Ed’s Daily Notes for June 10th   5 comments

Bloomberg: Buffett to Expand Energy Wager ‘As Far as the Eye Can See’

Berkshire Hathaway Inc., (BRK/A) which has struck deals to expand its utility business in Nevada and Western Canada, plans more investment in the industry, in part by betting on renewable power, ChairmanWarren Buffett said.

“We’ve poured billions and billions and billions of dollars in retained earnings, and several billion of additional equity,” into the energy business, Buffett, 83, said today at the Edison Electric Institute’s annual convention in Las Vegas. “And we’re going to keep doing that as far as the eye can see.”

Berkshire Hathaway Energy operates power grids in the U.K., natural gas pipelines that stretch from the Great Lakes to Texas and electric utilities in states including Oregon and Nevada. The business has committed $15 billion to renewable energy projects, like a solar farm in California that will be one of the world’s largest when it’s completed in 2015. Buffett said today that Berkshire could invest an additional $15 billion on such projects, aided by tax benefits as the U.S. strives to reduce carbon-dioxide emissions.

Buffett has been shifting toward capital-intensive businesses like energy and transportation, reducing Omaha, Nebraska-based Berkshire’s reliance on insurance operations and stock-picking. He’s said that utilities are a great way to preserve wealth since entering the industry about 15 years ago.

As you know by my Seadrill (SDRL) investment, I agree with Buffett on this, to an extent. Buffett is clearly betting that the next U.S. president will be as much of an enviro-nazi as Obama is (Hillary perhaps?). He may be right on this, regardless of my personal political opinion. As long as cash-strapped governments are willing to print money and toss it down any renewable energy sinkhole that comes along, renewable energy investments will continue to do well.

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Posted June 10, 2014 by edmcgon in Market Analysis, News, Politics

5 responses to “Ed’s Daily Notes for June 10th

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  1. Ed, while I do understand your opinion on Renewable energy, I recently changed my mind about solar after reading this article:
    http://www.businessinsider.com/china-laughed-when-it-saw-how-cheap-solar-could-be-2014-6
    China is pouring piles of money a the renewable energy. Their coal is expensive (imported from Australia). I do see China succeeding and playing a role-model for the world.
    Renewable is kind of a sinkhole for the moment, but expectations is that in 2017-2018 it will be cheaper then coal – try to imagine the impact of that.

    • The first flaw in this theory: As the demand for coal drops, so will the price. The second flaw in this theory: China also imports coal from Mongolia, which is just starting their coal mining industry, and is much cheaper than Australian coal.

      That said, the subsidized solar industry can succeed, but will it still succeed when the subsidies are gone? The U.S. solar industry hasn’t shown that ability.

      • But then again, price is not all: China really wants to get rid of coal, pirce is secondary. The pollution there is terrible. It is even one of the biggest complains from Chinese citizens.
        I think solar will succeed – globally. I don’t know about USA. But you don’t mind the environment like Chinese or European (many here wait untill it still gets a bit cheaper). And what will Africa do with China investing there? They have plenty of sun. And what about South-America or the many places where there is no cheap grid to tap from – just a few solar-panels in every town can do magic as a cheap, reliable source of energy. I think in some years solar will be cheaper without subsidies then solar was five years ago with subsidies. The prices are dropping like a bric here as well.
        The only question will be: will the solar company, where your invested in, sil be alive.

  2. We are talking with contractors about installing solar panels on our house this summer. With the current subsidies, economically it is a no brainer decision. Of course I live in Connecticut, which has second highest electricity rates in the country (but we try harder). Costs have dropped a lot in past five years and companies like SCTY are there to allow leasing. I have wondered about what this means for stocks. I know the impact is still on the margins, but I do not think I would invest in electric utilities right now. FSLR is the stock that looks most appealing to me, but I am yet to pull the trigger.

    • I just redid my PV array at the cabin and the panel costs were down to 45 cents per watt. While I do have a backup generator I haven’t used it for over a year and with the additional panels, I expect to never have to turn it on again. Decentralized PV solar is the future for the world. Forget wind, where the cost of maintaining complicated mechanical components is a killer.

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