Buffett and Musk disagree on who will own solar– users or utilities.
In April, Solar Tribune reported on Elon Musk’s attempt to push solar energy storage into the mainstream and break the chokehold that utilities currently have on solar producers. In July, we reported that Warren Buffett’s NV Energy was paying eleven lobbyists to fight the expansion of net metering in the state of Nevada. It looks like– for now, anyway– Buffett has the upper hand, chasing Musk and other solar entrepreneurs out of the state through sheer political horsepower.
Elon Musk, the man who brought us Paypal, Tesla Motors and SpaceX, also happens to be the co-founder of SolarCity, the nation’s largest solar energy provider. SolarCity set up shop in the state of Nevada two years ago, looking to bring their successful business model to a state with amazing solar resources. SolarCity was greeted with open arms by the state government, and went about its business, hiring hundreds of employees to service the new market.
Meanwhile, Buffett also entered the Nevada energy business. He bought the state’s largest utility, NV Energy, with an eye toward capturing the Nevada solar market in much the same way he cornered the wind energy market in Iowa a decade before. Buffett has an amazing talent for playing the new energy business to his advantage, relying on an army of highly-paid and well-positioned lobbyists to suppress independent renewable producers through legislative and regulatory machinations. He waits for indie producers to fight their way to the establishment of the combination of lower installed price and tax credits that will make their industry viable. Then, Buffett pivots and strikes, going all-in, buying up and rapidly deploying generation assets then crushing any remaining competition through sheer volume.
NV Energy’s ever-growing political influence is paying off for Buffett, who is looking to not only stop further indie solar installations, but to choke out the state’s existing small solar producers. NV Energy has had some big wins with the state regulators, which will all but kill the rooftop solar business in the state, as well as retroactively punishing people who have already installed systems. Musk’s SolarCity cut bait and ran, laying off 550 employees. Other big solar companies like SunRun were not far behind. In a matter of months, Buffett has monopolized the Nevada solar market.
“This is a very difficult decision but Governor (Brian) Sandoval and his PUC leave us no choice,” said SolarCity CEO Lyndon Rive. “The people of Nevada have consistently chosen solar, but yesterday their state government decided to end customer choice, damage the state’s economy, and jeopardize thousands of jobs….The PUC has protected NV Energy’s monopoly, and everyone else will lose,” he said. “We have no alternative but to cease Nevada sales and installations, but we will fight this flawed decision on behalf of our Nevada customers and employees.”
Despite outrage among Nevada residents, Buffett recently defended his action in an interview with CNBC, responding to viewer questions about this clash (a clash that Bloomberg Business intensified with a cover story): two viewers asked why Buffett’s companies are preventing and deterring net metering in Nevada. Buffett responded:
“We don’t have a problem with net meters, and we’re leading in renewables in the country among regulated utilities..we do not want our million-plus customers that do not have solar to be buying solar at 10 and a half cents when we can turn it out for them at 4 and a half cents or buy it at 4 and a half cents. So, we do not want the non-solar customers, of whom there are over a million, to be subsidizing the 17,000 solar customers. Now, solar customers are subsidized through the Federal Government — as we are, with our wind and solar operations ourselves. …
“In Nevada, [Musk’s company, SolarCity] had an arrangement for a very limited number of people — and the public utility commission decides this — they had an arrangement where the utility had to pay way above market for solar produced by these 17,000 homes…”
Fossil fuel industry insiders are rejoicing. Oilprice.com declared, “Warren Buffett beat Elon Musk in Nevada.” In opposition, website, investmentwachblog.com ran the verbose and inflammatory headline: “The bastard Warren Buffet is beginning to show his true nature as he kills home solar in Nevada to protect his monopoly on electricity in the area.” Obviously, there are a lot of strong feelings on both sides of this debate.
Has Musk thrown in the towel? No, not really. Where Buffett defends the old energy model, deftly manipulating the government regulated monopoly system to his advantage, Musk plays the long game. He does not appear to be interested in engaging in a political battle over net metering in Nevada. It’s not that Musk is opposed to using lobbyists… he has an army of them working for SpaceX in the highly regulated aerospace industry. However, Musk is looking past net metering, to a future when affordable on-site energy storage will make net metering obsolete. Tesla is deploying the first of their Powerwall storage units starting in Australia, expanding to the E.U. and Musk’s home country of South Africa. For now though, battery storage is only in the realm of early adopters in the US. Storage can’t compare to the low, low price of coal-fired electricity in this country. That won’t be the case forever, and Musk knows that… and so does Warren Buffett.
The big question is, can Musk keep all of the balls in the air long enough for his techno-libertarian dream of a post-utility industry energy economy to come to fruition? One thing is for sure, Warren Buffett will be watching, preparing a political attack on battery storage, which he will fight against right up until the point that he gets into the battery business himself. Then, the battle of the billionaires might actually play out. On the other hand, by that time, Musk may have sold his battery business to move into the new frontier of orbital solar generation….