Warren Buffett’s $2 billion solar acquisition tipped to spur solar industry

It’s been dubbed the “coming of age” for solar power – the world’s best-known investor, Warren Buffett, has paid big bucks to snap up a Californian solar farm.

Buffett’s MidAmerican Energy Holdings, the utility arm of investment giant Berkshire Hathaway empire, has nabbed Topaz Solar Farm in the biggest acquisition of a single photovoltaic project anywhere.

The project, valued at $US2 billion, is the world’s second-largest photovoltaic plant under construction.

It is expected to produce about half the power of a nuclear reactor – or power about 160,000 homes – when it starts in 2015. The project had just been rejected for a US Government loan guarantee.

John Grimes, chief executive of the industry body Australian Solar Energy Society, says the investment guru “clearly sees where solar is headed.”

“Major players see the opportunity to control what will be the world’s dominant energy generation technology in the coming decades,” Grimes says.

“The Chinese Government has given strategic support to over 300 solar manufacturers in China, and today produce over half of all solar panels globally.

“In a few short years, we estimate that they will control over 80% of global production.”

Greg Abel, MidAmerican chief executive, is quoted saying overnight the project “demonstrates that solar energy is a commercially viable technology without the support of governmental loan guarantees.”

Although the price has not been disclosed, analysts expect it was sold for between $US1.65 billion and $US1.95 billion, Reuters reports.

The deal is viewed as characteristically opportunistic for Buffett, with US tax credits for solar set to expire in 2015, two years after tax credits for wind finish.

Bloomberg also reports that the 550-megawatt project will still quality for a federal incentive because it began construction last month – just as the incentive program for up to 30% of development costs winds up.

It will also sell power under a long-term contract that was signed off before prices for solar panels dived 44%, the newswire says. It has signed a 25-year agreement with Pacific Gas and Electric Co.

“The smart guys are getting into these early projects because they have very attractive power-purchase agreements,” Mizuho Securities analyst Paul Clegg told Bloomberg

“Financing won’t be as easy at the rates being signed for the latest ones.”

Another analyst, Sanjay Shrestha of Lazard Capital Markets, said the investment showed that “solar has come of age” and that large-scale solar plants remained attractive despite the end of the grant program.
 
Buffett picked up a stake in China’s BYD Co Ltd during the global financial crisis, which has a solar panel business alongside its battery making and electric cars.

Australian Solar Energy Society’s John Grimes urges the Australian Government to “take a more strategic approach to solar.”

“If we do not, we risk losing our position as a centre for solar research and innovation,” he says.