In
2013,
REI
announced
a
public
aspiration
to
achieve
100%
renewable
energy-­‐powered
retail
operations
by
2020.
In
this
paper,
we
take
a
three-­‐step
approach
to
comprehensively
evaluate
REI’s
options
for
meeting
this
goal.
First,
we
analyze
the
policy,
technology,
and
competitive
landscapes
to
identify
viable
options.
Second,
we
quantify
the
environmental
and
financial
implications
of
each
option.
Third,
we
compare
each
option
based
on
environmental
and
financial
metrics
as
well
as
alignment
with
REI’s
corporate
sustainability
goals.
We
evaluate
four
options
for
procuring
100%
renewable
energy:
• Buying
Renewable
energy
certificates
(RECs)
to
offset
the
environmental
impact
of
conventional
electricity
demand
in
REI’s
retails
stores.
• Buying
solar
photovoltaic
(PV)
systems
for
all
stores
for
which
it
is
cost-­‐effective.
• Entering
into
a
power
purchase
agreement
(PPA)
with
a
solar
installer
for
all
stores
for
which
it
is
cost-­‐effective.
• Investing
in
large-­‐scale
(utility
scale)
renewable
energy
projects.
Of
these
four
options,
we
find
that
only
RECs
and
solar
PV
systems
meet
both
REI’s
corporate
sustainability
and
financial
goals.
Currently,
REI
is
purchasing
RECs
at
about
$1.40
per
MWh,
or
about
$75,000
for
portfolio-­‐wide
electricity
offset.
We
find
that
these
low-­‐priced
RECs
do
not
meet
corporate
sustainability
goals
because
they
do
not
induce
investment
in
renewable
energy.
Despite
the
original
intentions
of
regulators,
RECs
are
not
fungible
commodities
but
vary
widely
in
their
environmental
quality.
Making
environmental
claims
with
low-­‐priced
RECs
will
satisfy
the
basic
requirements
of
regulators,
but
may
create
brand
risk
for
REI
in
the
environmental
community.
RECs
that
offer
true
“additionality”
(i.e.
RECs
that
induce
clean
energy
investment)
would
cost
$10-­‐14
per
MWh
and
cost
$386,000-­‐$540,000
portfolio-­‐wide.
We
use
this
latter
figure
as
a
baseline
to
compare
against
solar
investments.
3
Clearly,
REC
purchases
represent
a
substantial
capital
outlay
and
one
that
must
be
renewed
each
year.
Therefore,
it
makes
sense
to
install
onsite
generation
when
it
is
a
NPV-­‐positive
investment,
which
will
reduce
the
number
of
RECs
REI
will
need
to
purchase
and
will
generate
additional
revenue
to
offset
the
cost
of
RECs.
We
find
that
between
33-­‐54
of
REI’s
retails
locations
offer
the
potential
for
NPV-­‐positive
solar
PV
installations
at
a
cost
of
$5.4-­‐8.7
million
and
a
NPV
of
$1.2-­‐2.8
million.
Of
these
stores,
thirteen
offer
very
attractive
returns
(greater
than
$50,000
NPV)
across
all
three
of
our
economic
growth
scenarios
(see
Table
4).
These
stores
are
extremely
strong
candidates
for
solar
installations
and
warrant
near-­‐term
consideration.
Additionally,
between
2-­‐30
retail
locations
are
strong
candidates
for
a
PPA
contract
for
solar
installation.
If
REI
opts
not
to
invest
in
solar
systems
outright,
these
stores
offer
a
positive
NPV
and
reduced
risk.
Of
these
stores,
eleven
have
a
NPV
greater
than
$10,000
across
all
three
economic
growth
scenarios
(see
Table
6).
As
such,
these
stores
represent
“money
on
the
table,”
and
should
be
evaluated
further.
On-­‐site
generation
also
offers
the
ancillary
benefit
of
stable,
predictable
electricity
prices
by
limiting
exposure
to
fossil
fuel
price
volatility.
In
turn,
this
pricing
predictability
will
offer
REI
heightened
accuracy
in
financial
forecasting.
Additionally,
in
regions
such
as
the
pacific
coast,
where
electricity
prices
are
expected
to
rise
substantially
in
the
coming
decades,
this
pricing
hedge
will
likely
increase
the
return
on
solar
investments.
REI
has
several
options
for
meeting
its
corporate
sustainability
goals.
While
no
options
are
cost-­‐free,
by
taking
a
proactive,
portfolio-­‐wide
approach
to
energy
investments,
REI
can
limit
risk
and
reduce
costs
while
simultaneously
leading
the
retail
industry
in
corporate
social
responsibility.