Sun rises over Wal-Mart’s power policy
The world’s largest retailer is exploring the use of solar panels in a sign of changing attitudes to renewable energy, says Jonathan Birchall

Wal-Mart, the world’s largest retailer and the largest private employer in the US, is regularly beset with superlatives. It may be now on the way to adding another, as it takes the first steps towards becoming the US’s largest user of solar power.

At the end of next month the retailer will receive proposals from companies that are interested in installing solar power equipment at a yet-to-be-determined number of its stores in as many as five US states. Initial projects would be carried out this year, but the retailer has also asked bidders for “expansion or build-out plans, including projected prices and costs, over the next five years”.

Joel Makower, an environmentalist who reported details of the Wal-Mart project on his blog, says the scope of the proposal suggest that Wal-Mart is about to embark upon the most substantial private sector commitment yet to solar power.

“It could be at least 50 times bigger than anything anyone has done so far,” he says.

The move is part of the retailer’s broad commitment to improve its much-criticized record on environmental and social issues, and comes amid renewed interest from the private sector, and from other retailers, in using solar power to reduce energy costs and the environmental impact of their operations.

Tesco, the UK retailer, announced on Friday it had signed a $13m contract for a 2MW solar roof— believed to be the world’s most powerful
on its planned new distribution center in California.

Staples, the largest US office products group, has just opened a new distribution center in Connecticut that carries a 433KW array of solar panels, alter opening two 520KW centers in California last year.

Mark Buckley, Staples vice-president of environmental affairs, says the retailer has also identified around 150 of its “big box” stores where smaller solar power arrays could be installed, generating 15-20 per cent of their annual power needs.

Whole Foods Markets, the organic and natural foods grocer, also opened a 121KW solar-powered system at a distribution centre in Connecticut in September, and has five stores supported by solar power.

The new US enthusiasm for solar power reflects both the impact of rising electricity bills, and concerns over reputational or brand identity issues.
Wal-Mart, for instance, says it wants its stores to be entirely powered by renewable energy, and has committed itself to reducing the greenhouse gas output from its existing global network by a fifth by 2012, while Staples has said it intends to get its emissions to 7 per cent below its 2001 levels by 2010. Solar power development in the US has, in general, lagged behind Europe and Japan, where governments

have been more active in encouraging it, and central. ised power utilities have created initiatives such as buying back surplus power for use on the grid. But potential users in the re now benefiting from

the emergence of a new approach to operating solar arrays. In a model developed by SunEdison, an energy services company specializing in solar power, the retailer pays for the electricity but not for the costly installation.

In 2005, SunEdison formed a $60m investment fund with Goldman Sachs and Hudson United Bank to finance the installation of 25 solar systems for Staples and Whole Foods, using the subsidies now provided by a growing number of US states to encourage the development of renewable power.
The model, says Mr. Buckley at Staples, dramatically changed the attractiveness of solar power, offering companies the immediate benefit of power priced below current prices on a 20-year contract, with maintenance costs handled by the service provider.

“We looked at solar power in the past, and to own it and put it on the roof just didn’t meet our standards for the internal rate of return on a capital project,” he says. Under the power purchase approach, “there’s no capital investment, no maintenance, and no associated costs. . . we know what our costs will be for that proportion of our load for that period of time.”

Wal-Mart has asked for companies submitting proposals to consider the power- purchase model in their submissions, as well as the sale or lease of the roof installations to Wal-Mart.

Bright idea: Sun Edison, an energy services company, has developed a new financing model for installing and maintaining panel arrays.

“In general retailers don’t want to own a power plant,” says Mark Culpepper, Sun- Edison’s chief spokesman for the power-purchase model. “They want clean renewable energy at predictable pricing over a long period of time, which they can’t get from other sources now. Solar power is the only source that lets you pre-purchase for the next 20 years.” State and federal tax credits and subsidies remain an important part of the financial proposition in the US, as they are in Europe and Japan. Mr. Buckley at Staples also notes that costs are increased by factors such as the lack of a competitive network of contractors experienced in installation — costs that could be reduced by the effects of a major commitment from Wal-Mart and other retailers. Elizabeth Sturcken, who heads the corporate partnership program of Environmental Defense, a non-profit group, says Wal-Mart’s entry into the

field will present of the most concrete examples of how its purchasing power could exert a transformational influence on both the technology and the costs of solar power.

“Just as they’ve brought low prices to consumer goods, they could bring everyday low costs to renewables by using their scale to push the technology and bring down price,” she says.