Despite recent and dramatic fall in oil prices, this piece of news about WalMart is quite promising. There is a good story behind the push into alternative energy despite the relative cost of carbon based alternatives. Corporations, particularly today, are most concerned with modeling accurate cost structures. Without accurate cost and revenue projections, corporations cannot plan well, and are subject to wild swings in earnings. With the ability of energy prices to double or triple within a five year planning cycle, CFO’s are going to become more amenable to smoothing energy costs.
Our recent volatility in energy prices, whether oil, natural gas or coal, has created an incentive for corporations to consider alternative energy sources not because the offer a greener environmental solution, but because the cost of such sources promises a much more steady cost structure.
Removing volatility in costing models is in and of itself a major selling point for alternative energy providers. I imagine that we will see a lot of cash rich companies investing in wind and solar in the near future as an alternative to the worry of competing for natural resources with the emerging economies when the global recession subsides. After all if cash is only yielding 1% or less, 5%, 6% or 7% IRR’s begin to look very attractive. Add to that the cost of solar energy in particular is about to implode do to falling ASPs, I think we will soon awaken to a bright future adopting alternative energy solutions.
But be careful if you invest, a number of the current players will probably be gone soon, leaving behind larger swaths of market share for the survivors. In this climate a healthy balance sheet cannot be underestimated.
WalMart buys wind energy supplyBENTONVILLE, Ark. (AP) Wal-Mart Stores Inc. says it has invested in a wind energy farm in Texas that will generate enough power to light 54 of its stores.
The world’s largest retailer said Thursday the Duke Energy farm is being built in Notrees, Texas, and is to start production in April. The retailer will purchase electricity directly from Duke’s Notrees Windpower Project, Duke Energy Corp. said.
The Bentonville, Ark.-based company has 360 stores in Texas, and the 54 stores represent 15 percent of those properties.
Wal-Mart says it will pay traditional rates for the electricity, but doing so will decrease greenhouse gas emissions and will help the company reach its goal of using only renewable energy sources.