For distributors, any capital project has to follow through with its return on investment, and some have found adding rooftop solar to their facilities is a worthy pursuit.

The warehouses and distribution centers these companies operate are naturally ideal candidates for solar installations. They’re typically big, boxy, flat, open and unobstructed from sunlight.

Environmental advocacy organization Environment America calculated that, as of 2022, the U.S. has more than 450,000 medium and large warehouses that cover over 16 billion square feet of space, and those figures are rapidly expanding. That represents immense potential for solar power — the fastest-growing source of renewable energy source in the U.S.

According to a 2023 study by Environment America, U.S. warehouses could produce, on average, 176% of their annual electricity use by fully building out their rooftop with solar. The group adds that such installations reduce energy loss that happens during electricity transmission and distribution — losses that totaled 5.2% of gross electricity generation in 2020.

California, Florida, Illinois, Texas and Georgia have the most warehouse solar generation potential, according to the study.

Some distribution companies that lease their facilities don’t have a say in whether they can add solar to their rooftop. But for those that own their facilities, it could be worth a discussion.

Case Study: AIS Industrial & Construction Supply

During a panel session at the November 2023 STAFDA Convention in San Antonio, I heard Dale Hahs — Owner, President and CEO of Denver-based AIS Industrial & Construction Supply — mention his company’s rooftop solar installation that went live in 2019 in time for the company’s 75th anniversary.

As a residential solar owner, this piqued my curiosity. So, I followed up by interviewing Hahs to get the details of that project, the overall experience and if he’d recommend it to other distributors that own their facilities. I think sharing it as a case study can inform other distributors who are currently considering solar, or previously hadn’t. I also invited Hahs onto the MDM Podcast to discuss his company’s interesting non-solar developments, which you can find here.

Why Solar for AIS?

The impetus for Hahs considering rooftop solar was that AIS needed a solution for backup power. The distributor had experienced regular power outages of 2 to 3 hours in recent years that would take operations essentially completely down about one day per month, putting it ‘dead in the water’ as Hahs described to me as far as staff and customer access.

First, Hahs looked at gas and diesel-powered generators, which would come with a price tag of around $60,000. As he was collecting quotes for that, Hahs talked with AIS’ information technology consultant, who asked if Hahs had ever considered a solar battery backup. That consultant had a contact who owns a residential and commercial solar consultancy — Andrew Ehernstein with Solar for Planet A — that partners with installation company Photon Brothers. 

From there, Hahs enlisted the Solar for Planet A and Photon Brothers to come up with a solution. What they came up with was a combination of a rooftop solar installation plus four Tesla solar storage batteries.

Batteries themselves store a finite amount of power, but alongside a solar installation, they can recharge continually. This tends to be a better solution in cases of long power outages as opposed to generators, he said.

The Process

One of the first things anyone interested in going solar — residential or commercial — will want to research is what credits are available. Currently, the U.S. offers a 30% federal tax credit, which is an immediate major savings on any project. Beyond that, many states and even local municipalities offer further credits or rebates.

Next was calculating the ROI. Solar for Planet A determined that the solution proposed for AIS would likely pay for itself in less than 7 years, and anything after that would be legacy savings as rates for electricity would likely continually increase. This is why considering what electric rates will be 5 to 10 years down the road is an important part of the ROI math.

With the three AIS buildings set to have rooftop solar installed being nearly 80 years old and with outdated electrical systems, some infrastructure upgrades were required to support the solar and battery system.

The overall cost of AIS’ installation was $260,000 — not including tax credits and rebates. It was turned on in December 2020.

Early on after it went live, when AIS had a power outage in the summer of 2021, its air conditioners were drawing more power than the solar project could actively produce, resulting in a complete power outage once the system failed. However, going forward, AIS was able to get around this by installing an automatic shutoff so that the air conditioner would not be included in what gets powered back on by solar and the reserve batteries. Such shutoffs enable users to prioritize which systems are essential for powering through an outage.

The End Result

With fully charged batteries and using only essential power draws like computers, phones and lights AIS’ solar installation can keep the company on from 1 to 2 days during a prolonged outage, Hahs told me.

While the cost savings from eliminating lost revenue from disruptions isn’t easy to calculate, Hahs estimates that his solar and battery system saves him about $22,000 in profit for each outage.

Here are the specifics of AIS’ solar and battery installation:

• Total installation cost: $260,000
• Credits & rebates: Federal – 30%; Accelerated Depreciation Expense cash value of approximately 18%; Colorado Enterprise Zone 0.6% credit of the total system cost.
• Installation type: Roof-mounted on three buildings
• Installation size: 90.4kW
• Battery storage: 44kW
• Return on investment: 6.4 years
• Annual savings: $17,100
• 10-year internal rate of return: 12%
• 30-year Electricity Savings: $552,463
• 30-year ROI: 105.7%
• Environmental impacts: Equivalent to saving 2,579 acres of trees; 245,552 gallons of gas; and 12 railcars of coal burned.
• In 2023, 91% of AIS’ electricity came from its solar panels

As of March 22, 2024, AIS’ system has produced over 414,000 kWH of clean power.

So, Was it Worth it?

That was my key question for Hahs after learning everything about the project, as well as if he’d recommend other distributors look into doing something similar.

“Oh, totally,” Hahs says without hesitation. “I don’t think they’re going to ever get hurt by it. If you figure out how to make it happen, it’s just another good way to differentiate yourself and show that you care, and you’re going to save money. Nobody’s ever going to do any of this stuff unless it makes good business sense and unless it saves you money. That is the dry run of it. And then it’s just nice to be a good steward of resources.”

Hahs added that the installation gives AIS something impressive to show off to customers, job candidates and suppliers during facility tours.

“The Tesla batteries are one of the highlights of tours here. When people walk by, they go, ‘What in the world is that? It looks like Star Wars.’ It’s really cool.”

Words of Advice

Like with any major business investment, certain factors can make it a much more difficult process if not properly addressed — no matter how good the solution is. For solar, Hahs says part of what made the project smooth for AIS was having great partners. He noted that Solar for Planet A and Photon Brothers didn’t hesitate to stop by and reconfigure AIS’ system after every power outage to ensure its staff was using it correctly.

“You’ve got to have really good partners. Otherwise, it could be a nightmare if you have people who are not trustworthy and don’t do what they say they will,” Hahs notes.

Solar for Planet A and Photon Brothers have completed projects for several other distributors in California and Colorado, including Granite Imports and Anheuser-Busch distributor Advanced Beverage Company.

Here’s a quick video from Photon Brothers showing off the AIS installation:

Feeding More Sustainability Efforts

Hahs detailed that the solar installation led AIS to pursue more on the sustainability front. Shortly after the project was complete and turned on, a fellow distributor who was starting up a business consultancy informed Hahs about Certifiably Green Denver, which is a city-funded program that helps businesses receive a designation — upon evaluation. The designation allows companies to receive thousands of dollars in funds to make building upgrades that will reduce energy, waste and water usage.

From there, the AIS leadership team created a sustainability manual that the company follows in its journey to continue saving money while being environmental stewards. It’s formed a ‘Green Team’ that meets once per month to discuss different aspects of adhering to Certifiably Green Denver’s requirements.

Part of being Certified Green Denver includes an audit that helps businesses find ways to save energy. This includes a “Switch It Out” program that replaces old fluorescent light bulbs to LEDs. For AIS, it resulted in swapping LED bulbs and fixtures into all four of its five buildings — approximately $10,000 worth including labor — all paid by the program. There are undoubtedly numerous other locally-funded energy savings programs that distributors can take advantage of but not currently on their radar.

“That was an Xcel Energy program that we otherwise never would’ve known of,” Hahs says. “There’s a lot of money out there waiting in the wings for people to use. So you might as well figure out what programs there are and use it.”

Other Distributor Solar Installations

Of course, AIS is hardly the only industrial distributor that has a rooftop solar installation. Here are a few examples from the large end of the company spectrum:

• Grainger
  • The MRO supplies distributor has 7 megawatts worth of direct current solar panel installations at its U.S. distribution centers, according to its 2023 ESG Report. Those installations have resulted in more than 8,000 MW hours of renewable energy produced in 2022. And Grainger isn’t satisfied with that. The report noted that in 2023 it added more large-scale solar installations, in addition to piloting smaller installations within the company’s branch network.
  • “We believe sustainability and strong business performance are connected. That’s why we are committed to investing in projects like solar panels, building management systems and hydrogen fuel cell-powered material handling equipment in our DCs,” Grainger Senior Vice President and CFO Dee Merriwether said in the company’s 2023 ESG report. “These initiatives both contribute to a greener planet and generate measurable financial results.”
  • Grainger’s 2023 ESG report was released on July 10, 2023, so the 2024 version is likely to release around that same date and provide an update on these installations and solar investments.
• Ferguson
  • The plumbing, HVAC, PVF and industrial supplies distributor’s 2023 ESG report (released Oct. 11, 2023) stated that during the company’s fiscal 2022 (Aug. 1 to July 31, 2022), Ferguson bought and installed a 1.1 MW solar array at its Perris, CA distribution center. It was the first instance of Ferguson owning renewable energy assets within its distribution network, and in its first year, the project offset 1,089 metric tons of CO2 emissions — equivalent to removing about 242 passenger cars from the road annually.
  • Additionally, Ferguson purchased a solar array for its Phoenix DC that was expected to go online during the company’s fiscal 2024 (which ends July 31).
• Fastenal
  • The industrial and construction supplies distributor operates two large buildings equipped with solar power technology: one owned at the company’s headquarters campus in Winona, MN and one leased in Dordrecht, Netherlands, according to the company’s 2024 ESG report (released March 28).
  • Fastenal added that in 2024, the company expects to participate in the Environmental Protection Agency’s Green Power Partnership to purchase and use solar and wind energy within its DCs and manufacturing locations.

The Final Word

Again, solar isn’t for everyone. For some, it just doesn’t make sense — based upon the amount of sun hours they receive per year and the kind of weather they get, particularly in winter. Numerous free calculators help determine this. Just Google ‘solar calculator’. Facility roof type and the age of the facility are also determining factors. And especially important is what tax credits or rebates might be available to reduce the overall cost of the project.

But, distributors won’t know if solar makes sense until they look into it. From what I can tell, it’s at least worth checking out.