How utilities can adapt when big-box retailers go solar
How utilities can adapt when big-box retailers go solar
The electric utility industry faces the risk of declining revenues as more customers install solar panels on their homes and businesses. Solar power currently supplies 2 percent of the country’s electricity needs, and is projected to grow to 16 percent by 2020. In 2013, solar panel prices for commercial installations fell 15.6 percent, from $4.64/watt to $3.92/watt.
To protect their revenues, some utilities are raising electricity costs for solar panel owners, but with mixed results. Credit ratings agencies are also expressing concern. Is there real cause for alarm or are these companies crying wolf? Judging by one customer segment – big-box retailers – the threat is real.
The Solar Energy Industries Association (SEIA) ranks U.S. companies based on their solar energy capacity, and the top five companies on the list (released in November 2012) are big-box retailers:
• Walmart tops SEIA’s list with 65,000 kW of solar power, enough to supply the annual energy needs of over 10,000 homes. It recently installed 10 new solar rooftop systems in Maryland, totaling more than 13,000 panels. Walmart is the largest retailer in the U.S. and in the world by revenue, with 4,423 U.S. stores and over 10,000 stores worldwide. Walmart and EDF have been working together since 2004 to reduce Walmart’s environmental footprint. With more than 200 solar installations across the country, Walmart plans to have 1,000 solar installations by 2020. Walmart’s goal is eventually to supply 100 percent of its energy needs with renewable energy.
• Costco ranks second on the list with 38,900 kW of solar power. Costco is the fifth largest U.S. retailer and seventh largest in the world, with 425 stores in the U.S. Costco has installed solar panels in approximately 60 stores, with an average size of 500 kW per store. Solar power supplies about 22 percent of each store’s energy needs.
• In third place on SEIA’s list is Kohl’s, with 36,474 kW of solar power. Kohl’s is the 20th largest retailer in the U.S. and the 44th largest retailer in the world, with 1,127 U.S. stores. Kohl’s has solar panels installed at 139 of its stores, and will have solar panels at 200 stores by 2015.
• IKEA is fourth with 21,495 kW of solar power. IKEA only has 38 U.S. stores, but its buildings can accommodate larger solar installations. By 2020, the company plans to meet 100% of its energy needs with renewable energy.
• Macy’s ranks fifth on SEIA’s list with 16,163 kW of solar power. Macy’s is the 16th largest retailer in the U.S. and the 36th largest retailer in the world, with 840 stores. The company is increasing its solar installations by 25-35 percent.
The SEIA top 20 list also includes:
• Staples (No. 8); 10,776 kW of solar power; 1,583 U.S. stores
• Walgreens (No. 10); 8,163 kW of solar power; 7,651 U.S. stores
• Bed, Bath and Beyond (No. 11); 7,543 kW of solar power; 1,143 U.S. stores
• Toys R Us (No. 12); 5,676 kW of solar power; 871 U.S. stores.
As a whole, the top 20 big-box retailers have over 18,000 U.S. stores, representing enormous potential for solar power growth. These retailers are only part of a larger group of commercial customers, which in total make up about one-third of U.S. electric utility sales.
But other commercial customers are turning to solar, too. The National Renewable Energy Laboratory reports that 40 percent of the nation’s 86,000 supermarkets are in areas with grid parity (the cost of power from solar panels is equal to the cost of buying power from the utility). Commercial customers are also making impressive strides in reducing their energy usage through energy efficiency.
What does this mean for electric utilities? We can expect to see the following changes to the electric utility business model going forward:
• Utilities will need to address the operational challenges of higher levels of solar power on their electric grids.
• Utilities will seek to limit the number of customers eligible for net metering plans, where the customer is paid for the excess energy supplied by their solar panels.
• Utilities will seek to reduce payments received for solar energy produced by net metering customers, who currently receive the full retail rate for their excess energy in many states.
• Utilities will seek to implement new, fixed charges for customers who install solar panels on their property.
• Utilities will start new businesses providing solar installation services for customers.
• Utilities will seek approval to own solar power installations on their customer properties.
• Regulators and utilities will consider adopting performance-based electricity rate plans. These plans would charge for electricity on the basis of service and performance, rather than the volume of energy sold to customers.
These changes present a host of legal and regulatory challenges. As a guiding principle, utilities must have an opportunity to earn a fair return in exchange for keeping the lights on. Similarly, electricity rates for solar panel owners should fairly reflect the full costs of serving these customers, as well as the full benefits that solar power provides to the electric utility.
These changes will be disruptive for electric utilities, but will allow customers to choose affordable clean energy and new technologies.
This article originally appeared on Environmental Defense Fund's Energy Exchange blog and is reprinted with permission.
Solar panels on Walmart store image by Walmart via Flickr.