Five years ago, Staples made it a corporate priority to cut its carbon dioxide emissions. The executives at the office supply giant decided, however, that whatever methods they chose—improving efficiency, changing operations, or buying low-carbon energy—the effort also had to make financial sense. At the time, no one could argue that buying solar panels was a good investment, as payback periods for recouping capital were typically measured not in years but in decades.
But a startup called SunEdison came along and made an offer Staples couldn’t refuse—employing a financial model that could give solar the edge it needs if it’s to provide a significant portion of the world’s energy. Under SunEdison’s plan, Staples would get solar panels on its retail rooftops at no upfront cost and without any monthly equipment fee. Instead, it would agree to pay SunEdison a preset rate for the power the panels generate over a period of 20 years. “The bottom line is that we’re able to purchase solar energy off our rooftops for less than electricity off the grid,” says Mark Buckley, Staples’s vice president for environmental affairs.
Staples has now installed about 10 megawatts of solar capacity at more than three dozen sites—the equivalent of 2,000 typical household solar installations. The advantages of SunEdison’s plan go beyond the monthly savings relative to the cost of grid electricity, in that it also eliminates the typical risks of ownership. Staples doesn’t have to worry that the panels will underperform or be damaged. “If our solar system is a lemon, then you don’t have to pay,” says Jigar Shah, SunEdison’s founder.
SunEdison takes the gamble. “You’ve dumped almost all of the risk onto a third party, while receiving the only attribute that you probably really want, which is the clean energy that results ideally in a lower power bill,” says Nathaniel Bullard, lead solar analyst at Bloomberg New Energy Finance. But since the amount of sunshine over a 20-year period in any given location is highly predictable, the risk isn’t as big as it may appear.
The plan also helps Staples limit its exposure to increases in electricity rates and utilities’ distribution charges. SunEdison’s customers pay a rate that increases but does so predictably and more slowly than grid electricity historically has. Grid prices typically rise along with the rate of inflation, according to the U.S. Energy Information Administration. But the pattern could change and rates could swing upward independently, especially if carbon regulation is imposed at some point. “We’re looking at solar as providing a long-term hedge with price certainty,” says Buckley of Staples.