Kohl s Road to Renewables. John Fojut Vice President Sustainability Kohl s Department Stores

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2 Kohl s Road to Renewables John Fojut Vice President Sustainability Kohl s Department Stores

3 Who we are Operate 1059 stores in 49 states by year end Headquarters in Menomonee Falls, Wisconsin $16 billion in sales 120,000 + associates

4 Our business focus Customer-focused approach Offering value-oriented national and private brands Convenient, fun shopping experience

5 Connecting to customers

6 Setting an environmental mission To be the leading environmentally responsible retailer through focused resource stewardship through our associates, vendors and business partners

7 Green strategies Recycling/minimizing waste Energy efficiency Building design Emission reduction Encouraging environmental values

8 Environmental impact Energy consumption is Kohl s biggest impact on the environment

9 Energy efficiency Energy management Technology improvement Solar Renewable energy

10 Energy management Centralized automated building controls Automated utility payment process Demand response programs

11 ENERGY STAR All locations in ENERGY STAR portfolio manager as national benchmark tool Labeled stores are in top 25% of all retail stores for energy efficiency Each store receives an ENERGY STAR score for comparison By the end of September, 300 Kohl s store locations will earn the ENERGY STAR label for energy efficiency

12 Energy technology improvements Occupancy sensors Three to two lamp lighting conversions Metal halide spotlight retrofits LED signs in new stores

13 Solar energy Plentiful rooftop space Clean, silent, renewable Open to varying sized arrays 6 to 8 week construction cycle Solar Service Power Purchase Agreements (SSPPA) Lease

14 Solar Construction Vet site: 1-2 weeks Design: 2-3 weeks Permitting: 2 to 4 weeks Construction: 8-10 weeks Staging and construction all on rooftop Transparent to building occupants Testing/activation: 1night Requires building to be offline

15 Kohl s solar portfolio Capacity: Megawatts Production: million kwh per year Array Locations: California: 57 stores, 1distribution center New Jersey: 8 stores Maryland: 5 stores Wisconsin: 2 stores, 1 photo studio Connecticut: 3 stores Oregon: 1 store

16 Kohl s solar construction in New Jersey

17 San Bernardino, CA Distribution Center

18 Sussex, WI Store

19 Oceanside, CA Store

20 Milwaukee, WI Photo Studio

21 To host or own? Solar Host Reduces capital outlay Claim is slightly different REC retention is possible at a small cost in some states Solar Ownership Large capital outlay Retain all REC ownership claims Maintenance required

22 Solar hurdles Municipality requirements/permitting Age of building roof Landlord support Building ownership status Ground lease Building lease Wholly owned

23 Embracing renewable energy It s about doing something more Mitigates our environmental impact Demonstrates our serious commitment to long- term sustainability Supports future emission reduction goals

24 2009 Renewable status 600,990,000 kwh greening 50% of Kohl s electricity usage EPA Green Power Partnership Rankings #2: retail #4: overall #9: on-site generation

25 Renewable energy credits Plan to continue to purchase post 1997 renewable energy credits annually Retention of solar renewable energy credits at 30 locations Diversification of portfolio to support specific projects Partnership with waste companies to form closed loop and purchase bio mass RECs

26 Closing Solid energy management program is key foundation to moving into the renewable energy arena Gain top management support Find partners with long-standing track records

27 H-E-B was founded in Kerrville, Texas in 1905 with a single grocery store. For more than 100 years, H-E-B has been an innovative retailer known for low prices, fresh food, quality products and convenient services. The company has grown to more than 300 stores in Texas and Northern Mexico with more than 70,000 employees. It conducts a wide range of efforts geared toward helping the community and the environment. H-E-B is one of the largest food chains in the United States, with annual sales of more than $15 billion, and is the largest privately held company in Texas.

28 H-E-B Renewable Energy Strategies

29 Goals for Renewable Purchases Provide a fixed price for the term of the contract Provide a hedge against conventional fuel increases Pursue long term contracts that offer optimal financial benefit Do our part to protect the environment Avoid REC s

30 Current Renewable Purchases 10 year contract with a municipal utility for 25% of our load

31 Original 10 Year Wind Purchase Fuel Charge ($/kwh) % 10 Yr Purchase ('06) Projected 6.5% Annual Fuel Cost Increase Actual Fuel Cost

32 Current Renewable Purchases 10 year contract with a municipal utility for 25% of our load 15 year contract for an additional 10% of our load

33 Additional 15 Year 10% Purchase Original 10 Yr Purchase ('06) Additional 15 Yr Purchase ('08) Projected Fuel Cost Blended Rate

34 Current Renewable Purchases 10 year contract with a municipal utility for 25% of our load 15 year contract with municipal for an additional 10% of our load 5 year contract with another municipal for 10% of our load

35 5 Year Wind Contract Projected 4.9% Annual Fuel Cost Increase $/kwh Projected Fuel Cost Wind Rate

36 New 10 Year Wind Proposal Utility's Scenario 7.39% Annual Fuel Cost Increase $/kwh With Wind $xx

37 H-E-B's Scenario (slower FC increase) $/kwh 4.9% Annual Fuel Cost Increase With Wind $.xx

38 H-E-B 20 Year Proposal $/kwh 4.9% Annual FC Increase With Wind $.xx

39 Current Renewable Purchases 10 year contract with a municipal utility for 25% of our load 15 year contract with same municipal for an additional 10% of our load 5 year contract with another municipal for 10% of our load About 5% of total company electric load is from renewable sources.

40 No current purchases with our deregulated REP s

41 Distributed Renewable Generation Recently commissioned a 23.3kw solar PV system Estimate 31,000 kwh of annual electricity production Approximately 2500 square feet of roof space $100K rebate from municipal utility 30% federal tax credit

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43 Green Power Procurement David Ozment Walmart Energy

44 Walmart: Renewable Energy Lessons Learned

45 Walmart Sustainability Goals Be served by 100% Renewable Energy Create Zero Waste Sell Sustainable Products Note: Share learned information with others

46 Renewable Energy Aspirational Goal: Be served by 100% Renewable Energy Produce/purchase renewable energy at or below utility prices Focus on on-site or directed output purchases To date, have not purchased RECs to meet goals Complementary Energy Efficiency Goal Develop a store prototype that is 25%-30% more efficient Focus on three energy consuming systems; refrigeration, heating and air conditioning, and lighting

47 Walmart Renewable Energy Examples Solar 20 solar installations in CA and HI 19 roof mounted systems One 1MW ground mounted solar tracking system at distribution center April 2009: announced additional CA projects Wind April, 2009: begin buying wind energy from wind farm in Notrees, TX, through PPA agreement with Duke Energy Testing on-site micro-wind turbine and exploring larger community wind technologies Waste-to-Energy/Biomass Exploring opportunities

48 Renewable Energy Purchasing Lessons Learned/Decision Points Renewable energy purchases should align with corporate sustainability goals What is your renewable energy goal? What price are you willing to pay? Are you willing to pay premium? How much? Is REC ownership an issue with your company? Types/Sources of renewable energy On-site (Solar, Wind, Biomass) Direct project output (such as wind farm) Utility program purchases REC purchases Combination/Other

49 On-Site Renewable Energy Purchase Options (Solar) System Ownership Model Capital Intensive Must meet corporate IRR expectations/hurdle rates Eliminates/reduces finance cost Owner is responsible for future O&M Power Purchase Model (PPA) No capital required Customer buys energy output under long term agreement (10, 15, 20, 25 years) System owner builds, owns, operates

50 On-Site Solar Site & Installation Considerations Site Considerations Building ownership (owned or leased) Age of building; age/condition of roof; relocation plans Structural integrity/snow loading Covenants & restrictions Solar System Roof Installation Considerations Solar system weight-vs-structural capacity Roof penetrating mounting systems Generally lighter weight Non roof penetration mounting systems No (or minimal) roof penetrations Ballast adds weight

51 Sample Renewable Energy PPA Considerations Negotiate PPA terms to match company objectives: Length of PPA (10, 15, 20 years) Balance PPA term with building; roof life; business model PPA price escalation rate provisions (% annual increase) PPA rate projections vs utility cost projections Buy-out provisions; relocation provisions Turn key cost vs non-covered costs REC ownership Customer; system owner; utility

52 Good luck in your renewable energy efforts!