Archive for Wal-Mart

Wal-Mart completes first stage of Solar RFP

Today Wal-Mart Stores, Inc. announced a major purchase of solar power from three solar power providers, BP Solar (NYSE:BP), SunEdison LLC, and PowerLight, a subsidiary of SunPower Corporation (NASDAQGM: SPWR), for 22 combined Wal-Mart stores, Sam’s Clubs and a distribution center in Hawaii and California.

Back in December, when Wal-Mart first put out the RFP, I predicted that SunEdision would participate, and that the solar utility model (where you don’t own the panels, but rather contract for solar power) would continue to gain steam. I think we can take this to mean that BP Solar, Powerlight, and SunEdison are very serious about pursuing this model, and also that they are serious about supplying solar power at a reasonable price. Otherwise, they wouldn’t be doing business with Wal-Mart.

For more of my thoughts on this business model, see my original article.

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Wal-Mart pushes CFLs: Update

A month ago I wrote about Wal-Mart’s plan to sell 100 Million Compact Fluorescent Lightbulbs (CFLs) in 2007.  Yesterday, there was an excellent article in the NYTimes with some updates about their plans and early efforts. 

My favorite parts:

  • In 2005, Wal-Mart sold 40 Million CFLs.  Sales in August 2006 were 3.94 million in 2006 vs. 1.65 million in 2005, so if the 40 million/ per year grew at the same ratio as August sales, total CFL sales at Wal-Mart in 2006 were 95 million.  I’ll guess that 2006 sales were more likely around 80 million, because the August month was probably chosen for the press because the growth rate was the most impressive.  However, that still makes 2007 sales of 100 million not a stretch, as the article implies.  My prediction: Wal-Mart will sell around 130-150 million CFLs in 2007, and they’ll be able to make another big PR splash by greatly exceeding their goal.  (I didn’t have these numbers when I wrote the other entry)
  • A GE exec was quoted anonymously as having said “Don’t go too fast. We have all these plants that produce traditional bulbs.” (This was in 2005, likely before GE’s touted EcoMaginationpush under Jeffrey Immelt)
  • The GE story also underlines Wal-Mart’s market power… GE will probably go along in the end, or Wal-Mart will just get their CFLs elsewhere, and undermine GEs sales of incandescents anyway.
  • Wal-Mart’s market power is also shown in the fact the Phillips, simply because WM requested it, renamed their line fo CFLs from “Marathon” to “Energy Saver.”  This involves a real sacrifice for Phillips, because they have probably invested millions of dollars in the Marathon brand, as well as having to change their packaging.

Thanks to Stephen McNally for forwarding me the NYT article.

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A Solar Business Model that Makes Sense

Joel Makower wrote today about Wal-Mart’s RFP (Request for Proposals) for solar panels on their roofs.  This got me thinking about two things:

  1. I’ve sure been writing a lot about Wal-Mart’s sustainability push recently. (see July 30, Dec 3 entries) 
  2. Third party ownership in photovoltaics seems to be the wave of the future.

Wal-Mart is asking suppliers to build, own, and maintain the PV systems, and sell the electricity to WalMart, allowing them to avoid the large up-front cost, and having to branch out from what they are good at: selling products to consumers.  I say that this is the model of the future for the same reason I like CitizenRE’s model: a business focused on installing and maintaining systems will be able to do it much more cheaply and efficiently than a building owner, who may not know anything about solar.  In the residential space, there is the added advantage that the federal tax credit is not capped at $2000, and the ability to take advantage of accelerated depreciation.

Update: 5/7/07 Wal-Mart has completed the RFP. According to the press release the winning bidders are SunEdison (as I predicted below), BP Solar, and PowerLight. Thanks to Marc Gunther for tipping me off to this.

Separate ownership is nothing new on the utility scale: electricity generation is often built and operated by a third party, who receives payment for electricity produced.  For instance, the new solar farm to be built by SunEdison for Xcel Energy in Colorado’s San Luis Valley.

Speaking of SunEdison, I will be very surprised if they do not bid on  the Wal-Mart RFP.   I heard their CEO Jiggar Shah talk about their model at Solar 2006, and he wasn’t talking about installing solar one residential rooftop at a time.  I admit I was somewhat skeptical at the time… I thought solar installations would take much longer to ramp up than he was saying.  I’ve changed my mind since then.

Solar power is still a business totally reliant on government policy.  If the customer had to pay the current $6-$9 a watt of installed DC power, the only locations where it would make sense would be off-grid, but with companies able to capture a combination of rebates and tax credits worth up to 80-90% of that price in states with good incentives (the same states, incidentally, in which Wal-Mart is issuing its RFP: California, Colorado, Connecticut, Hawaii, and New Jersey) it’s a whole different ball game.  And, with the Democrats taking power in Washington and many states, the outlook for renewable energy incentives is definitely bullish.

 What does this mean for the investor?  Buying solar electricity will have a negligible effect on Wal-Mart’s bottom line, except if they manage to use the publicity to brighten their public image, which could have some indirect benefits for the bottom line.  However, so long as federal and state support for solar remain strong or increase, it’s good news for PV manufacturers and suppliers.  But don’t just buy anything on the list: do your homework, and look for companies that already have a working technology, and are ready to rapidly increase volumes within 1-2 years.

Update 1/18/07:  It turns out that there is a company in South Africa called NuRa using this same model.  When it comes down to it, people want electricity, not solar panels.

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Wal-Mart pushes CFLs

A few months ago I blogged about Wal-Mart‘s energy efficiency push.  I predicted that Wal-Mart would be one of the first mass distributors of E85 ethanol, and I have since noted that compact fluorescent lightbulbs (CFLs) have been given increasingly prominent displays in their stores, and that they have an excellent selection of styles.  (When I moved into an new office a couple months ago, one of the first things I did was tell my landlord about how much money he could save by switching to CFLs (about $25 a month for a $70 investment in this case.)  He later asked me where he could find the candelabra bulbs (the ones with the tiny bases shaped like a flame,) and I immediately told him: Wal-Mart.  He’s an employment lawyer, and does not shop at Wal-Mart as a matter of principle… He still has not replaced the candelabra bulbs, so I’m going to give him a pack for Christmas (bought somewhere else.)

 Since I wrote the blog, Wal-Mart has announced that they’re exploring selling E85 (admittedly not the greenest renewable fuel, when made from corn, but rolling out distribution for E85 will make cellulosic ethanol easier to introduce.)

Now they’ve annouced that they are going to try to sell 100 Million CFLs in 2007.  Considering that replacing wasteful incandescent lightbulbs with CFLs is the best financial investment I know (the money saved on electricity pays for the bulbs many (as much as 25) times over), as well as being the most effective way most people can reduce pollution and greenhouse gas emissions (#2 is using energy efficient transport), I sincerely hope they beat their goal.

I’m particularly pleased by the fact that they will be introducing interactive displays and educating employees about how to choose.  The number of types and wattages (as well as color temperatures) of CFLs can be baffling to the unitiated, and people should be guided towards buying Energy Star bulbs for their greater reliability (If you have ever had anyone tell you that they tried CFLs but then switched them out because they stopped working, you can be almost certain that they weren’t using Energy Star bulbs.)

So it sounds like great news.  How great?  It’s hard to know because they’re not saying how many CFLs they were selling before.

 Thanks to Phil van Hake for sending me this article.

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Wal-Mart: the Low Cost of Energy Efficiency

Last weeks Fortune’s cover story was entitled “Wal-Mart Saves the Planet- Well, not quite.  Of course, we have to be skeptical when WMT starts burnishing its green credentials; you’d have to be brain-dead not to guess that this is a public relations campaign.  On the other hand, as I never get tired of telling people, energy efficiency usually makes excellent economic sense; the main reason people and companies do not do a lot more of it is education and lack of global thinking (often the savings are indirect.) 

For instance, suppose you are designing a building, and have found that with R-38 insulation, and you calculate that each extra R-1 of insulation will cost $300, but only save $250 in future energy bills (These numbers are just for illustration.  If any architects/engineers have more realistic numbers to substitute, leave a comment, and I’ll change them).

A cost conscious designer would be tempted to stop there.  However, if he then considers the required size of the building’s heating, ventilation and cooling system (HVAC), he may note that if he increases the insulation to R-45, he can reduce the size (without impacting comfort) of the HVAC system, and save $1000.  So, and extra $2100 would be spent on insulation, and $1750 would be save on energy bills, and $1000 would be saved on the smaller HVAC system, for a net savings of $650, without even considering the added benefits to society of lower energy use.)

What does this have to do with Wal-Mart’s Green-washing?  When they started looking into ways to be more green, they started talking to Environmental Defense and the Rocky Mountain Institute.  And they discovered that there are a lot of “green” things they can do which will save them money.   In case you’ve been on another planet for the last couple decades, there is nothing that is more Wal-Mart than saving money.  Often, it has got them into trouble with the left, because they’re skimping on health care for their workers, or selling clothes made in sweatshops.

So Wal-Mart discovered that they could save money by using energy more efficiently.  To name a couple things, on their fleet of 7,200 trucks, they installed auxiliary power units that allow the drivers keep cabs warm or cool during mandatory 10 hour breaks from the road, allowing them to stop idling their engines.  This saves Wal-Mart $28 million a year in diesel costs, or about 10,000,000 gallons of diesel.  That’s about as much diesel as we’d save if we scrapped 5,000 Hummer H2’s, and made their owners ride bikes. 

They’re also making a move to reduce excess packaging on a private-label line of kid’s toys.  This is saving them on transportation costs (if the packaging is smaller, they can fit more in a truck), on top of the cost of packaging, and on the cost of disposal.  Annual net savings (on one line of toys): $2.4 million, 3800 trees, and one million barrels of oil.

The point is, I think that Wal-Mart CEO Lee Scott and much of Wal-Mart management has caught the efficiency bug.  I don’t think they’ve caught it because they’re on a crusade to save the planet; I think they’ve caught it because they’re on a never-ending crusade to save costs, and if it helps them with their gigantic PR problem, so much the better.

For better or for worse, Wal-Mart is one of the most powerful forces in our economy, not only with their own operations, but because of their power over their suppliers.  If they can cut the amount of packaging on things they sell, increase the efficiency of the entire nation’s trucking fleet by demanding more efficient semis from their suppliers, we should support it.

If we are going to move our economy onto a more sustainable path, we need Wal-Mart.  Like it or not, Wal-mart has enormous economic power, so just like a I am thankful for Nancy Reagan’s belated support for stem-cell research, so I am very happy to see Wal-Mart doing what it is.  So long as Lee Scott continues pushing at Wal-Mart’s stores and coercing his suppliers to do likewise, he has my support.

One caveat: there are only 5 Wal-Mart employees dedicated full time to efficiency.  This might be a sign of lack of commitment, but it might also simply be a sign of using resources (in this case man-hours) efficiently.  They are contracting with some of the top minds in the country for efficiency ideas: implementation requires commitment at the top levels of management.  Thinking about efficiency is probably best as a small part of everyone’s job, rather than a full time job for just a small part of the workforce.

I’m hopeful.  Does this mean we should give Wal-Mart a pass on all the other things we may not like about them?  Of course not.  But just because we disagree with them about some things, does not mean that we can’t support them in their drive to be more green. 

Is WMT, the stock, a buy?  I’m currently neutral on it (but last year I thought it was as Sell at 50, so this is an upgrade.)  At $45 (down 44% from its high in 2000), with a P/E ratio of around 16, and a dividend yield of about 1.5%, and expected long term growth of 12-14%, it still does not look like a great value.  But I am keeping an eye on it, and I’ll probably buy if it falls to $35.  (I generally only buy stocks when I think they are screaming deals, or if they are fairly valued and very, very green.)

Some other thoughts on Wal-Mart

  • I expect that Wal-Mart will be one of the first mass distributors of E85 ethanol, and maybe even biodiesel at their gas stations, partly because of this green push, and also because they are a lot more nimble than traditional gasoline retailers about changing formats.  Unlike stations owned by oil companies, they won’t worry about cannibalizing their own sales.  Last year, there was a Wal-Mart near me with a gas station, and a Sams Club about a ½ mile away without one.  Within the space of 3 months, the Wal-Mart gas station had been removed, and a new station was operational at the Sams.  They must have decided that gas would sell better at the Sams than at the Wal-Mart down the road, and the did something about it.  Fast.  When Wal-Mart decides to hop on the alternative fuel bandwagon, I think that will be fast also.  I wouldn’t be surprised if we start seeing Wal-Marts with E85 or B20 before the end of 2007.
  • I spoke this spring to a wind contractor who was working on the “green” Wal-Mart that opened last year in Aurora.  He was installing a small wind turbine to power the sign at the far end of the parking lot, along with a battery bank and some PV.  This was totally overkill for the power demands of the sign, and since it was an off-grid application, there is nowhere for the excess power to go.  Partly, this wastefulness is just due to experimentation by Wal-Mart to see what works, but I think part of this is also greenwashing… they probably think that the highly visible wind turbine and panels on the sign, way out in front of the store, is good advertising.   Cynical, yes.  Good PR?  Yes.  Green?  No.

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