Choosing Distributed Generation For Retail: 3 Factors To Consider

[This article was originally published September 17, 2015, as a guest column on the Green Retail Decisions blog, found here. Its author, Ben Chadwick, attended and spoke at the annual Green Retail Decisions Innovation Summit in June.]

In business, keeping the lights on means more than a flick of a switch, and powering facilities with diverse functions is no easy feat. Today, on-site generation technologies can mitigate the potential threat to power supply and stability and provide a method of delivering reliable, sustainable energy to a broad array of facilities, large or small.

When I attended the Green Retail Decisions Summit in July, the primary concern among retailers was the pressure to more effectively manage price risk. Retailers are often drawn to a certain technology because of a singular value proposition, such as its reliability as a back-up source, or because of its contribution to their corporate sustainability goals. But to make the best decision when choosing distributed generation for retail, energy managers should instead consider these three factors equally: economics, sustainability, and reliability.

Economics

Integrating distributed energy resources into an energy management strategy is most easily accomplished through long-term, fixed priced power purchase agreement (PPA) contract structures.

These contracting structures achieve budget predictability in a volatile market, as they allow businesses to hedge their price risk for a term (10-20 years), not generally possible through the five-year cap of retail energy supply agreements. More importantly, PPA contracts allow energy managers to treat distributed energy as another component of their operating budget, eliminating the need for large capital expenditures, complicated internal rate of return considerations, and capital approval processes.

Working with an energy manager ensures that for complex businesses, multiple facilities can effectively budget long-term and avoid surprises and the kind of stop-gap solutions that can add up over time.

Sustainability

Distributed energy allows businesses to meet corporate sustainability goals through the use of cleaner technologies and renewable fuel sources.

For example, some technologies may reduce emissions, like on-site solar, while others use recyclable fuels, such as a biomass plant. Also, a company with a goal of powering half its load by sustainable sources may hit a roadblock if only 20 percent can be sourced by solar power. Achieving the other 30 percent could be done with biomass, fuel cells or a number of distributed generation options that could reduce or eliminate emissions.

Reliability

Distributed generation can work alongside the existing grid to increase energy resiliency and stability.

Unforeseen weather events that seem to be increasingly more common result in more frequent and lengthy grid outages that can dramatically impact retailers’ bottom lines. To prevent the effects of these events on a company’s facilities, a common solution is a backup generator fueled by diesel or natural gas – but this trusted model of reliability is no longer the only means of combating grid uncertainty. Behind-the-meter resources such as fuel cells, batteries, and even solar, can play an important role in resiliency as well.

In summary, the project economics, sustainability and resiliency goals for a major retailer are subject to its footprint, which includes hundreds or even thousands of store locations, distribution centers and corporate offices that all have different functions, hours of operation and peak load times. Geographic location, regulatory environment, energy prices and climate all add dimension to strategic energy considerations.

Therefore, the reality is that retailers cannot streamline the same energy strategy across their diverse and multiple facilities. However, a distributed generation strategy can ultimately lead to more effective execution and better results across the business.

By working with an energy supplier with expertise in evaluating and acting on these factors and taking a comprehensive view of a company’s needs, corporate leadership can develop an effective approach and deployment strategy to better support sustainability goals, achieve optimal project economics, and gain long-term reliability for diverse facilities. The availability of energy solutions that are both sustainable and scaled for business growth and expenses will ultimately reshape the way retailers evaluate their energy strategy.

Ben Chadwick is the Director of Commercialization at Constellation, a leading competitive supplier of power, natural gas, renewable energy and energy management products and services for homes and businesses across the continental U.S. Ben oversees product and market development for Constellation’s suite of distributed energy offerings, including cogeneration, battery storage, fuel cells, backup generation and compressed natural gas. In 2013, he helped to launch Constellation’s distributed energy business.