Baffling Reaction to Buffets Big Solar Buy
by Andy Sendy
As posted on SolarReviews Facebook page, Warren Buffet recently announced that his company would be investing $2.5 billion on solar projects in the U.S., the largest being the Antelope Valley Solar Projects in California. To me, this sends a clear signal that the economics of solar in the U.S. has improved drastically. Let’s face it – Warren hasn’t backed too many losers in his 60 year investment career.
Predictably, a segment of the media, presumably spurred on by anti-solar lobby groups, suggested that Warren Buffet had made the investment on the hope that he could leverage his relationship as an advisor to the President to get government subsidies and then “flip” the assets for a profit. These types of conspiracy theories generally don’t warrant comment, but in this case it besmirches the name of an investment legend. The theory shows two things:
- That the people making these claims have not conducted an economic analysis of the long-term return that solar power projects provide.
- That the people making these claims are not aware of Warren Buffet’s successful approach to investing, and how his solar investment is entirely consistent with his investment approach over the last 60 years.
Warren Buffet is not a legend because he has made a lot of money (there are certainly many people who have done that). It’s because of his attitude and the way he thinks. Warren Buffet is, perhaps, one of the least cynical and most positive people I have ever heard speak. When investing, he looks for opportunities that make the world a better place, be it a better product or a better method of delivering products to consumers. He became interested in Coke in the 50’s because it tasted good and he knew other people would like it too, and after conducting a thorough financial analysis, he realized that Coke could make money selling its product, so he bought shares. His company, Berkshire Hathaway, still owns 400 million shares of Coke.
In the case of solar, he realized that solar energy is an inherently better solution for America’s energy needs, when compared to fossil fuels. He, again, conducted a thorough financial analysis and was able to determine that the returns are acceptable and will continue to grow with inflation over time as energy prices increase. I suspect his investment decision process wasn’t much more complex than this and, indeed, is unlikely to be much more complex for any of the investments he makes. In my view, this is what makes Warren Buffet special. While all investors conduct financial analysis to determine the worthiness of investments, the greats apply the first filter: Will the investment make the world a better place? I suspect Warren Buffet will own these solar assets for a long time.