Case5

Topics: Photovoltaics, World energy resources and consumption, Nuclear power Pages: 26 (4084 words) Published: April 16, 2015
CASE: BE-17
DATE: 12/2/2011

REI’S SOLAR ENERGY PROGRAM
By making these investments, we’re going to have strong cash flows 10, 20, 25 years from now, and that’s a huge benefit. We’re making a business decision that’s going to help REI fulfill its vision of being viable 100 years from now.

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—Tim Nuse, REI’s Energy Manager

In 2010, Recreational Equipment, Inc. (REI) considered adding photovoltaic solar panels to the roofs of some of its facilities. This was driven by both financial and environmental considerations. Electricity costs were volatile, while the cost of solar panels was decreasing. These panels, once installed, provided electricity at virtually no additional cost. Generating electricity from solar panels also helped REI’s environmental sustainability program. The company had ambitious goals for greenhouse gas emissions (GHG)—it wanted to become carbon neutral by 2020, and to cut its GHG impact by 50 percent between 2010 and 2015.2 REI had experimented with solar panels in 11 of its stores in Texas, California, and Oregon two years earlier. This “Phase 1” solar project had been undertaken as a learning exercise. Tim Nuse, the company’s energy manager, considered what REI had learned from Phase 1 and the economic and political changes that had taken place, as he prepared an analysis of potential Phase 2 solar installations. Additional solar installations would not be undertaken as a learning exercise—they would compete for funds against other capital budget requests. RECREATIONAL EQUIPMENT, INC.

In the early 1930s, avid outdoorsman and amateur mountain climber Lloyd Anderson was frustrated with the quality, availability, and price of equipment in the United States. When 1

Quotations are from interviews with the author, unless otherwise specified. See GSB Case SM-196: REI’s Environmental Sustainability Strategy, for a discussion of the company’s background and sustainability program.

David Hoyt and Professor Stefan Reichelstein prepared this case as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. 2

Copyright © 2011 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved. To order copies or request permission to reproduce materials, e-mail the Case Writing Office at: cwo@gsb.stanford.edu or write: Case Writing Office, Stanford Graduate School of Business, Management Center, 655 Knight Way, Stanford University, Stanford, CA 94305-5015. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means –– electronic, mechanical, photocopying, recording, or otherwise –– without the permission of the Stanford Graduate School of Business. Every effort has been made to respect copyright and to contact copyright holders as appropriate. If you are a copyright holder and have concerns about any material appearing in this case study, please contact the Case Writing Office at cwo@gsb.stanford.edu.

REI’s Solar Energy Program: BE-17

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looking for a mountaineering ice axe, he imported a higher-quality, less expensive axe from Austria. He began ordering equipment for his friends, which he sold to them at cost. In 1938, Lloyd and his wife Mary incorporated Recreational Equipment, Inc. (REI) in Seattle as a cooperative with 23 members, each of whom paid $1. By the end of its first year, the co-op had 82 members. Profits were distributed to the members—as Anderson said, “I never thought a man should make money off his friends.”3

REI moved out of the Andersons’ house into a store in 1944. It did not open a second store until 1975, when it expanded to Berkeley, California. By early 2011, REI had grown to 117 stores, about 8,000 employees, well over 4 million members, and was opening new stores at a rate of 6 to 8 each year. It sold a broad range of gear and apparel for hiking, backpacking, camping, mountaineering,...
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