In recent years, the retail giant Tesco has made significant strides in sustainability and energy efficiency.
As one of the largest supermarket chains in the UK, Tesco has been actively working to reduce its carbon footprint and enhance its energy sustainability.
One of the key strategies they have adopted is utilising ‘free to fit’ solutions to install commercial solar panels on their logistics centres and network of stores.
This move aligns with Tesco’s broader commitment to achieving net-zero carbon emissions across its operations by 2035.
What is a ‘free to fit’ solution…
A ‘free to fit’ solution is a financial arrangement where a third-party developer installs, owns, and operates a renewable energy system (such as commercial solar panels) on a customer’s property.
The commercial customer, in this case, Tesco, agrees to purchase the electricity generated by the system for a predetermined period, usually at a fixed rate (plus inflation) much lower than their grid contracted price.
This model has been widely adopted by businesses looking to embrace renewable energy without the upfront capital expenditure and maintenance responsibilities associated with owning the system.
Tesco has been working towards expanding its renewable energy capacity across the UK and other markets.
To reduce its reliance on non-renewable energy sources, Tesco announced plans to install commercial solar panels on the rooftops of its stores, distribution centres, and other facilities.
By using ‘free to fit’ solutions Tesco can access renewable energy at predictable rates while also contributing to the UK’s overall clean energy goals.
The solar installations are part of Tesco’s broader renewable energy strategy, which includes wind power and other clean energy technologies.
Through these initiatives, Tesco aims to generate a significant portion of its electricity requirements from renewable sources.
By partnering with renewable energy developers, Tesco can install solar panels on hundreds of sites, including store roofs, car parks, and logistics centres.
How Tesco is utilising ‘free to fit’ solutions…
The use of ‘free to fit’ solutions allows Tesco to expand its renewable energy footprint without incurring substantial upfront costs.
Instead of buying, installing, and maintaining the commercial solar panels themselves, Tesco enters into agreements with third-party developers who take on these responsibilities.
Tesco agrees to purchase the electricity generated at a set price, below the market rate for conventional grid electricity, resulting in long-term cost savings and energy price stability.
For instance, Tesco has entered into a ‘free to fit’ solution to install commercial solar panels across its logistics centres and select stores.
The solar power generated from these systems is used to power refrigeration, lighting, and other operational needs, thereby reducing the company’s dependency on grid electricity.
This approach not only helps Tesco cut energy costs but also contributes to their sustainability targets by reducing their carbon emissions.
By 2025, Tesco aims to use 100% renewable electricity across its global operations.
To achieve this, the company has been actively exploring opportunities to partner with renewable energy developers.
Through ‘free to fit’ solutions, Tesco can increase its renewable energy usage without having to invest heavily in capital-intensive solar infrastructure.
What are the benefits of ‘free to fit’ solutions for Tesco?
1) One of the main advantages of a ‘free to fit’ solution is cost savings:
Traditional energy costs can fluctuate due to market conditions, but a ‘free to fit’ solution can lock in a fixed rate for electricity for the duration of the agreement.
This predictability in energy pricing allows Tesco to manage its energy budget more effectively and reduce exposure to energy price volatility.
In addition, Tesco can benefit from reduced electricity costs because solar energy, once installed, is cheaper to generate than conventional grid electricity.
2) Another main advantage is no requirement for up front investment:
Installing a large-scale solar energy system involves significant upfront costs, including the purchase of equipment, installation, and maintenance.
For Tesco, investing in such infrastructure across all its stores and logistics centres would require a substantial financial outlay.
By entering into a ‘free to fit’ solution, Tesco avoids these initial expenses, as the third-party developer takes on the financial risk of installing and maintaining the solar panels.
This means Tesco can use its capital for other business operations or investments while still benefiting from renewable energy.
3) Then there is sustainability, corporate social responsibility (CSR) and Environmental Social Governance (ESG) to consider:
Tesco has set ambitious sustainability goals, including reaching net-zero carbon emissions by 2035.
By using ‘free to fit’ solutions to install solar panels, Tesco can significantly reduce its carbon footprint and demonstrate its commitment to environmental sustainability.
This aligns with consumer expectations, as more customers are looking to support businesses that prioritise green energy and sustainability.
Furthermore, utilising renewable energy can enhance Tesco’s brand image, positioning it as a leader in corporate social responsibility and Environmental Social Governance.
4) And another benefit is risk mitigation and reliability:
Since the third-party developer is responsible for the installation, maintenance, and operation of the solar panels, Tesco can mitigate risks associated with owning and managing a solar energy system.
Why has Tesco chosen ‘free to fit’ commercial solar panels over direct ownership…
Although Tesco could technically invest in its own solar infrastructure, there are several reasons why a ‘free to fit’ solution model is more appealing:
Capital Allocation Efficiency:
Directly investing in solar panels would tie up Tesco’s capital, which could otherwise be used for expanding stores, improving technology, or other core business activities.
‘Free to fit’ solutions allow Tesco to allocate its funds more efficiently while still advancing its sustainability goals.
Lower Financial Risk:
By opting for a ‘free to fit’ solution, Tesco transfers the financial risks associated with the installation, operation, and maintenance of the solar energy system to the third-party developer.
This reduces Tesco’s exposure to potential cost overruns or system failures that could arise from owning and operating its own solar panels.
Expertise from Developers:
The third-party developers who enter into ‘free to fit’ solutions with Tesco specialise in renewable energy projects.
They bring expertise and experience in the design, installation, and maintenance of solar energy systems, ensuring that the project runs smoothly and efficiently.
Tesco can leverage this expertise without having to build in-house capabilities, which would be a time-consuming and costly process.
Scalability:
‘Free to fit’ solutions make it easier for Tesco to scale its renewable energy initiatives.
By partnering with developers who are willing to invest in solar installations, Tesco can quickly expand the number of sites equipped with solar panels without having to navigate the complexities of financing and managing each installation individually.
Conclusion…
Tesco’s use of ‘free to fit’ solutions to install solar panels across its logistics centres and stores represents a strategic approach to sustainability and cost management.
By leveraging ‘free to fit’ solutions, Tesco can achieve its renewable energy goals, reduce its carbon footprint, and stabilise energy costs, all without the need for significant capital investment.
This model not only supports Tesco’s ambitious net-zero emissions target but also strengthens its position as a leader in corporate social responsibility and environmental social governance.
It’s also important to note that ‘free to fit’ solutions can be utilised by any organisation given the right circumstances (over 500 square metre of usable roof top space and using over 100,000 kWh electricity annually)
Don’t qualify…
Using financial modelling, day one cash positive solutions can be a reality.
Cash savings in reduced electricity usage provided by a solar panel system, can – in many instances – more than cover the monthly finance fees, providing reduced total monthly outgoings from day one.
