Buffett’s big bet on solar

Warren Buffett

Does Warren Buffett really love solar – or is it a cynical ploy to grab some government subsidies?

As Australian solar fans considered what the new year will bring in respect of solar energy, news arrived from over the seas of a spectacular bet on solar from one of the world’s richest men. I’m talking of Warren Buffett, the man considered one of the wisest investors in the land (he’s not known as the “Wizard of Omaha” for nothing folks) and his $US2.5 billion swoop for SunPower’s Antelope Valley Solar Projects. The projects are expected to begin construction in 2015.

The Californian venture is considered the largest PV project in the world and solar shares surged in the wake of news of Buffett’s big buy.

Interestingly though, two widely differing views of the Buffett dive into solar energy appear to have emerged in the U.S press in reaction to The Big Man putting his money where his mouth is on solar investment.

Firstly the cynical view — and yes it does sounds very cynical — is that Buffett is an advisor to President Obama and is heavily investing in solar in order to profit benefit from massive government solar subsidies before perhaps moving on. I believe the Americans call this “flipping” the asset. If this scenario is upheld, it would mean Buffett is not really looking at solar energy as the leader of the renewable energy pack and the vanguard of the future but rather the means to an end. Which is of course to make an awful lot of money.

The argument does have some merit, after all Buffett is first and foremost an investor and consummate businessman.

The second argument is far more positive. It holds that Warren (The Big Cheese) Buffett has read the markets and decided that solar power is the way of the future. This point of view points to the fact that this is not the first time Buffett has invested in solar. Indeed he has investments in Topaz Solar Farms and a solar plant in Arizona. It also is supported by the price he paid for the Antelope Valley Solar Farm as well as the fact that, at 579 megawatts, the Antelope Valley projects are the world’s largest photovoltaic solar development.

So folks take your pick, means to a financial end using government subsidies or an investment in the future of energy development on our planet. Or, as so often happens, the position may be more nuanced with a combination of both arguments.

Whichever the huge investment may well be the harbinger of things to come with more massive investments in solar energy in the U.S in the near term. Thoughts folks? And what about our country? Can you see similar betting plunges here? Love to hear your opinion either here or over at our Facebook Page.

Comments

  1. Hmmm. Buffett is rarely a speculative investor, having developed his wealth (via Berkely Hathaway) by buying companies with intrinsic value (ie. low share price wrto quality and internal value of business). I’d tend to say that he’s found a company in SunPower undervalued by the market and one in which he sees monopolistic characteristics, good management and a probably higher future value (quite possibly enhanced by a legal framework that brings in cash subsidies). In which case, he’ll hold on to it for quite a while.

    I’d say it’s a vote of confidence in that specific company’s solar ambitions. Extending that to the US solar industry as a whole is probably not a given, however. There’s probably enough over-valued, over-extended, dubiously managed and struggling companies in the same market that won’t get a sniff of his cash, so I’d not be throwing money at the US solar market in general, just because he’s bought into one company.

    • Hi Andrew,

      Thanks for your reply. I totally agree that Buffett has got to where he is through smart investment. I also agree that he’s made the decision that solar is the future for the U.S. and well worth investing in. As the article mentions this isn’t the first time he’s bought into solar. Makes you wonder where the Buffett’s are here in Australia!

      Best

      Rich

      • Ron Spencer says

        There is over 1million mum dad etc solar systems in QLD there the Buffets

        • It would actually make more environmental and financial sense for people to be able to invest in large PV Projects instead of despoiling the visual environment with solar panels that depreciate, need cleaning and require large taxpayer subsidies to make them viable

          • Need large subsidies to make them viable??? You have certainly not done your maths on this. I get only 8c / Kw feed-in tariff and even with that, or without it, at the current price of electricity my setup is very viable

          • John, you’re dead wrong about needing subsidies to make them viable. That may have been the case a few years back but it certainly isn’t any more. If you want to see energy production that requires subsidies look at the cost of building a new coal or nuclear generator and the fact that in Australia coal supplies are very heavily subsidised for power generation- wind and solar are far cheaper and I’m afraid you must have been looking elsewhere when we got to that tipping point. It has happened very quickly, but traditional power generation models have now gone the way of the land line. The traditional gentailers are having a panic attack and refusing to buy power from householders that store their electricity in South Australia. It’s the beginning of the end for traditional models and you’ll find Warren Buffet is once again on the smart money.

          • As for the visual environment, do you not think that electricity poles are ugly? And electrical substations? And coal burning factories? Or do you take them for granted because you have grown up with them?

            Sometimes, out of fear of the new, people will make any excuse not to try it. Lots of anti-solar and anti-windpower people are like that, I have observed. And that’s for the last 40 years! How long will it take? Just think how far we could have come by now if we hadn’t had these naysayers all these years. Backward looking, frightened of change.

            You know that in the late-nineteenth century, when electricity first came in, some people were sure they could see ‘vapours’ coming out of the wires. Poisonous of course. There was a big reaction against it by some……

          • This is just a couple of lines of bait for some quick fire responses to measure eyes on the screen. The clues are the number of inflammatry points that can be identified, and the fact that the points raised have long been settled.
            It’s a bit like bringing up ‘the validity of rail travel’ or ‘the abortion debate’

          • andrew evans says

            if wind and solar were cheaper then people would be using them now instead of regular coal fired power. When they are cheap enough and efficient enough then they will be the power source of choice. until then they are just the dreams of the greens who think the planet which survived 4 billion years without them, needs them to survive.

          • Hi Andrew,

            Thanks for the comment. At the socket – solar is already cheaper than grid electricity. I have a solar system on my roof that is delivering my electricity at about 12c per kWh. To buy it from the grid would cost me 33c per kWh.

            That is why 10% of Aussie homes have solar and growing.

            In South Australia, wind is delivering us about 25% of our energy needs, and has reduced the overall cost of wholesale electricity, because it is so cheap.

            Best Regards,

            Finn

      • John, the idea is to have PV solar panels in the sunlight; not your head. Fair dinkum pal, talk about sunstroke

  2. SWH Energy says

    Whatever the reason, it is now a fact that he chose to invest in solar energy businesses. That, is a huge step forward for the solar energy industry. The ripples can sometimes become more important than the rock that created it! 🙂

  3. Ripples also reflect off rocks-and that is Australia as Liberal governments have made it in terms of renewable energy.

    • Salty clarkey says

      As usual we look to America….. Australia has the way and the people with the ability to show their wares, to the world, we need to get our industries mobilised to demonstrate our inherant ability with solar usage and innovation . Money can not influence much result without the genius of the Aussie way behind it..End of comment.

    • LNP with rocks in the head more likely. The party is leading us backwards to a heavily polluting future. Why on earth did we vote for them?

  4. He’s the Oracle of Omaha, not the wizard –

  5. Well Kevin and Julia both thought the sun shone from their behinds. Maybe they should of considered a PV panel to fit to them, after all they both thought of themselves as almighty. They didn’t care about Aussie “Buffets”. All they wanted to do was tax the hell out of “Aussie Buffets”. No wealth equals no opportunity. Thats why Aussie inventors go to the US to find the money to support their inventions. It ain’t too difficult to figure that one out. Hey but what would I know.

    • Interlineal P.E.Ruser_P.robable E.rror says

      Danno, you should have written either “should have” or simply “should’ve”, but never “should of”. “Should of”, when said quickly, sounds like “should’ve”, but “should of” is incorrect.

      • a very relevant and important point to make in a casual solar power conversation ………

        • Interlineal P.E.Ruser_P.robable E.rror. You are so right. I bet Danno still doesn’t know what you mean. As for the anti Jules and Kev people. Get real and realise Abbott is far worst for normal Aussies. He’s a twenty first century Maggi T without her G&D. Solar rules!!

    • But what would you know, you clearly believed the LNP with all their emergencies only to see them now increase the deficit, change everything environmental under that sun that shines out of theirs too, drawing their environmental wisdom from Wikipedia.

  6. Buffett is a capitalist. The mortal enemy of the socialist left. A baptist and bootlegger – he dropped Pepsi for Coke when there was money in it. His only interest in solar is in the money he can make out of the scam like his only interest in government is loose tongues. The guy underwrites catastrophe insurance which means he bets all up against global warming. And as he only bets on sure things he’s no doubt been told this side wager is a certainty.

    • Leroy-Rodney Ditto J. Fackenburpa-Schnitzelwiczski III says

      Whom shall accrue all the money if Warren doesn’t do it, and what would these other people do with the money were they to accrue it all instead of Warren, who mostly bets on sure things instead of taking unnecessary risks? Shouldn’t more people be trying to follow his lead instead of betting on very risky prospects? Would you like Warren a lot more if he did stupid things like blowing all his money? It might be better that you just continue to munch on your sour grapes which are probably nearly as green as you and your envy. It’s better the devil you know in Warren than just a blow-in who’d blow all his money.

  7. No doubt Buffett would have considered the actual technology possessed by Sunpower along with the financial capacity of the company to apply it. In Australia we have witnessed the departure of an Australian Company, Silex Systems to the USA. This company subsequently bought the PV panel manufacturing business in Australia previously operated by BP Solar. But it could not make a go of it either and later pulled out. We have also seen in years gone by, the Aust Govt restrict research funding to UNSW, one of the worlds leading researchers into solar at that time. This also caused a brain drain. In this instance to China. So as previous comments have pointed out, Buffetts decision will be about money – which is more available for research in the USA than it is in Australia. So Buffett must see Sunpower as a company able to attract cash to a greater extent than plenty of other players in the market whose technology may be equal or better than Sunpower’s. This could come from subsidies – not so readily available in Australia, as well as sales. But does not necessarily indicate that Buffett sees the whole sector as a growth prospect when picking Sunpower as a stock.

    Don

    • Silex is still listed here on the ASX and their subsidiary is Solar Systems, which started the concentrated PV array project near Mildura but then ran out of money. Silex took it over a few years ago and since then has built several more solar power stations in the NT.

      Silex do a lot of work in the US because their main business is efficient nuclear enrichment for power generation and we don’t do that here in Australia.

      I’m fairly sure Silex wasn’t involved with BP Solar either. Perhaps you are thinking of another company.

  8. Guys, can we talk about the issues rather than using this as stick to continue the left vs right fight? We are going to get nowhere here if we look at every issue through this stupid prism. It forces everyone into corners, our aggressive instincts take over from our brains, and we miss the things that are important to our left+right=us future.

    • Well said! I believe in Sustainable Development – who cares if we are right or left? The issue is that those companies who currently own non-renewable sources of energy are in no rush to create the infrastructure for a renewable energy system. How can NR energy be cheaper? The power from the sun is free! I wish that we had a government in power that understood the necessity and urgency of these changes.

  9. Jenny Stirling says

    Buffet is an old man who considers philanthropy the duty of wealthy people so it stands to reason, as he approaches the sunset of his life, that he would like to be remembered for contributing more to the good of human kind than he already has in the past. And solar power is an antidote to the damage coal is doing right now the future of the planet. Well done mate a more (solar) power to you. My children thank you.

  10. icurhuman2 says

    Recent breakthroughs in PV technology have increased the power output and reduced production costs in the same stroke, putting solar substantially in front of coal for the first time. Though storage of cheap electricity overnight still has a way to go industrial power use during daylight periods is a big money saver – where there’s money to be saved there’s money to be made. The also added saving on maintenance that comes with solar compared to fossil fuel plant costings is an ongoing exponential bonus that is hard to overlook.

  11. ' george hanson ' says

    Have any of you seen the price of a single BERHSHIRE -HATHAWAY share ………go look it up ? Most people don’t earn that much in 2 years of work . He must be doing something right .

  12. To say nothing about the missing apostrophe in “thats”.

  13. chris peacock says

    He is just making money and taking advantage of being part of the inside circle of Presidential power.
    If it had been a Nuclear development he would still have invested.

  14. d'Albert Mtalhoko says

    I wish the ‘Wizard from Omaha’ , ‘outshine’ all the other philanthropic USA Billionaires who have so graciously and generously invested n Africa in various fields and ‘kick-start’ Africa into ‘GREEN ENERGY’ by weaning the fledgling democracy of BOTSWANA from ‘KING ‘ fossil-fuel killer COAL and investing in SOLAR ENERGY HARVESTING FARMS. That is a Country which, almost like parts of the Australian Continent, has up to 300 CLOUDLESS days out of 365 in an average year. I have been trying to sell the message to the Botswana Leaders in a memorandum since 1997 that they could lead the way of developing their rising Capital City Gaborone into a uniquely verdant minimal pollution haven by woeing billionaire Corporates to ‘SAVE THEM’ from king fossil-fuel killers and their new-found Diamond mining wealth wasting ‘Coal and Petro-chemicals’ to invest in Solar-Energy Harvesting Farms larger than Germany’s all over Botswana .Energy that would help power their leading foreign capital earners, Mining and Tourism as wealth as a Country-wide network of turbines mining life-saving aquifer sourced water. I never had even an acknowledgement of my plea , nevertheless I keep at it at every opportunity.

  15. Hey , I’m thinking about buying some land in central Australia and setting up a kickstarter campaign for people to buy a share in a solar farm . My idea is to split revenue into investor returns , expansion and R and D. I was wondering if there would be much interest in this idea. Pleased to hear comments.

  16. Hermes Brenner says

    Solar is expensive, dysfunctional and most companies that sell their products disappear overnight. The industry is full of crooks. Solar(fill in the blank) is a flash in the pan, Obama is sold on pie in the sky initiatives that help his buddies.

  17. It is not uncommon for politicians to make (corrupt) deals with their brethren from the business community for high profits and quick turn around. In this case, the stock of choice is a solar company.
    Absolutely NOTHING to do with saving the planet or ‘caring’ for the environment.

  18. red sky energy have a solar project on the go in dubbo and the share pice is 0.02 he could of bought the whole company

    • ‘could have’ Jennifer, not ‘could of’. You’re not mates with Danno are you? At least you didn’t write ‘brought’.
      Go Solar!

  19. dennis nickell says

    I keep hearing about how the coal industry is subsidized but I don’t know how/where they are subsidized. Could the subsidises be decreased which would almost have the same effect as taxing the industry without using dreaded words like Carbon and Tax?

  20. I think that the real money to be made is in storage systems for the home at a price that will enable those with a decent pv system to go off grid and use their own stored power at night.

  21. it’s Berkshire (not Berkley) Hathaway Buffet is known as the “Oracle of Omaha” not the wizard….pretty sloppy fellas!!

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