Focus on: Solar Power
From Kohl’s to Whole Foods Market, retailers nationwide are utilizing solar power as a way to rein in energy costs. Still, solar energy remains victim of many misconceptions, according to Ben Collingwood, director of national accounts for REC Solar, a San Luis Obispo, Calif.-based solar power provider. Here are some of the most common:
- Solar is not practical for retailers. FALSE
“Retailers large and small are going solar. And these companies wouldn’t be doing so if it weren’t financially attractive,” Collingwood said.
According to Collingwood, today’s retailers are utilizing solar power for the return on their financial investment.
“Going solar allows a retailer to lock in energy rates for the next 25 years or so, creating a hedge against future energy prices,” he explained. “It gives them a competitive edge over chains that don’t have a built-in hedge against rising rates. There will be big differences down the road in operating costs for retailers that invest in solar versus those who do not.”
- Solar systems have a high upfront cost. TRUE and FALSE
A retailer can purchase a solar system outright, which involves a significant cash investment but greater benefits after the initial payback is realized. Or a retailer can enter into a power purchase agreement, which involves no upfront costs at all.
“If a chain purchases the solar system on its own, the electricity produced by the system is free to the chain,” Collingwood said. “So once the payback on the investment is realized, the system is generating profit in the way of free electricity for 20 or 25 years.”
With a power purchase agreement, a third-party provider owns the solar system on the retailer’s property and is responsible for installation and maintenance. The chain pays only for the power produced by the facility, not the equipment or installation.
“Under a PPA, the third party sells the electricity produced by the solar facility to the retailer at a reduced price,” Collingwood said. “The arrangement is cash-flow positive from day one, but the potential for long-term savings is not as great as compared with when a chain owns the system outright.”
Currently, the market is about equally split between retailers that prefer to purchase the system (both Ikea and Costco fall into this camp) versus those who go the PPA route (Kohl’s and Wal-Mart).
“In considering the two options, retailers first need to decide whether they have the cash available to make the investment and, if so, whether they want to put it to work for solar or another investment,” Collingwood said. “But if you are willing to put up your own money, the long-term savings can be double what you would have saved under a PPA.”
- It takes a long time to see a return on investment for solar systems. FALSE
Depending on the area, payback can be in two years or less, according to Collingwood. In general, the payback comes the fastest in areas with high electricity prices, such as New Jersey, Hawaii and California. Solar incentives and solar compliance requirements also hasten the payback.
- Solar systems require substantial investment in system maintenance and upkeep. FALSE
Solar systems, which have no moving parts, require much less maintenance and upkeep than other types of renewable systems, according to Collingwood.
“Maintenance basically requires cleaning dirt off the solar panels once or twice a year. The system also requires a general electric check once a year, with the latter typically performed by an authorized representative,” he explained.
While retailers that own the system can perform the maintenance themselves, most outsource it to the original solar provider. Under a PPA, the third party is responsible for all maintenance and upkeep.
- Solar technology changes quickly. FALSE
The changes in solar technology have been very incremental for the commercially available products that retailers use, according to Collingwood.
- Complications from leasing facilities and operating multi-site locations make going solar difficult. TRUE and FALSE
According to Collingwood, retailers that are exploring a PPA need to consider how long they plan to be in the building. Many PPAs require the retailer to buy the electricity for the next 20 years.
“It does not make sense for a retailer with a short-term lease to enter into a PPA unless the agreement includes the option to relocate the system to another facility,” he said. (REC is one of the few solar integrators who will offer a relocation option. It has a specially designed solar system that does not penetrate the roof, making it easy for relocation.)