Scaling up Solar with a Portfolio Approach – The Whole Foods Market Case
Posted from the NRG Power Perspectives
Grocers and food distributors are big energy consumers; electricity often represents a large portion of operating expenses. These expenses can be offset with solar energy which is often coincident with typical peak pricing. Food retailers also have a very specific set of needs beyond OpEx savings (as detailed in a case study released this month by Retail Industry Leaders Association, The Solar Foundation, and Whole Foods Market). These can include landlord approvals, organizational acceptance of 15-20 year contract terms, roof scenarios, and onsite installation considerations to minimize disruption to normal operations. In order to provide Whole Foods Market with the best solution possible, we had to step out of our “energy shoes” and into our “grocer shoes” to customize a development approach that not only made progress toward their ambitious sustainability goals, but also with their unique, store-specific constraints in mind.
During our workshop at the conference, I related how we think through evaluating, developing, and executing on a multi-location portfolio of solar projects, using our portfolio with Whole Foods Market as a “real world” example of the savings that are possible with solar today.
Aaron Daly from the Whole Foods Market Global Store Development Team, and Tristam Coffin from the Northern California Region Sustainability & Energy Team joined the conversation, offering their experience and customer insights on the benefits of solar. They have been doing this for years – so they can truly offer a unique point of view on partner selection, site suitability and multi-solution integration.
This time around, Whole Foods Market and NRG focused on developing a portfolio of onsite solar projects to take advantage of economies of scale, streamlined contracting with a Master Power Purchase Agreement and site-specific addendums, and a single partner to rely on. The outcome of the “Portfolio Approach” yields more MWs of onsite solar in a condensed development timeline and with optimized pricing.
The intersection of sustainability with management of facility operating expenses is increasingly becoming top-of-mind for most food distributors and retailers, which naturally leads to investigating what’s possible with onsite solar. Sustainability leaders are looking for ways to reduce dependence on traditional power without adversely impacting business activities while saving money – all at the same time. Onsite solar is a win-win approach to meeting each of these goals.
NRG owns and operates the solar systems and sells the power to Whole Foods Market through a Power Purchase Agreement (PPA) at a fixed price per kilowatt-hour (kWh) rate for a term of 15 years on average. Under a PPA, the technology risk is on NRG as the owner of the panels. As solar power off-taker, Whole Foods Market simply takes advantage of buying clean kWhs at a competitive rate without concern for technology risks or upgrades.
However, for some, solar feels like a new or far-off technology. If I had one message to share with the FMI audience and beyond, it would be that solar is a smart choice today. You should not be waiting for new technologies to become available or for solar technology costs to decrease, because each year you wait to install solar, you lose out on the benefit of savings on utility bills and benefit of reducing greenhouse emissions by buying kWh’s from onsite solar.
Each session (and even while networking in-between sessions) the same four questions continued to surface – so I’ve compiled a quick Q&A to address them:
Q: What happens to the system I’ve installed as technology continues to improve?
A: Technology isn’t improving exponentially – there are panels from 15+ years ago that are still producing power as forecasted when they were installed.
Aaron from Whole Foods Market addressed this question especially well; “I don’t foresee any silver bullet technology that will make my solar projects obsolete – and certainly not in the next 15 or so years. By entering into a PPA, I am paying for power, not panels, so all I really need to take into consideration is how much alternative costs (grid power from my utility) and where it’s trending, and at what cost I can purchase clean, renewable power from my own roof.”
Q: Isn’t the cost of solar declining? Why would I install today if prices are expected to fall more in the future?
A: Solar install costs dropped over the past 5-10 years at a rate of 40-60%, while over the past year costs only decreased by 2% as we approach a levelized cost of energy. There’s also an opportunity cost with waiting. With a PPA you experience savings from day one, which makes the present value of making the switch to solar outweigh the incremental decrease in materials costs that may come down the road.
Q: Isn’t solar expensive – what’s the payback period?
A: The most common method to finance solar is through a Power Purchase Agreement (PPA) which enables you to make the switch to solar with little or no upfront capital. Under a PPA, NRG purchases and installs the system, and the offtaker simply pays for the power consumed from the panels for an agreed upon term (typically 15-20 years) – similar to how you presently pay your utility – but for cleaner power at predictable costs.
Q: What if my building lease is shorter than the term of the average PPA?
A: PPA terms can be customized based on the creditworthiness of the customer and portfolio of sites under consideration. In some cases, terms can be adjusted to meet the remaining time of the lease.
Conferences like FMI are a great opportunity for energy professionals to learn more about our customer’s point of view as well as to hear their excitement and questions regarding our products and services. Industry conferences like FMI bring together individuals who, for lack of a better term, “get stuff done” – a convening of “doers” if you will. When professionals work on solving problems with energy experts, store management, and all roles in-between, we can better use our skills and resources to work collaboratively to meet sustainability and clean power goals through a more holistic approach.
I certainly look forward to my next convening of doers.
Have questions about distributed energy? Contact Kassie Eckhart –Kassie.Eckhart@nrg.com
Kassie is responsible for developing renewable distributed generation opportunities for NRG. Prior to joining the team, she was the West Coast Origination Manager for NextEra Energy, where she led all...
