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CarMax - Speeding Towards 100% Renewable Electricity

CarMax Investor Relations

The concept for CarMax was developed by Circuit City in the early 1990s, when Circuit City began searching for future growth opportunities beyond the consumer electronics sector. The automotive retail sector was identified as having the greatest potential based on its huge size, fragmented competition, and reputation for unmet consumer needs. The first CarMax used car store was opened in Richmond, Virginia, in September 1993. Today, the company operates in 41 states with over 240 stores employing more than 30,000 people.  Using their unique business model based on the Circuit City big box approach, they’ve appraised more than 42 million cars, certified more than 45,000 cars, purchased more than 12 million cars and sold more than 11 million cars.  This speedy rise to the top of the automotive retail industry was capped off at the end of 2023 when they recorded more than $6.1 billion in revenue.

A Fast Transition

This speedy rise to the top of car sales is matched by their quick implementation of a sustainability strategy with clear actionable points.  To begin, CarMax set specific goals outlined in their latest Sustainability Report.  They began by committing to achieving net-zero carbon emissions by 2050, and making a substantial increase in the share of renewable energy in the global energy mix by 2030.  The goals are designed to make a clear dent in CarMax’s carbon footprint and demonstrate environmental stewardship. To achieve those goals the company focused on implementing a two-pronged strategy aimed at reducing Scope 1 emissions and increasing the share of renewable energy in its overall electricity supply to address Scope 2 emissions.  While CarMax has already made meaningful reductions to its carbon footprint date, it’s also targeting a 50% reduction of greenhouse gas emissions by 2025 compared to a 2018 baseline. 

CarMax CEO Bill Nash, Photo credit - Casey Templeton for the The Breeze, James Madison University

These efforts are part of CarMax's broader strategy to align with the Paris Agreement and demonstrate its commitment to doing the right thing.  “At CarMax, ‘do the right thing’ is one of our values. We believe that our goal to achieve net zero by 2050 demonstrates our commitment to address the challenge of climate change,” said CarMax CEO Bill Nash after announcing the net zero goal in 2021. “We have a clear roadmap to meet the target of a 50% reduction by 2025, and a number of steps are already underway toward that goal. Longer term, we will be evaluating all aspects of our business to see what additional measures we can take to achieve our 2050 goal.”  

Acting Quietly and Swiftly With Renewable Procurement

Following Nash’s lead, what CarMax has done with renewable energy procurement is highly impressive.  And they did it all without fanfare or major public announcements.  In fact, most if not all of what they’ve done can only be found in their sustainability reports.  The latest of which documents how they’ve increased their share of renewable energy considerably.  In 2022, CarMax’s renewable electricity use represented 36% of our total electricity consumed, up from 17% in 2021 (this includes direct renewable energy certificate (REC) purchases). 

The primary sources of renewable energy used at CarMax to date include: 

  1. A Power Purchase Agreement (“PPA”) in CarMax’s home state of Virginia that serves 96% of our Virginia operations with renewable energy sourced from a Virginia biogas project; 

  2. A Retail electric supply contract in Texas that includes Renewable Energy Certificates (“RECs”) from a wind resource in Texas; 

  3. A separate retail supply contract that included RECs served Ohio stores through November 2023.

  4. A Solar panels on four stores in Texas and Arizona; 

  5. A renewable tariff that provided 100% renewable energy for two of our locations in Kansas City; 

  6. And RECs from the Aurora Wind Project (AWD2) in North Dakota. (48,000 vintage year 2022 Green-e certified U.S. wind RECs were retired and recorded via the North American Renewables Registry on December 27, 2022, and applied to CarMax’s CY22 Scope 2 market-based inventory).

This entire mixed approach of off-site PPAs, retail supply + RECs, on-site solar and RECs has been done in just a few short years.  It’s both aggressive and impressive! (It should be noted that CarMax's reporting to the Green Power Partnership for 2023 indicates 75,179 MWh of their renewable electricity came from RECs, a significant increase over 2022.)

More importantly, they have now plans of stopping there.  As stated in their current report, CarMax is executing a community solar agreement in New York state that supports the development of additional renewable resources in Spring 2023, and going forward, they’ll continue to investigate the benefits of potential Virtual Power Purchase Agreements (“VPPA”), as well as more on-site renewable generation opportunities to support progress toward our decarbonization targets.

Looking at the numbers this work allowed CarMax to procure 95,884 MWh of renewable energy from the source above, of which 48,000 came from unbundled RECs to address a load of 269,946 MWh of consumed electricity.

Including RECs With Additionality In The CarMax Strategy

Despite doing such amazing work, there is room for improvement and an opportunity to relieve themselves of the complexity that went into their efforts. That’s where including Renewable Energy Certificates (RECs) with additionality in their strategy could prove very useful. RECs with additionality could have a positive impact on several fronts.

Given that CarMax is committed to ”doing right’ and to making its own dent in the climate crisis, RECs with additionality would allow them to directly contribute to increasing the speed at which the grid changes to renewable energy. CarMax could do this in two ways.  First they could transition their strategy away from the use of unbundled RECs, which only support existing renewable energy projects, and use RECs with additionality to support net new renewable projects still under development.  Second, they could eliminate the headache of having to search for and focus on specific VPPA projects that meet their needs and simply focus on acquiring attributes that show they invested in new generation.   

After all, if they’re considering VPPAs in the future, they're really only seeking to acquire the attributes which allow them to claim that they helped fund the development of that specific new project.  RECs with additionality would allow them to consider multiple projects at once while focusing on acquiring only the attributes they need to address their scope 2 emissions.  

Just as important, CarMax’s use of RECs with additionality would not only make renewable procurement easier, it would be less costly with fixed pricing they could name themselves for shorter, more digestible and manageable terms.  Allowing them to help the grid’s transition to scale quicker than one project at a time, while making a substantially stronger sustainability claim than unbundled RECs. 

In conclusion, CarMax's commitment to sourcing 100% renewable electricity and reducing its scope 2 emissions is commendable. However, the inclusion of RECs with additionality in its strategy could potentially accelerate its progress towards its sustainability goals and enhance its impact on the transition to renewable energy.


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