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REI Is Moving Ahead With Its Green Initiatives. Here’s Why.

  • By Andrew Deichler
  • Published: 6/7/2017

solar
Despite President Trump’s decision to withdraw the United States from the historic Paris Climate Accord on reducing greenhouse gas emissions, many American businesses are moving forward with green initiatives. That is because going green will likely be less of a financial burden to corporate treasury groups as time goes by, said author and former Executive Forum speaker Andrew Winston.

“The economics of renewables will continue to get better and companies will continue to want to buy it,” Winston told AFP.

Winston noted that major companies like REI, Boeing, UPS Wal-Mart, Google, Microsoft and Apple all use substantial amounts of renewable energy, and are reaping the benefits. “It’s not a small experiment anymore; there are tons of big companies like this,” he said. “And all of them see it as a good deal because they’re saving money.”

REI just finished construction on a distribution center in Arizona that is covered in solar panels and uses half the energy that the original design would have called for. REI has a vision for the retail industry, and that is that it will continue to move in the most sustainable direction possible. “We use 100 percent renewables,” explained Rick Bingle, vice president of supply chain for REI.

The goal for REI’s new distribution center was ambitious; the retailer wanted to be the first company to build a high-tech, energy net-neutral facility that is also certified LEED Platinum. REI achieved both goals. “We have a solar array on the roof that produces more energy than we actually use to operate a 400,000-square-foot warehouse in Arizona—which as you can imagine, needs to be fully air conditioned,” he said. “And we built it within the standards of LEED. There are only three other LEED Platinum warehouses in America, and there is no other warehouse that is both LEED Platinum and energy net neutral.”

Cutting costs along with emissions

But what about the cost? As companies have gradually have made the switch to solar power, most of them have done so through power purchasing agreements. They sign 15 to 20-year contracts with solar providers to buy the energy from them, and that’s not cheap. “For years, you would lease your roof to someone who had the panels, and you’d have a constant cost of energy,” Bingle said.

That’s why REI has taken things a step further and actually bought its own panels. “Capitalizing into this just made sense, versus offering up our roof to someone else for some elongated period of time,” he added. “The ROI is 4.7 years and the panels have a 25-year lifespan—so we have free energy for over 20 years.”

However, ROI is a little more complicated when it comes to solar power, because companies also have to take into account the municipality that they are in. Depending on the municipality you’re in, the local government may either be generous to companies buying and selling back power, or they may be resistant to solar power overall. So ROI is often less about the cost of the panel and more about where you are geographically, Bingle explained.

For REI, the total investment was about $3.5 million, plus a 30 percent write-down on its investment from the federal government. “So we have very inexpensive panels on the roof, relative to the cost of buying power in Arizona,” he said. “And Arizona’s known as one of the cheaper places to buy power. So it makes your mathematics even more challenging to work. But if they do work in Arizona, then you can get them to work in quite a lot of places.”

As for the current administration’s decision to pull out of the Paris accord, Bingle doesn’t see it having a huge impact on forward-thinking companies that are already committed to doing the right thing. "We’ve been committed to 100 percent renewable energy since 2013. That doesn’t change with the Paris Agreement news. We’re at a point where this is just smart business, and it’s also the right thing to do for the planet,” he said. “The cost structure of energy has been changing so dramatically towards solar over the last few years that it’s unlikely that will change. Businesses are going to continue to make the investments that seem right for them.”

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