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Walmart … lighting a revolution for energy efficiency use?

May 10th, 2007 · 2 Comments

As discussed prominently in the New York Times earlier this year, Walmart has committed to pushing aggressively for sales of compact fluorescent lightbulb sales in its stores, targeting a doubling of CFL sales of from 50 to 100 million CFLs by 2008.

CFLs burn roughly 25% of the electicity of incandescent lightbulbs, last longer, and thus end up saving users money while reducing GHG emissions. Unless you are a traditional bulb manufacturer, all-in-all a win-win situation.

But, why is Walmart taking this path? What else is Walmart doing in the energy arena? …

The NY Times article Wal-Mart Puts Some Muscle Behind Power-Sipping Bulbs begins:

As a way to cut energy use, it could not be simpler. Unscrew a light bulb that uses a lot of electricity and replace it with one that uses much less.

While it sounds like a promising idea, it turns out that the long-lasting, swirl-shaped light bulbs known as compact fluorescent lamps are to the nation’s energy problem what vegetables are to its obesity epidemic: a near perfect answer, if only Americans could be persuaded to swallow them.

CFLs are a hard sell.  We have a culture focused on purchase price, rather than ownership cost. CFLs cost more up front and too many don’t trust the ‘advertising’ claims of energy savings on the bulbs’ packaging — seemingly viewing like some form of snake-oil salesmanship rather than an honest assessment.  Many people — even confronted with analysis — reject the concept that buying CFLs makes economic sense and view them as a scam to sell things.

Walmart has been testing how to get past that challenge,

To explain the benefits of the energy-efficient bulbs, the retailer placed an education display case at the end of the aisle, where it occupied four feet of valuable selling space — an extravagance at Wal-Mart.

My first Daily Kos diary, Making Energy Cents — From the Home to the Globe, had quite a few words about compact fluorescent light bulbs and how much they made economic sense.  I’d replaced all my house before I’d ever considered doing my own calculations against the ’snake-oil advertising’. As you would see there, once I did the calculations — after I’d already switched to CFLs — I was surprised at how good an economic (in addition to “green”) invesment they were for me, the individual homeowner.  (For a good, adaptable calculation tool, download “lighting” at Lou Grinzo “Cost of Energy” downloads.) My 30 or so CFLs are not even a drop compared to Walmart’s target.  I was heartened by COEJL’s efforts to get synagogues selling CFLs with a target of 50,000 bulbs — wow, a great step foward. To put things into perspective, Walmart states a target of 100 million CFLs per year.  There is a drive to associate schools with CFLs.

An 8th grade science teacher in Long Island has a simple idea for making a big dent in energy consumption. Kenny Luna wants to give one compact fluorescent light bulb to every child in the U.S., grades preK-12. …. According to their calculations, if 50 million kids put a CFL in a lamp at home, we’d achieve $2.3 billion in energy savings.

Translate this to Walmart’s target — by 2008, is Walmart intending to save Americans $4.6 billion in energy savings?  As Walmart’s business practice is not centered on reduced sales, would 2009 see even more CFLs being sold?  And, would therefore that $4.6 billion figure go up by an additional $5.4, let’s say, the next year, totaling some $10 billion in sales.

And, the GHG implications — well, it won’t stop the warming, but it would help turn the US toward a more energy efficient path.

Wal-Mart Puts Some Muscle Behind Power-Sipping Bulbs is the latest in the NYTimes The Energy Challenge series.  This series has included articles on fossil fuel economics, efforts to develop advertising campaigns re energy issues, solar power, ethanol fuel, nuclear power, coal-to-gas liquids, and wind power.  As discussed in Blowing in The Wind, The Energy Challenge is valuable because of the dedicated attention to energy issues by America’s newspaper of record — but seems to have serious issues related to the focus of reporting. For example, there has yet to be an article on the how efficiency could lead to massive reductions in requirements for energy imputs — while improving America’s economic situation and Americans’ quality of life. In other words, to date, the series has not seemed to have taken a holistic approach to energy challenges.

Now, Walmart is doing much on the energy front — notably seeking to cut its energy use in its own operations.  As per the announcement for a public lecture in two weeks,

The world’s largest private purchaser of electricity and the nation’s second largest fleet of trucks is striving for increased efficiency and conservation. Wal-Mart’s 7,200 trucks travel over a billion miles a year. By installing auxiliary power units that enable the drivers to keep their cabs warm or cool during breaks from the road, Wal-Mart could save $26 million a year in fuel costs alone. Wal-Mart’s new sustainability plan seeks to increase the efficiency of its vehicle fleet by 50% over the next ten years and reduce energy demands in their facilities by 30%.

In fact, the Rocky Mountain Institute is working with Walmart to try to spark enough momentum for some of the core elements of Winning the Oil Endgame (like more efficient trucking fleet) into the marketplace.

The topic of the talk, how Walmart seeks to save energy, could be focused in classic business economic terms:  

  • ROI (return on investment) provides a clear cash accounting (how much does it cost to save how much energy — do the savings provide a justifiable ROI?).
  • If the fiscal ROI is not strong enough, are there other factors (like good will, public relations) that weigh in to make this viable business practice?

In fact, energy efficiency programs often have extremely good fiscal ROI.

The subject of this discussion, however, turns to a different question, no longer inward looking at operations, but externally to its clientale and its “gross revenues” (the energy efficiency might more accurately reflect on net revenues/profits than on its gross sales)

Selling CFLs could, howeer, be somewhat contrary to the ROI equation model.  Selling CFLs might drive reduced total light-bulb sales and reduced profits from them. And, let us be honest, the Walmart model has not been dominated by trying to sell high-quality, very durable products that won’t need replacement for a long time.  The CFLs seem contrary to that model. Would focusing efforts to sell CFLs based on their longevity and lower total ownership cost (TOC) lead Walmart customers to question the TOC for other Walmart products that are ‘cheap’ to buy but don’t necessarily last long (and thus aren’t necessarily ‘cheap’ to own)?  

For that to turn around, Wal-Mart will have to persuade its traditional consumers that it is worth paying a bit more at the checkout counter to save a significant amount money down the line, a seemingly simple task that few companies ever accomplish. It is particularly difficult at a retailer that has long emphasized “always low prices.”
“It has taken the American public forever to grasp this,” said Charlie Jerabek, the chief executive of Sylvania.
Helen Capone encapsulates the challenge. Ms. Capone, 68, said she “curses the energy company every month” because of her electricity bill and loves the five-year-old, trouble-free compact fluorescent bulb in her attic. But she won’t switch to the energy-saving bulbs in the rest of her house in Secaucus, N.J. “They are not the prettiest things in the world,” she said, surveying the bulbs at a Wal-Mart.
That has put Wal-Mart in the strange position of racing ahead of its customers and coaxing them, bulb by bulb, toward energy conservation.

“We start with the premise,” Mr. Ruben, “that customers make good choices.”

(Could the CFLs be a leading edge of a new Walmart business model, focused on “lowest ownership cost” rather than “lowest purchase price”?  To be honest, that seems a bit farfetched.)

But, if this is “isolated” solely to CFLs, the pure fiscal ROI without counting intangibles probably is massively overwhelmed by good press/public relations like this. As the article notes, this is

a move that could also improve Wal-Mart’s appeal to the more affluent consumers the chain must win over to keep growing in the United States.

There is an interesting twist that could change this need for intangibles like good will to make this a good business move.  Among its critics, no one suggests that Walmart is not quite strategic in its approaches (whether you hate or like them …).  Imagine that Walmart CFLs sales end up, on average, saving its customers $15 billion each year that otherwise would have gone to pay an electricity bill.  Is Walmart calculating that some good percentage of that $15 billion would be spent at Walmart, more than compensating for any reduced incandescent lightbulb sales?

Now, returning to Walmart sales and relationship to energy use, Walmart’s

ambitions extend even further, spurred by a sweeping commitment from its chief executive, H. Lee Scott Jr., to reduce energy use across the country …

It is the environmental movement’s dream: America’s biggest company, legendary for its salesmanship and influence with suppliers, encouraging 200 million shoppers to save energy.

What will it mean, “encouraging … to save energy”?  Will Walmart get into the home enegy audit business?  Focus on selling more energy efficient products? What?

… Wal-Mart decided to go green. More than a year ago, Mr. Scott… began reaching out to some of environmental groups, telling them that Wal-Mart, long regarded as an environmental offender, wanted to become a leader on issues like fuel efficiency and greenhouse gas emissions.

Mr. Scott viewed such a move as a way to use Wal-Mart’s influence to improve the environment, cut costs and, of course, burnish the company’s bruised image. In September 2005, … Steve Hamburg, an environmental studies professor at Brown University [told Scott]
“You need to look at what is being sold on the shelf,” Mr. Hamburg recalled telling Mr. Scott over a dinner of turkey and mashed potatoes. He began talking excitedly about compact fluorescent bulbs. “Very few products,” he said, “are such a clear winner” for consumers and the environment.

Soon after returning from the trip, Wal-Mart publicly embraced the bulbs with the zealotry of a convert. In meetings with suppliers, buyers for the chain laid out their plans: lower prices, expanding the shelf space dedicated to them and heavily promoting the technology.

How far will this go?  Is does this stop with CFLs? Did Walmart do this with LED Christmas lights? Not discussed here, but is Walmart driving its suppliers of telephones, TVs, and other appliances to become the most energy efficient products on the market?   How far will Scott take Walmart in seeking to play a role “to reduce energy use across the country.” Will Walmart sponsor public transportation to its stores to reduce SUV mileage within its parking lots?

Blowing in The Wind had many examples of problems with the discussion of wind power.  Let us take a moment to look at one problem with this discussion:

A compact fluorescent has clear advantages over the widely used incandescent light — it uses 75 percent less electricity, lasts 10 times longer, produces 450 pounds fewer greenhouse gases from power plants and saves consumers $30 over the life of each bulb. But it is eight times as expensive as a traditional bulb, gives off a harsher light and has a peculiar appearance.

  • “75 percent less electricity” — yes, roughly correct
  • “Lasts 10 times longer” — hold it, we need a bulb-to-bulb comparison. Not all incandescents nor all CFLs are made equal.  The “10″ number is somewhat high (perhaps 6-8, not expert on that number) for the average.
  • “produces 450 pounds fewer greenhouse gases” — well, this depends on (1) the wattage of the bulbs (bigger the incandescent bulb being replaced, bigger the savings) and (2) the source of electricity. (If from solar power, there is basically no effect on GHG emissions, if 100% coal, then significant reductions.)
  • “saves consumers $30 over the life of each bulb” — yet again, it depends. What is the cost of the electricity and what is the wattage of the bulbs?
  • “eight times as expensive as a traditional bulb” — depends, but in the ballpark
  • “gives off a harsher light” — obviously, the reporters did not bother to test out all the different CFLs out there. The ones in my family room certainly are not “harsh” lighting.
  • “a peculiar appearance” — well, there are many CFLs on the market that are ‘weird’ looking, but there are more virtually every day that are far more attractive in ‘traditional’ lighting terms.

One paragraph with so many problems. …

As a result, the bulbs have languished on store shelves for a quarter century; only 6 percent of households use the bulbs today.
Which is what makes Wal-Mart’s goal so wildly ambitious. If it succeeds in selling 100 million compact fluorescent bulbs a year by 2008, total sales of the bulbs in the United States would increase by 50 percent, saving Americans $3 billion in electricity costs and avoiding the need to build additional power plants for the equivalent of 450,000 new homes.

That would send shockwaves — some intended, others not — across the lighting industry.

Who are the losers?

Because compact fluorescent bulbs last up to eight years, giant manufacturers, like General Electric and Osram Sylvania, would sell far fewer lights. Because the bulbs are made in Asia, some American manufacturing jobs could be lost.
Michael B. Petras, vice president of lighting at G.E., concedes that “the economics are better with incandescent bulbs.”

In other words, moving to a smarter, more sustainable, and prosperous energy future will have both winners and losers …

Now, to another problemmatic area in the article:

And because the bulbs contain mercury, there is a risk of pollution when millions of consumers throw them away.

Absolutely true — this is an issue which requires approaches for fluorescent lighting recycling the CFLs and having hazardous waste collection eased for CFLs (and batteries). Walmart merits credit on this …

Then there is the mercury inside the bulbs, a problem Wal-Mart is working with the federal government and environmental groups to resolve, possibly by collecting the bulbs at its stores or off-site locations for recycling.

But, it is worthwhile to note (EMPHASIZE even) that the primary introducer of mercury into the environment is (I believe) emissions from coal-based electrical generation. The average electrical reduction from using CFLs reducing coal burning emissions of mercury significantly more than the mercury in the CFLs.  (According to the EPA fact sheet Mercury in CFLs, a CFL cuts overall mercury by 40%, on average, across a 5-year life … but that is with 100% of the electricity coming from a coal plant while the average, across the United States, is 50%.)

Now, the article provided some interesting background history re CFLs

Compact fluorescent bulbs, introduced in the United States with much fanfare in 1979 by Philips just as the nation’s second energy crisis of the decade was getting under way, have never captured the public imagination.
The new bulbs — lighted by sparking an efficient chemical reaction, rather than heating a metal filament — were ungainly, took several seconds to light up and often did not fit into traditional light fixtures.
Since then, refinements have made them far more convenient to use, reducing their size and price as well.

Absolutely true — CFLs have taken a long time to become ‘easy to use, easy to live with’, but they are there now and getting better everyday.

To keep up with swelling orders from the chain, Osram Sylvania took to flying entire planeloads of compact fluorescent bulbs from Asia to the United States.

Hold it, I know light bulbs are light, but airlifting them?  I wonder what the GHG emission balance is between airlifting and shipping a lightbulb … and the GHG savings from having the CFL replace the incandescent. I’m worried that they are aren’t so good.

An interesting possibility is that Walmart would become part of something bigger.

The goal was to turn its sales campaign into a broader cultural movement.
One proposal, headed by Lawrence Bender, who produced Al Gore’s 2006 documentary, “An Inconvenient Truth,” is to create a Web site that would track sales of compact fluorescent bulbs at major retailers like Walgreen’s and Target. The result would be a real-time map, with data collected by a third party, showing how much Americans have saved by using the energy-efficient bulbs.
Mr. Ruben said such a map “helps consumers see this as something bigger than buying a bulb.”
At the same time, Google and Yahoo are in talks with Wal-Mart about how to use their search engines to promote the bulbs.

Does all this suggest that, sometime soon, CFLs will be front-paged on every Google search out there.

But, at the end of the day, the search for a sustainable (and prosperous) energy future is the challenge of the decade, of the century.  Business will be a (not the, a) key part of meeting this challenge.  Walmart is changing its internal practices to become more energy efficient (and even starting to directly produce renewable power including new plans for solar PV on stores.)  It is taking a leading edge position regarding CFLs?  What does this suggest for their other goods for sale? And, what are the implications of Walmart for other businesses approahces to energy issues?

NOTES:

  1.  CAVEAT:  I chose not to engage in discussions of general Walmart business practices — other than how, in my opinion, they relate to energy issues.  The lack of discussion in the diary or lack of engagement in comments’ threads focused on Walmart business practices results from this, rather than indicting any specific views on those practices.
  2.  NOTE: Not discussed, but this article has (another example) potentially interesting discussion of Walmart’s relationship with it suppliers.  
  3.  Consider joining Daily Kos Environmentalists.
  4.  Business is a (”a”, not “the”) critical element in terms of finding new paths forward toward a more sustainable and prosperous energy future such as laid out in Energize America. Some business leaders have taken up the challenge. Such as Richard Branson and the Virgin Group, who have pledged the same amount to fight Global Warming as the U.S. government committed to the Climate Change Technology Program — $3 billion.
  5. And, well, Walmart has announced a contract to put up solar PV systems. (See also  Wal-Mart going solar in February?)
  6. This post adapted from a 5 Jan 07 discussion.

Tags: CFL · Wal-Mart · business practice · energy efficiency · lighting

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