09.12.12

Corporate Giants Are Leading the Solar Charge

Big box retailers are covering their roofs with solar panels. Alex Klein reveals why.

Face off: Florida, the sunshine state, versus Walmart and Costco, infamous corporate mega-chains.

The solar industry is booming in the U.S., as homeowners in sundrenched states plant panels on their roofs and utilities build massive solar farms in the deserts of Arizona and California. America now generates twice as much solar power than it did a year ago.

But solar electricity is all big at the mall. According to the Solar Energy Industry Association (SEIA), together, Walmart and Costco have installed more solar panel capacity on their store rooftops than the entire state of Florida.

Across the country, big box retailers are covering their roofs with solar panels. And they’re not doing it just to buff their images.  Thanks to broad empty roofs, high electricity prices, long-term real-estate commitments, government incentives, and the rise of new financing techniques, Fortune 500 retailers have realized there’s millions to be made and saved in solar.

Big box retailers have acres of unused roofs. As Kim Saylors-Laster, Walmart’s Vice President for Energy, put it, “We have a lot of roof space, and it’s a really underutilized asset.” As the price of new panels drops (nearly 14 percent, year over year), “we can locate solar on those rooftops without buying any additional ground.” There are even more benefits on the margin. As Rhone Resch, head of the SEIA said, “When you step back as a building manager and look at a roof, it’s a liability for most buildings. You’ve got to repair it, replace it every ten years.” Panels change them into an asset. “You generate electricity but you also protect the roof by blocking the ultraviolet rays. You get a longer lifespan.”

Walmart has been particularly aggressive. From 2007 through January 2012, it put solar panels on 100 stores. But in the past eight months, the corporation has added 44 more solar systems, and by the end of the year alone, plans to reach 200. In total, Walmart can generate 65,000 kW, the most of any private company, and some of their stores get as much as 30 percent of their power from solar. Companies like Wal-Mart have been able to ramp up energy production quickly because they avoid a lot of the capital expenses associated with solar. The panels on Walmart’s roofs are owned and operated by third party solar companies—like Sun Edison, Sun Power, and Solar City—from which the company buys energy through power-purchase-agreements. Some sell the system for free, and give customers better rates than the grid.

These sophisticated, low-cost financing efforts have encouraged rapid expansion.  According to the SEIA, a non-residential solar system goes up every 72 minutes, on average. And together, the top 10 businesses have deployed more solar energy than most of America’s aging electric utilities, according to the SEIA.

IKEA, the Swedish chain known for its massive, warehouse-style stores, is also putting its empty roofs to use. But unlike Walmart, it’s buying the panels themselves, instead of using power-purchase-agreements. “Reflecting our Swedish heritage, we’ve always had a commitment to the environment,” said Joseph Roth, the company’s chief U.S. spokesman. “But from a practical standpoint, it allows us to reduce the cost of our electricity.” A full 79 percent of American IKEA stores have solar roofs; the annual power generated is the equivalent of reducing 71,000 tons of atmospheric CO2, or removing 14,000 cars from the road, or powering 90,000 homes. (Stunningly, all that goes to powering only 39 IKEA locations – which shows how “big” a big box store is.)

Together, the top 10 businesses have deployed more solar energy than most of America’s aging electric utilities.
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The price of solar installation is coming down. But retailers are also being pushed to seek alternative power sources by “the fact that electricity rates are high,” says Roth. As Walmart’s Saylors-Laster explains, “Utilities are one of our top three expenses … [Solar] needs to be economical and cost-effective in order to be sustainable.” As long term power costs have risen, so have the fortunes of the solar sector. “It’s a financial hedge against rising energy prices,” says Resch. First Solar, a stock that was hammered in the recession, is now reportedly being eyed by General Electric. Other solar stocks are rallying this year. Look at the closely correlated and rising retail price of electricity and net solar power generation over the past five years, and you can see why.

Another reason these big box retailers are so well suited to solar rollout is their curious real-estate footprint. In a bottomed-out market, the companies have huge stores that will have to stay put for the long-term – a decade, at least. Since solar panels tend to take a few years to start paying for themselves, due to high upfront installation costs, they’re another way of turning a weakness into a strength. “Most of the solar projects and agreements we have are for 10 years and we have the option to extend for 10 more years,” says Saylors-Laster. As Resch explains, “These companies have figured out that the capital investments they’re making in their facilities are long-term, and that solar comes warrantied for 25 years.” The SEIA calculates that the top ten private companies save about $47.3 million a year in total on sun power. If those systems operate for the next 20 years, as Walmart predicts, that’s almost a billion dollars. IKEA is particularly bullish on its panels’ staying power. “It’s a much shorter payback than what we originally envisioned,” said Roth. Walgreen Co. and Kohl’s department stores installed 134 and 124 systems respectively, nationwide, while Macy’s is currently generating 16,163 kW annually.

Big business is also better positioned to take advantage of federal subsidies, which grant investment credits to those that invest in renewables. “Most of these companies are in a position to utilize it,” says Resch. “They can reduce the cost of their solar system by 30 percent.” With the large compliance departments necessary to navigate complicated state and federal subsidies law, the corporations have a leg up on the rest of us – and can save millions. “They tend to have the larger a more sophisticated government affairs groups,” said Resch, who singled out Walmart.

For clean-energy evangelists, big business has long been the bad guy. And big box retailers – demolishing neighborhoods and driving Mom and Pop out of business – have been the even worse guys. But now, they’re becoming the undisputed kings of solar: darlings of the SEIA and organizations like them. Next time you take off from an airport, look down. Those flat, sparkling rooftops, capping aisles of cheap goods and flanked by acres of concrete parking lots? They might just prove our energy savior.