Asda Looks into Selling Energy

Last week, we briefly mentioned Wal-Mart’s rumored efforts to start selling electricity here in the U.S., but now those same rumors are arising about Wal-Mart’s U.K. arm Asda.

While Wal-Mart’s U.S. division consumes the most energy in the country (those 24/hour supercenters don’t light themselves...), Asda is far from consuming enough power to warrant an in-house plant. Wal-Mart-brand electricity might not be the best thing for consumers, either. If the company’s current services are any indication, coverage would be paltry, lines would be long and customer service would be non-existent. What’s the upside here?

Asda hopes to sell power to customers [Financial Times]

Asda, the supermarket group owned by Wal-Mart, is to explore selling electricity to its customers through its power services company, Power4All, in a move that reflects its US parent’s growing interest in energy.

Andy Bond, chief executive, told the Financial Times that in the “medium term” the retailer hoped to extend to Asda’s customers a programme initially set up last year to provide its stores with “low-cost energy and energy from totally sustainable sources”.

“I’m very confident that in the future we’ll be able to do it for our customers as well,” he said.

Rivals Tesco and Sainsbury both considered entering the UK retail energy market as the sector underwent deregulation in the late 1990s, but scrapped the idea amid concerns over risks to their core brands.

Mr Bond said Power4All would build on expertise developed by Wal-Mart in the US, where it set up its own energy services group in late 2004 to supply energy to its stores in Texas. The subsidiary, Texas Retail Energy, provides more than 1.6m MW hours annually to Wal-Mart’s network of over 300 stores in the state, and is also operating in New York state.

Wal-Mart is the largest private user of energy in the US, with an annual power bill estimated at more than $2bn (£1bn).

The retailer initially stressed the cost benefits of the Texas programme, made possible by energy deregulation, which reduced its bills in the state by over $15m annually.

But Wal-Mart, along with Asda, is increasingly linking its participation in the energy market to broader environmental goals.

Lee Scott, Wal-Mart’s chief executive, last week highlighted the possibility of the group eventually supplying “eco-friendly energy” to its customers in the US.

Mr Scott told a meeting of 7,000 Wal-Mart managers that he could imagine a day when the retailer would feed wind and solar power generated at its stores into the local grid.

The terms of Power4All’s licence from the UK’s Gas and Electricity Markets Authority restrict it to reselling power to business and commercial customers.

Asda has said it expects to save more than £2m from Power4All, and that initially 5 per cent of its power will be from renewable resources.

Posted by Alex Goldschmidt on Monday, January 28, 2008

Click Here for a Printer-Friendly Version