July-August 2006

Investing in a Clean Energy Future

A corporate culture sensitive to environmental issues and a willingness to invest today to reduce energy costs in the long term has produced kudos for FedEx Corp. companies.

FedEx’s retail unit, FedEx Kinko’s, was ranked 5th on the Environmental Protection Agency’s top-10 list of retail greenpower partners this year, and the EPA and the US Department of Energy recognized FedEx Express with the 2005 Green Power Leadership Award for green power
purchasing.

FedEx Kinko’s and FedEx Express, both subsidiaries of FedEx Corp., are reducing CO2 emission by 36,800 tons a year. They are doing it by committing to buy renewable energy credits totaling 40.6 million kWh annually and by operating what is currently the largest corporate solar system in California, located at FedEx Express’s Hub in Oakland.

City Promotes Solar
The corporate parent gave the green light to the multi-million-dollar 904-kW solar system at its Express Hub following a confluence of events and business connections.

FedEx Corp. has its headquarters in Memphis, TN, where Sharp Electronics Corp., which makes photovoltaic cells, has a manufacturing facility. FedEx routinely ships in Sharp’s PV cells from its plant in Japan. When it began thinking about a solar system installation in September 2003, Sharp arranged an introduction between FedEx Express and Berkeley, CA-based PowerLight Corp., a designer, manufacturer and installer of grid-connected solar systems that regularly installed Sharp systems.

Meanwhile, in Oakland, where FedEx has a large presence at Oakland International Airport, the city began a quest in late 2003 to add 5 MW of solar by the end of 2005. FedEx decided it would make sense to contribute toward the city’s goal.

“It was important to our corporate social responsibility goals and to be a better corporate citizen for the community,” says Mitch Jackson, managing director for corporate and international environmental programs at FedEx Express. Economics also had a lot to do with it. Jackson explained that over the next 30 years the state expects electricity costs will increase 8.2% annually. A solar system would give the company a clean, relatively stable energy source.

FedEx’s Oakland Hub is a 350,000 square-foot facility at the airport run by the Port of Oakland. There, FedEx employs 1,700 people, with 20 aircraft gates that serve an average of 85 international and domestic flights daily. The Hub handles 260,000 packages a day on an intricate system of conveyor belts to load and unload them directly onto or off of planes parked at the hub doors. It has the standard warehouse lighting and heating, ventilating and air-conditioning systems.

PowerLight’s Proposal Accepted
PowerLight began by arranging a site audit, says Marco Garcia, who oversaw the project for PowerLight. He was major account manager at the time and is now director of sales for PowerLight Europe. Garcia’s team developed a technical proposal for its “PowerGuard” solar system. The Hub’s 81,000-square-foot roof was suitable for that system because it is flat and the system could sit on top, not penetrating it, he explains. The modules become part of the building envelope and protect and enhance the life of the roof.

FedEx management accepted the technical proposal, which included an energy audit, in what was a six-to-nine month proposal process. FedEx declined to say how much it paid for the solar system but Garcia says the cost ranges from $7 to $9 per watt. A system of this size, because of economics of sale, will fall in the lower range, he said. Costs are going up, he warned, because demand is exceeding supply at the moment. Rebates, he says, covered 50% of the cost.

PowerLight received the rebates from the state of California and passed the savings on to FedEx by lowering the cost of the installation. Combining federal and state tax credits with the energy savings provided an economic analysis that made sense and convinced FedEx management to fund the project, said Garcia.

Garcia says Mitch Jackson made this project happen. “It’s easy for a large company to ignore a project like this, but Jackson made a point of understanding environmental benefits, and he drove the economic benefits through the corporation,” he says. “That was the hard part.” Moreover, the relatively quick payback for lighting upgrades, identified during the energy audit, combined with the long-term benefits of the solar system improved the overall economics for the solar system.

In something of a reversal, Garcia adds that the facilities manager, in discussing his delight with the lighting upgrades, said he wouldn’t have gotten the new lighting approved without the solar system.

Solar System Covers Roof
The major portion of the six-month project period was taken up with design and permitting processes. The actual installation took four to six weeks. Garcia says his instructions from FedEx Express were, “Don’t bother the operations,” and the installation crew did not.

During the permitting process, the Federal Aviation Administration got involved because it was concerned about the height of the crane that would lift PV panels to the roof, about 30 feet above the building. The FAA asked that a red flag be placed on top of the crane to alert airplane pilots. The FAA also had concerns about potential glare from the panels that might affect aircraft landings. Garcia says the PV panels have anti-reflective coatings to absorb as much light as possible. “This is true for all crystalline panels and is standard for PV panels,” he says, adding that the reflectivity of the panels is less than that for water.

Garcia describes the method used for installing the PV panels on the roof of the Express Hub. A solar panel, made up of 60 silicon wafer cells, is mounted on an insulated PowerGuard unit known as a tile. The 5,769 tiles were then arranged on the roof to surround the many air-conditioning units located there. The solar panels encompass virtually the entire 81,000 square feet of roof space across the facility’s two buildings.

The 904-kW system was dedicated Aug. 9, 2005, and in the first six months has generated 365,000 kWh, Jackson says. The system will offset 25% to 30% of the Hub’s annual electrical needs and 80% during peak summer afternoons when demand for electricity is high. Jackson monitors the usage through a Web site created by PowerLight.

“In general terms, the PV system provides significant savings on the utility bills, especially during summer months when the rates are the highest,” Garcia says. The facility operates 24 hours per day, seven days per week, thereby reducing to 25% the total amount of electricity consumption that could be served by the solar system on an annual basis.

This leaves no opportunity to put electricity back into the local distribution system, even though the solar system is interconnected with the grid. FedEx has interconnection agreements with both Pacific Gas & Electric and the Port of Oakland, which serves as the local municipal utility.

More Solar In The Future
The Oakland Hub’s PV system is being seen as a pilot to test the reliability of the system in a packaging facility, Jackson says. The next logical project location is Memphis. “We were trying to meet the needs of this particular facility and didn’t know it would become the largest corporate PV facility in the state,” he adds.

So how is the City of Oakland doing with its goal of 5 MW of solar by 2005? Not too well. In addition to FedEx Express’s installation, about 1 MW has been installed on municipal buildings, leaving the city 3 MW behind in its goal. The Port of Oakland, a charter enterprise owned by Oakland, also has ambitious plans. Its Board of Port Commissioners approved a renewable portfolio standard in July 2004 with the intent to increase its mix of renewable power purchases for resale by its utility to 40% by 2017.

Dave Peixotto, engineer for special projects for the Port of Oakland, said the Port is delighted with the FedEx solar system and is now looking at other projects. He said the staff is reviewing proposals from several solar power providers for a ground-mounted PV installation. Power would be fed into the distribution system. And staff is also looking at an offsite landfill gas project.

Top Five REC Buyer
FedEx Kinko’s began buying green power in California in 1999 from Austin, TX-based Green Mountain Energy Co., one of the first retail green marketers in the country. Those sales ended when the retail renewable power market in the state collapsed in early 2001 at the tail end of the energy crisis and Green Mountain Energy pulled out of the state.

FedEx Kinko’s began purchasing renewable energy credits in 2003—first in Seattle, WA, in direct purchases from the utility, and then for more than 50 centers in North Carolina, South Carolina, and Virginia. Those purchases amounted to 14,000 MWh.

In the fall of 2005, FedEx Kinko’s increased its REC purchases for its centers in Wisconsin, Tennessee, Ohio, Pennsylvania, and southern California, boosting the company’s annual purchases to 40,600 MWh at more than 400 centers. Its purchases for its southern California centers alone are 10,800 MWh.

Larry Rogero, director of environmental affairs for FedEx Kinko’s, says that, as a retail customer, the company buys renewable power in two ways.

One, it participates in utility programs throughout the country in which a portion of its bill goes to the utility’s renewable development program. Second, it buys RECs monthly for its electricity supply needs from the wholesale market where a generator, such as FPL, markets its RECs. Terms vary from transaction to transaction, Rogero says.

The RECs are generated by a mix of new wind and biomass resources located mostly in the Southeast and Northwest. All of the RECs in southern California, Pennsylvania, and Ohio are Green-e certified.

Rogero says the renewable power market as a whole is becoming more and more competitive and is much different from a year ago because of demand growth and technology development. “We’re paying less than the cost of fossil-fuel-generated electricity in some areas and more in other places,” he says. “Two years ago, we were paying more across the board for renewables, but not any more.” For example, customers in Austin, TX, are paying less for renewables through Austin Energy after it signed a long-term fixed price contract for wind power.

Why pay more? “Too often we call it a cost, but it’s an investment into a sustainable future,” Rogero says. Short term, FedEx Kinko’s is looking to purchase more RECs. “Long term, we’d like to see new technology development” produce renewable options, Rogero explained. Examples he cites include flexible solar roofs, embedding solar cells in large retail facility windows, and small wind turbines.