Picture the typical retail store: Throughout most of the U.S., that mental image is synonymous with a single story structure with a flat rooftop and a parking lot.
Those of us with an eye on sustainability see significant opportunity when we consider the availability of open rooftop and parking lot space, along with the recognition that retail’s peak energy usage occurs during the greatest solar output.
While many retailers have made the first move by installing at least one array to test the water, there are a few key reasons we don’t see solar popping up on every store on the block.
For every challenge, there is an opportunity. Here are four we see:
The challenge: In a business environment where all potential projects are held to the same return on investment (ROI) criteria, it can be hard for solar to make the cut. Even for companies with dedicated sustainability budgets, other projects, such as energy efficiency or recycling, might pay for themselves sooner through avoided costs, therefore taking priority.
The opportunity: In some instances, combining the right financing models, incentives and solar conditions make solar economically realistic. Special financing options, such as Power Purchase Agreements (PPAs), transfer the upfront and ownership costs to a third party. Another model, Property Assessed Clean Energy (PACE), spreads the cost of a system over a longer time period by paying upfront costs back through property tax.
The challenge: Often, retailers with stores across the nation want to develop portfolio-wide solar strategies. But solar policies differ by state, region, utility or even municipality. Because the feasibility of solar is largely dependent on the policy climate, identifying the opportunities across a store portfolio proves challenging. Moreover, each solar program has a unique application process and participant restrictions.
The opportunity: Tools, such as the Database of State Incentives for Renewables & Efficiency (DSIRE) and utility incentive websites, are heading in the right direction. While they still lack the national search capabilities that would enable retailers to make easy store-by-store feasibility comparisons, they are becoming easier to navigate. Some solar developers provide the capability to assess nationwide opportunities.
The challenges: The obstacles posed by trying to install solar on a leased store primarily come in two forms. The first is when retailers do not have control over their roofs. Similar to a rental home, retailers can more or less go about their business inside the leased space, but installing rooftop systems likely requires consulting the landlord for permission to do so. Retailers have encountered mixed results when attempting to engage their landlords on solar installations. Inherent to this issue is also the need to define cost and benefit sharing: Who pays the upfront and maintenance costs? Who gets to claim the renewable energy credits?
The second challenge is the length of the lease term. Even when retailers control their roofs per the lease agreement, the lease might be valid only for two, five or 10 years. Comparatively, solar is a much longer-term investment with regard to both the technology’s lifespan and payback period.
The opportunity: Many shopping center developers have environmental goals of their own and may be open to negotiating the terms of a solar installation when approached. Retailers also can proactively keep their options open by discussing future possibilities for solar during the lease negotiation and incorporating lease language that enables them to install solar when appropriate.
4. Rooftop space
The challenge: Many retail spaces are small format or, in some cases, transitioning into smaller formats. This significantly limits opportunities to install solar systems large enough to be cost effective.
The opportunity: Smaller format store spaces often are leased as part of a larger shopping center. While having a landlord raises challenges, it also provides the possibility of grouping solar projects as part of one shopping center-wide installation. This means if tenants were to agree on a financing agreement, a larger array potentially could be installed across a number of tenants’ roofs.
Recognizing these opportunities, some retailers have taken on solar development full force. A quick glance at the EPA’s Green Power Partnership National Top 50 Partners list proves retail has a strong showing, with Kohl’s Department Stores, Whole Foods Market, Wal-Mart Stores Inc. and Staples all making the Top 10 in annual green power usage (kWh).
As solar generation becomes increasingly common in retail, we can expect to see more companies taking a portfolio approach in the future.
To learn more about renewable energy and the convergence of sustainability and technology, be sure to check out VERGE SF Oct. 14-17.
Rooftop solar image courtesy of Walmart.