies are really important too. And we've got a great opportunity here in the UK to be at the forefront of some of that. So I'd love to see the next government really get behind that.

00:13:24:21 - 00:13:43:06
That'd be one of my, big challenges. We spend a lot of time talking to politicians. The national food strategy never quite got off the ground and the food industry doesn't get a lot of help, it's left its own devices, so we'd love to see the next government put a wind behind that.

00:13:43:08 - 00:14:10:06
And understand that food security is important. And help the industry get us to a better place. Because, as I said, a lot of food factories, they're old, they're tired, they're inefficient, the supply chains are inefficient, and there's a phenomenal amount of waste in that system that you could save. You look at food, like all the food that we either consume or that we go out and buy and it requires three main things for us to get there.

00:14:10:08 - 00:14:33:21
It requires power, which we're obviously a part of at SmartParc. It requires some form of heat as well, whether that's to, cook it, whether it's to store it or whether it's to grow it in a vertical farm. And it generally requires some form of chilling as well. And it's great that Veolia can work alongside SmartParc in being part of that and delivering that and getting a great product out to people.

00:14:33:21 - 00:14:50:17
So fantastic. We've got HelloFresh there at the moment. Now, I know that you just told us about some exciting news about your next tenants at SmartParc. Here we go. This is a podcast first. So we have just started to build for Greggs. Greggs, on the site at SmartParc.

00:14:50:19 - 00:14:58:21
So we got planning permission at the back end of February and they just announced a couple of weeks ago they're coming to SmartParc. So another very big building, 350,000 square feet.

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Equally we think there will be some benefits for us collaborating as well.

00:15:02:08 - 00:15:19:19
And there will be, you know, SmartParc, that particular one at Derby is 155 acres, roughly 2,000,000 square foot of buildings. There's a lot that people can work on together. And when you share that collective intelligence, you'll pretty much always get a better answer than if you did it yourself.

00:15:19:19 - 00:15:32:07
And I think when you think a bit bigger, you think about, well, what can we put next to these SmartParcs? So as we do the final few buildings we're either going to get restricted because some may need more cooling or heating and we can't balance it.

00:15:32:09 - 00:15:48:24
Or if we have spare heat, why don't we export that? Why don't we heat the hospitals and schools of Derby? And we're talking to Derby Council about that now actually. So, you know, if you think a bit broader, and you think about having to balance all that energy that is either heating or cooling things.

00:15:48:24 - 00:16:06:09
If you can balance it, there are huge savings to be made and there are huge steps towards becoming net zero. Which is the ultimate goal. We've all got a massive challenge ahead of us, towards net zero, whether that's on a personal level or on a corporate level. There's lots of challenges that we've got to rise to.

00:16:06:09 - 00:16:24:00
And I think everything that we can do to break that process down into each constituent part and have a look at what we can do in that part and food manufacturing is obviously an essential part of that process as well. Yeah. I mean food manfacturing, well, the food supply chain in this country will be the single biggest employer of people.

00:16:24:02 - 00:16:41:14
When you think about all the food that's made, all the food that's grown, harvested, served to you in restaurants or pubs. That's all a huge supply chain that gets that to us all. So, it's a huge, huge employer of people in this country.  

00:16:41:14 - 00:16:58:23
Congratulations. I've been to the site. It looks fantastic. Still relatively early days. It looks fantastic. It's very impressive and if anybody gets the chance to go to the site, I heartily recommend that you do that. You've got another 99 to come, at least. Yeah, yeah, well, there's a few more to do around the world now. And some of them around the world might be slightly different.

00:16:59:11 - 00:17:17:03
There will be different challenges in different countries actually. Bbut ultimately when you cluster businesses together, that's where you can really get at some of those efficiencies and really drive down some of those energy costs, as we said. Which is just fantastic for everybody all round. 

00:17:17:03 - 00:17:20:22
Phil, thank you very much for joining us today. It was a real pleasure to talk to you. I've learnt a lot more about SmartParc than I knew before.

00:17:21:00 - 00:17:25:10
Once again, Phil, from SmartParc. Thank you very much for your time. Thank you for having me.