Iceland Foods’ CEO Tarsem Dhaliwal has said a new long-term solar power deal will give the company better clarity over its rampant energy costs.

The frozen food retailer has signed a 10-year deal with Octopus Energy that will see 150 Iceland stores directly supplied by solar power from the Breach solar farm in Cambridgeshire. 

The deal will secure 14% of Iceland’s energy needs until 2033 and will help the supermarket cut its CO2 emissions by an estimated 23,000 tonnes during that time.

“This partnership is an exciting step in our journey towards achieving net zero by 2040. It also gives us some clarity on our energy costs for the coming years, at a significant discount to the current wholesale price,” Dhaliwal said.

“This helps to mitigate the impact of the volatility that has plagued the industry for the past 12 months. Switching to more renewable forms of energy to power our sites will be a huge priority for us in the coming years, as we continue to identify solutions to optimise sustainability across the business.”

Octopus manages Breach solar farm on behalf of Octopus Renewables Infrastructure Trust (ORIT). It began construction on the farm in November 2022 and is scheduled to bring the site online by Q4 2023. When operational it will provide c.64 Gigawatt hours (GWh) of renewable energy every year to Iceland stores.

Like other businesses in the sector, Iceland has been particular exposed to soaring energy costs over the past year due to its reliance on chest freezers and chillers, prompting concerns about Iceland’s prospects of refinancing part of its £750m net debt.

In September, now executive chairman Richard Walker told the Mail On Sunday its latest energy bill had more than doubled, growing by £20m as a result of spiralling costs.

There were further concerns in February after the French insurer Coface withdraw cover for Iceland suppliers over unease that the supermarket’s energy bill could become unmanageable. It was the third insurer to limit its exposure in the space of a few months, after Atradius and Allianz also withdrew cover.

The business has been working to mitigate those costs by reducing its amount of chilled food and upgrading to more energy-efficient freezers in some stores.

In its third quarter results in February, Iceland revealed it had also signed long-term deals to secure around 40% of its energy needs for the 2023 fiscal year at a 25% discount. Further agreements mean it has secured around 50% of its energy needs at a more than 50% discount beyond 2024.

Those efforts, combined with falling energy prices will help to reduce its energy bill by an expected £24m by 2024, and improve the retailer’s chances of refinancing its debt, according to credit ratings agency Moody’s.