Wal-Mart’s Wind Power Gripe in Massachusetts
Cape Wind’s green power will cost it more. It’s trying to avoid the rate increase while trumpeting its green energy initiatives
Bloomberg Businessweek, June 24, 2010
Wal-Mart on June 9 asked the Massachusetts Public Utilities Dept. for a formal voice in discussions surrounding Cape Wind. The wind farm, with a proposed 130 turbines five miles off the Cape Cod coast, was approved by the Interior Dept. in April after nearly a decade of debate. National Grid (NGG), a utility that delivers power to 28 Wal-Mart stores, has pledged to buy half of Cape Wind’s output when it comes online three years from now. The utility has a 15-year contract to buy electricity for 20.7 cents per kilowatt hour, including about 6 cents in state-mandated fees. That’s more than double its average cost for power generated by conventional plants. National Grid forecasts this will add $1.59, or roughly 2 percent, to the monthly bill of a typical residential customer.
Wal-Mart doesn’t buy electricity directly from National Grid, though it does pay the utility to deliver power it purchases elsewhere. The retailer is concerned about how the $1 billion cost of Cape Wind will be recovered, says spokesman Bill Wertz. Although he has no estimate of the additional costs the company might incur, Wertz says, “We feel it isn’t fair to raise rates for people who are not going to receive the electricity directly.”
National Grid argues that everyone benefits from clean energy so it makes sense to spread the costs. While Cape Wind entails hefty initial costs, over time it will help lower rates if coal and natural gas prices rise, says Jim Gordon, president of Cape Wind Associates, which is building the wind farm. “This project is about transitioning to a cleaner energy future,” says Gordon, who hopes to start construction this year. “I’m surprised that Wal-Mart, which is trying to present a green image, would oppose America’s first offshore wind farm.”
Wertz says the company isn’t against Cape Wind. “We would not want our request to be involved in the rate structure to indicate any opposition to the project itself,” he says. Yet some analysts say the company supports green projects only when it’s convenient. “Wal-Mart claims to want wind power but doesn’t want to pay for it,” says Adam M. Kanzer, managing director of Domini Social Investments, a green investment fund in New York. “In the long run, sustainability should be more efficient and save us money, but in the transition there are going to be up-front costs. Is Wal-Mart willing to help us make that transition?”
Although the move may conflict with Wal-Mart’s messaging on clean energy, it fits with the company’s parsimonious image, says Joseph Feldman, an analyst at research firm Telsey Advisory Group. Most of the company’s green initiatives so far have led to cost savings, Feldman says. “Wal-Mart’s proposition to their customers is to help save them money,” he says. “Anything that gets in the way is a hindrance to that.”
The bottom line: Wal-Mart doesn’t want to pay more for electricity because of Cape Wind, but the project’s backers say it’s fair to spread the cost.