Why utilities need to get on board with big retailers and their solar installations

Walgreens announced about a month ago that it would expand its solar energy installations to 350 stores, up from 200. Walmart, Costco, Ikea and Kohl’s are all expanding their commitments to generating energy from solar, as well.

So what do we make of this commitment to solar?

Big box retailers have the roof acreage and the means to invest in activities that provide a long-term payoff.

As solar technology becomes more advanced and the panels (and shingles) become more efficient, Walgreens et al. will most likely continue expanding installations on stores, on distribution centers, and in other areas that are not currently being used for solar today.

At some point, they will produce more electricity than they need and be able to sell the rest. In deregulated states, they may actually become small-scale energy providers to local industries, companies or even residential areas.

Their business savvy puts them in the position to be tough competitors.

Utilities are faced with many challenges as a result of new technologies, but this one shapes up as a question of whether they want to fight these powerful entities – including the world’s sales leader – or join them.

I understand why this requires a major adjustment of mindset.

For much of the past hundred years or so, most electric utilities have operated on the same business model: They generate electricity and distribute it – customers buy it.

The generation from thousands of retail buildings presents a whole different challenge.

It’s been hard enough for utilities to get on board with buying a kilowatt-hour here and there from residential customers with rooftop units.

Even when utilities help subsidize solar, many set caps on new solar generation that are far below the market demand for new projects. For example, the Tennessee Valley Authority reached its cap in the first four months of 2013 and will not purchase power generated from new solar installations on businesses, farms or homes for the rest of the year.

I understand that utilities still have to provide reliable, consistent electricity 24/7, which they can’t get from solar or wind alone. But the fact is that these stores will be generating power during daylight hours, including the afternoon hours of peak use and peak prices.

This will cut into utility revenues, no question. But it also offers a solution to peak demand problems. During hot summer afternoons, many of these retailers will likely be generating power in excess of their needs – most now have skylights and other daylighting features to reduce their consumption during the day. And the cost of buying excess power from these new “generators” has got to be lower than the cost of building new peak demand natural gas generation plants – particularly in light of Obama’s recent announcement regarding emissions limits on power plants.

Retailers are on board with solar, with or without utility involvement. So it’s time for utilities to get on board, too, and start incorporating this new generation into their generation and business planning.

Utilities can partner with these well-known brands and purchase excess generation during peak events. They can even maintain control by offering to install and maintain the panels on retailer rooftops.

This also offers a great opportunity to not only earn the goodwill of retailers, but improve overall customer satisfaction scores. We consistently see in our Energy Pulse and Utility Pulse studies that consumers strongly support solar energy development and think that it’s important for utilities to promote and develop renewable energy. A co-branded marketing campaign may be just the thing to enhance a utility’s image.