How big businesses got a taste for rooftop solar
America’s businesses are hungry for clean energy, and firms are increasingly seeing their own rooftops as potential solar generating plants. There are now at least 1,686 separate major commercial solar systems in place across the U.S., according to a recent Solar Energy Industries Association (SEIA) report, with a combined capacity of 907 megawatts. In all, America’s businesses installed at least 338 megawatts of new capacity last year in the 37 states tracked by SEIA, a 59 percent increase over 2014.
That’s just a fraction of the 62.3 gigawatts that the National Renewable Energy Laboratory calculates could be generated if all of America’s 102,000 big box retail stores, malls and warehouses put solar panels on their rooftops. Still, with commercial solar prices collapsing, and companies paying about half as much per kilowatt as they did five years ago, solar installations are increasingly being seen as a smart way for companies to reduce their operating costs.
It’s been estimated that rooftop solar could help big stores to reduce their energy bills by as much as 42 percent, saving the sector up to $8.2 billion a year. “While solar has long been viewed as an environmentally responsible energy choice, businesses now deploy solar because it is a smart fiscal choice,” the SEIA report notes.
Walmart (NYSE:WMT) remains America’s biggest corporate rooftop-solar player, with 348 installations and a total of 142 megawatts in solar capacity, while other well-established clean-energy players such as Target (NYSE:TGT), Apple (NASDAQ:AAPL), and IKEA also rank highly on total rooftop solar capacity.
Perhaps more remarkable, though, is the fact that the second-largest solar player on SEIA’s list isn’t a major tech or retail player — it’s Prologis (NYSE:PLD), a large but low-profile warehousing player that’s increasingly viewing its properties’ rooftops as an additional source of revenue. The firm now has solar panels on 100 buildings worldwide, totaling 140 megawatts in combined capacity. “We were motivated to generate clean power, but also to leverage an underutilized asset. This is a for-profit activity,” explains Matt Singleton, the firm’s vice president for global energy and development.
The rise of commercial solar is providing important new business opportunities and revenue streams for residential solar providers, with SolarCity (NASDAQ:SCTY) targeting small commercial operators, and Vivint Solar (NYSE:VSLR) last year announcing a $150 million investment fund targeting commercial installations. “Providing more than residential solar enables us to reach additional customers and markets, and we're excited about the potential this expansion into the commercial and industrial space brings with it," says Vivint Vice President Jan Newman.
Distributed, roof-based solar generation can be more cost-effective than buying clean energy from off-site bulk producers, once distribution costs are factored in — and that’s potentially a major threat to existing utilities. “Business as usual for the utility cannot continue,” says Pacific Gas and Electric (NYSE:PCG) strategy chief Elizabeth Brinton. “There is urgency for us to recognize disruption is an opportunity.”
Such opportunities do exist: while rooftop solar is often cheaper, it can’t provide the sheer volume of energy needed by some large corporations, especially for those looking to do more than just keep the lights on in a specific building. “You can only go so far with onsite generation,” says Rame Hemstreet, operations chief for Kaiser Permanente. “There are only so many parking lots, so many roofs.”
So far, though, it’s been independent energy producers, not utilities, that have best adapted to the surging corporate demand for renewables. Since 2009, when Google (NASDAQ:GOOGL) first put in an order for 114 megawatts of wind energy from an Iowa wind project, U.S. companies have bought thousands of megawatts of wind and solar energy through PPAs with independent producers. That’s reshaping the clean-energy economy: while utility buyers accounted for 75 percent of wind-energy contracts as recently as 2013, by Q4 2015 corporate and industrial buyers were responsible for three quarters of new contracts.
For now, direct purchases of solar or wind energy are only for the largest and most committed companies, writes Peter Mostow of Wilson Sonsini Goodrich & Rosati. Still, some players are exploring ways to create shared “solar gardens” where firms could effectively buy a slice of a solar plant’s output, allowing smaller businesses to get in on the action. “There is great reason to believe that corporate demand … in the end will mean corporate PPAs become a major, lasting part of the energy sector,” Mostow writes.
As recent developments in Nevada have shown, the solar sector remains vulnerable to regulatory pushback, especially in distributed applications that bypass utilities. Still, investors can expect to see solar panels popping up on an increasing number of corporate campuses in coming years — and many other businesses finding creative ways to place clean-energy purchases from off-site providers. “The momentum taking solar this far isn't going to stop anytime soon, and that's good for both solar companies and their corporate customers alike,” writes Motley Fool analyst Travis Hoium.
Companies to watch
* SunPower (NASDAQ:SPWR) is making a play for the large-scale commercial market with its SunPower Helix Roof units, which can be installed at a rate of 33 panels per installer hour — more than twice as fast as conventional solar panels.
* Global solar-energy player Sungevity is also targeting businesses through a partnership with CleanSpark, and this summer will roll out new realtime monitoring and analytics product aimed at helping firms to get more out of their rooftop solar installations.
* Clean-energy broker Altenex has carved out a niche advising Fortune 1000 companies and other large organizations on how best to build up clean-energy portfolios, and claims to have facilitated over 1 gigawatt of renewable-energy purchase deals.
Ben Whitford is the U.S. correspondent for The Ecologist. He has written for the Guardian, Newsweek, Mother Jones, Slate, and many other publications