For months, Wal-Mart (WMT) has defied the economic slump by posting relatively healthy earnings even as other retailers got pummeled. Now, it's offering a bright spot in a wobbly renewable energy market.
Wal-Mart plans to announce for Earth Day on Wednesday that it will as much as double the size of its solar-power initiative in the next 18 months by putting rooftop solar arrays on 10 to 20 stores and distribution centers in California. The retail giant early this month finished installing solar setups at 18 Wal-Mart and Sam's Club stores and two warehouses in California and Hawaii.
"(Wal-Mart) is something of a bellwether," says analyst Nat Bullard of New Energy Finance.
The U.S. solar market showed healthy first-quarter gains in an otherwise bleak renewable energy industry, though some experts say that largely resulted from a 2008 order backlog.
All of Wal-Mart's solar projects will generate enough clean energy to power the equivalent of 2,600 homes and avoid 22,500 metric tons of carbon-dioxide emissions each year — tantamount to taking about 4,000 cars off the road. The company is considering other sites for solar arrays.
As with the first batch of stores, Wal-Mart won't buy the solar setups outright. Under a 10-year power purchase agreement, or PPA, it will pay for the electricity it uses. BP Solar will make, install, own and maintain the systems.
Wal-Mart aims to buy the green power at prices equal to or less than traditional energy. The chain already has reaped a "moderate savings" with the initial projects, says David Ozment, Wal-Mart's energy director. Each store gets 20% to 30% of its power from solar.
"The pilot program led us to the point that we believe in solar," says Kim Saylors-Laster, Wal-Mart's vice president of energy.
A good time for solar?
The project is part of an aggressive environmental campaign Wal-Mart unveiled in 2005. The chain is among a bevy of retailers that announced solar projects the last two years, including Target, Macy's and Whole Foods. Most signed PPAs, which have exploded in recent years because they let large businesses buy solar energy without huge upfront costs or, more significantly, the hassles of maintaining systems. The set-ups comprise the bulk of the large commercial solar market, says consultant Larry Sherwood of the Interstate Renewable Energy Council.
"It really allows BP Solar to do what they do best, and it allows us just to focus on (store operation) and energy procurement," Ozment says.
Wal-Mart likely would have to spend more than $2 million per store if it purchased the solar setups, says Jigar Shah, a consultant and founder of SunEdison, the top solar services company.
Some say the PPA market has slowed recently along with the economy. Project developers are having a tougher time securing financing while many commercial customers "are focusing on their core business," says Arno Harris, CEO of Recurrent Energy, a leading PPA provider. Mom and pop merchants, in particular, are less likely to buy solar energy for one building, he says.
Another hurdle: Prices of fossil fuels such as natural gas have plunged, stabilizing utility electric rates. But Harris says "more sophisticated buyers" with multiple locations are moving ahead with projects, anyway.
Wal-Mart, for instance, recognizes electricity rates are bound to rise in coming years as fossil fuel costs rebound, while solar prices are stable as there are no fuel costs. "We really look for the longer term," Wal-Mart's Saylors-Laster says.
There are also deals to be had for those who want to pay cash. Solar prices have fallen 15% to 20% in recent months, Shah says. Meanwhile, Congress beefed up and extended federal tax breaks last fall, while states such as California and New Jersey continue to offer generous incentives.
'Significant' for California
For California, projects such as Wal-Mart's are key to helping the state reach its target of getting 33% of its power from renewable resources by 2020.
"We have a very aggressive agenda (for clean energy)," California Gov. Arnold Schwarzenegger says. "Anything that goes in that direction (such as the Wal-Mart deal), we find significant."
Renewable energy investment tumbled 50% in the first quarter vs. the year-ago period, New Energy Finance says. But the amount of new solar capacity announced jumped more than tenfold in the quarter, the firm says. Many are by utilities such as Pacific Gas & Electric that must meet ambitious state renewable energy standards. Meanwhile, first-quarter solar installations in California and New Jersey — which includes more than half the market — totaled 103 megawatts, vs. 151 megawatts for all of last year, Sherwood says.
BP Solar CEO Reyad Fezzani cites an order backlog from 2008 as customers struggled to get financing. That means the market is likely to slow the next few months before rebounding. Projects are "backed into late 2009 and 2010," he says.
USATODAY
