How To Get Wal-Mart To Stay Solar Without Tax Credits

When President Obama chose a Silicon Valley Wal-Mart on Friday to announce several renewable energy and efficiency initiatives, the symbolism was obvious.

Without generous tax credits that discount 30 percent of their solar power expenses, the world’s largest retailer would not have become such an industry leader in the use of renewables, covering hundreds of their stores with solar panels that provide up to one-third of each store’s electricity needs.

More than 300 leading U.S. businesses, including Wal-Mart (NYSE: WMT), Apple Inc. (NYSE: APPL) and IKEA, have made various commitments to run on solar power, Obama announced. Wal-Mart dwarfs any other company in terms of solar-power capacity and announced on Friday that by 2020, it will double its on-site solar energy projects and increase its supply of renewable energy by 600 percent. Though it’s still far away from its goal of running its stores on 100 percent renewable energy, Wal-Mart claims that it currently gets 24% of its electricity worldwide from renewable sources.

That is a testament to the tax credit, says Ken Johnson, vice president of communications for the Solar Energy Industries Association (SEIA). “The solar investment tax credit is working the way it was intended to. The return for America has been great. We’re helping fight climate change, reducing our dependence on foreign oil.… We created 100,000 jobs and pumped tens of billions into the U.S. economy.”

But the subsidy comes at a cost in lost tax revenue to taxpayers and is becoming less necessary as solar panels become more efficient and popular, note some environmental researchers. “This is a substantial subsidy to Wal-Mart from taxpayers,” said Ted Nordhaus, chairman of the Breakthrough Institute.

Nordhaus uses solar panels at his home in Berkeley, California and like Wal-Mart, gets the 30 percent tax credit. He says solar power would halt without those subsidies.

“What we do know is that pretty much every place where solar subsidies lapse, solar installations go away,” he said, citing Germany’s solar industry as an example.

In Mexico, where Wal-Mart is also rapidly expanding solar capacity, the government’s approach is slightly different. Wal-Mart Mexico is on track to supply 60 percent of its energy demand through renewable source by the end of this year, with the completion of four large-scale renewable projects added to existing wind projects, according to the company.

The Mexican government has set a goal to generate 35 percent of its energy from renewable sources by 2024, an ambitious rise from the country’s 4 percent renewable generation of electricity in 2012. New energy laws are expected to pass through the Mexican congress in June that would open up the electricity sector to private investment, and instead of subsidizing renewable projects like the U.S., establish a system of tradable emissions credits that companies will be able to buy and sell to comply with climate laws.