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Wal-Mart Saves Money, Lives Better with Solar


Behemoth signs 10-year agreement with BP Solar.

Wal-Mart's (WMT) solid earnings have been a bright spot in an otherwise dismal retail sector during the economic downturn.

Now, Wal-Mart may deliver a jolt to the slowing alternative-energy sector.

The world's largest retailer plans to about double the size of its commitment to solar energy in the next 18 months by adding rooftop panels on 10 to 20 stores and several distribution centers in California.

Earlier this month, the company completed the installation of solar arrays at 18 Wal-Mart and Sam's Club stores in 2 warehouses in California and Hawaii.

When the latest projects are complete, the solar panels will have the capacity to generate enough electricity to power about 2,600 houses and reduce carbon dioxide emissions by about 22,500 metric tons a year. The reduced emissions are about equal to taking 4,000 cars off the road.

Solar equipment is expensive to buy, install and maintain, but Wal-Mart has avoided these costs by signing a 10-year Power Purchase Agreement with BP Solar International, a subsidiary of oil giant BP (BP). BP Solar will manufacture, install and maintain the systems. Wal-Mart will pay only for the electricity it uses.

Wal-Mart probably would have spent about $2 million per store if it had purchased the solar equipment.

Wal-Mart's deal is needed good news for the renewable-energy sector because investment has fallen about 50% from the first quarter a year ago. Other companies are likely to spend heavily on solar energy, including utilities such as Pacific Gas & Electric (PCG) that must meet stringent state renewable-energy standards.

Wal-Mart's solar-equipped stores now get 20% to 30% of needed electricity from solar, USA Today reports.

Wal-Mart kicked off its environmental campaign in 2005. Other retailers, including Target (TGT), Macy's (M) and Whole Foods (WFMI), have become active in solar energy over the past 2 years.

The market for Power Purchase Agreements has slowed with the rest of the economy, and some developers appear to have trouble lining up financing in the credit crunch. This underscores the importance of Wal-Mart's deal to the fledgling solar industry.

But the cost of fossil fuels has dropped as worldwide demand slackens in the recession, raising a basic question: Will Wal-Mart's deal make sense in the future?

Probably. Short of Armageddon, the economy will rebound, and demand for coal, natural gas and oil will grow, sending prices higher.

Congress voted last fall to extend tax breaks for solar energy, and several states -- including California and New Jersey -- offer incentives to use solar power. So it appears Wal-Mart has made a good long-term bet while also grabbing short-term benefit.

California hopes to get 33% of its power from renewable sources by 2020. That seems wildly optimistic and it's not hard to imagine the state mandating the use of solar energy. If so, Wal-Mart will be ahead of the pack and will have a great advertising theme to counterpoint its emphasis on low prices.

In memory of our fallen friend and trusted colleague, Bennet Sedacca, 100% of the donations made to the RP Foundation through April will be channeled to philanthropic endeavors consistent with the RP mission, working closely with the Sedacca clan in the distribution of those funds. We thank you kindly for your support as we strive to effect positive change in the lives of children.
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