Walgreens Plans First Zero-Energy Store
Utilizing solar panels, wind turbines and geothermal technology, Walgreens plans to build what it believes will be the nation’s first net zero energy retail store. The location, in Evanston, IL, near its headquarters, promises to produce energy equal to or greater than what it consumes.
Walgreens plans to generate electricity and reduce its usage at the store by more than 40 percent through:
- More than 800 roof-top solar panels,
- Two wind turbines,
- Geothermal energy obtained by drilling 550-feet into the ground below the store,
- LED lighting and daylight harvesting,
- Carbon dioxide refrigerant for heating, cooling and refrigeration equipment,
- And energy efficient building materials.
"We are committed to reducing our carbon footprint and leading the retail industry in use of green technology," said Thomas Connolly, Walgreens VP of facilities development, in a statement. "We are investing in developing a net-zero store so we can learn the best way to bring these features to our other stores. Because we operate 8,000 stores, we believe our pursuit of green technology can have a significant positive impact on the nation’s environment."
Walgreens currently operates two stores that have achieved a LEED certification level of gold and certified; 150 stores utilizing solar power; a store in Oak Park, Ill., using geothermal energy; a distribution center in Waxahachie, TXMA, that generates energy though the use of wind; and 400 locations with electric vehicle charging stations. Many of its stores make use of fluorescent lamps (lowest wattage in the industry), LED cooler and freezer lighting and energy management systems to reduce energy.
A few retailers seem to taking the lead in energy-efficiency. IKEA last fall announced plans to become energy independent by 2020 through its use of solar and wind power. Both Walgreens and IKEA were rated among the top retail companies in terms of energy capacity in a report last year from the Solar Energy Industries Association (SEIA). Others making the list included Walmart, Costco, Kohl’s, Macy’s and Staples.
Discussion Questions
How much of a competitive advantage are retailers gaining with energy-efficiency initiatives? Will the greatest benefits ultimately be in the cost savings, customer goodwill or something else?
With energy costs steadily rising and the cost of going green coming down, it makes sense for retailers to harness new technologies to reduce their energy usage and carbon footprint. At this time it may not make financial sense to become net zero at all locations, but retailers should look for energy savings that are readily available.
The benefits of these efforts are stabilized energy costs, positive public relations and long-term savings that can increase profits and lower consumer costs.
At this point the answer probably is—none.
The cost of these systems will—for some time—outweigh the potential savings and customers are likely to be neutral about the program. Other than some hardcore “greenies” most customers will focus more on their personal experience inside the four walls of the store rather than what’s on the roof or driving the power plant.
Longer term, it may be a different story. For one thing the savings should start to be realized at some point in the future and, for another, Walgreens and/or other retailers may begin to shape the story of energy savings into a larger story of community involvement or a more “organic” approach to life which may, in turn, resonate with a broader customer base.
Customer goodwill in the form of increased sales for this is hard to measure, but this will no doubt build more goodwill in the high-income, highly educated demographic. I don’t think retailers would be doing this if it were losing them money; they’re doing it because going green now pays off in energy savings. It also protects them against rises in traditional energy costs that are almost sure to happen sooner rather than later.
Fantastic initiative! They will save money over the long haul and it is the right thing to do anyway. Now, how about leaning on brands to reduce packaging, make it biodegradable, and encourage more shoppers to recycle more regularly?
An obvious advantage to the energy efficient businesses is a long-term cost savings. In this case, Walgreens has an amazing PR opportunity. They are smart people and will take advantage of being a socially conscious retailer. It may have some customer goodwill, but more than anything they are going to garner a lot of press.
Retailers will have to count on goodwill from consumers as the benefit until the cost of the investment is recouped. Will that consumer sentiment drive sales? For consumers concerned about the environment, yes. Is that a large consumer segment? Not now, but it appears to be a larger percentage of Millennials which may be a good way to lure younger consumers to the retailer.
Once the investment is recouped and Walgreens begins to save money by not having to pay for energy and as energy costs continue to escalate, Walgreens will find itself in a good position.
One of the main benefits retailers are realizing by utilizing these energy-efficiency initiatives is reduced risk. Retailers will no longer have to account for increased energy costs and will continue to reap tax benefits as governments will continue to subsidize environmentally friendly behavior as resources are lost.
In regard to customer goodwill, This is difficult to measure. It puts Walgreens at an advantage in the competitive landscape. However, one must consider that costs that accompany implementing these initiatives and consider if the ends do justify the company’s net income.
Retailers need to be profitable in order to stay in business—an obvious fact. With over 8,000+ stores, Walgreens is smart to explore ways in which to make their facilities more efficient and effective.
Those learnings serve to provide a beta for future plans. They likely will recognize that they will have pluses and minuses that may lead to further experimentation with these types of facilities.
We’re all concerned about the environment. The jury is still out as to whether solar offers the best balance of cost/environmental benefits. For large retailers, like Walgreens, this represents a positive initial step—that of achieving a “net zero status”—that will provide very positive PR, particularly if Walgreens is open to sharing the results with other retailers and the local community (Evanston) where the “experiment” is taking place.
I’m with Ryan on this: “Net-Zero benefit” would be an apt description. I’m not sure I share his optimism about the long term though. How long will the enthusiasm last when HQ realizes they’ve added a whole new layer to their maintenance department, or they have to remove 320 roof panels to fix what would otherwise be a $412 roof leak?
Retailers focusing on energy efficiency is a great competitive advantage in terms of TCO and is just as important as mobile.
Fuel costs have impacted prices of goods and services and reducing the cost of energy allows a retailer to be price competitive, particularly with online retailers.
The greatest benefits will be in cost savings in the long run. It also helps to create an image for the company which could lead to customer goodwill and could also potentially help in attracting talent.