MidAmerican upgrading wind turbines early

[Cardboard]

Finally some reaction!!!  ;D

 

I have been telling people on here for months that we have a ton of hypocrites on this board. They are rich parasites of the deformed capitalist system: benefit immensely from the capitalist system via their investments/better jobs due to more opportunities, then push for large social programs so they don't have to pay.

 

Then they call themselves better than everyone else because they care about their fellow human beings... And let's call the hypocrisy on that too since the real reason is to keep the poor fed and quiet so that barbarians don't come too close to the gate!

 

They then try to lecture us on how to measure happiness, how Denmark is so great, etc. Just remember that nothing is free. Someone has to pay for it.

 

Jeffmori7 calls himself a scientist. Not sure in what specialty or if he even delivers anything of value to society (seems to spend a lot of his time on this board on company time?). But, maybe he would understand the First Law of Thermodynamics? Guess what? It is the same in economics. Must be some redneck demagoguery?  :o

 

So you can pride yourself as a self declared warrior on climate change but, realize that your actions of blocking everything related to fossil fuels, such as the development of natural gas, is contributing to more CO2 generation as nations importing energy are forced to burn coal and to develop more polluting energy sources. Your impatience in this transition is aggravating worldwide CO2 generation which I think is the relevant issue and not Quebec CO2 generation.

 

Same goes for your statements of not developing more hydro in Quebec for export purposes or even energy self sustaining purposes as yes, Quebec burns a ton of natural gas coming all the way from Alberta. Hydro Quebec has been asleep at the wheel. They feast on 60's and 70's projects with little to show for going forward. They should be world leaders in developing ultra high voltage transmission lines while we see no better than average and at extracting every ounce of that hydro. As a so called scientist, you surely must understand that a continually flowing fluid such as water contains a lot more kinetic energy than a highly variable mass of moving air?

 

Then we have the government selling the hydro electricity for below market rates (yes you need to look at what it sells for when you put foot outside your fief) which creates a dependency and a lack of effort by Quebecers for energy efficiency. In the end, all of this contributes to more CO2 generation globally and not less.

 

Cardboard

 

 

[RichardGibbons]

You know, Cardboard really seems to love turning investment threads into political threads.

 

I've been respecting Sanjeev's decision to restrict the political discussion to the political boards, but if the group believes that these threads should be politicized, I'll start throwing my hat in.  After all, embarrassing, foaming-at-the-mouth right-wing rants like Cardboard's previous post really do encourage responses. Or at least some mockery.

[woodstove]

I appreciate the excellent (non-rant) info provided in this thread.  The original info about wind turbine upgrades.  The paper link re wind turbine payback.  The EROEI article, and also the energy storage ESOEI ratio.  On the latter, very impressive return for compressed air, may solve problems of intermittency.  Amazed at low paybacks for solar arrays, but I hope that improves, as I have done a tiny bit of work on some aspects of the technology.  And Jeffmori7's info about Hydro Quebec was great. 

 

It's always seemed to me that trying to get others to agree is useless in public.  Frank exchange of views is what diplomats call it.  Understanding is the purpose.

[Cigarbutt]

The underlying topic is capex of a BH sub in a form of renewable energy and in a regulated market.

Business aspect and political aspect.

 

-Mr. Buffett has made significant investments in this field and, presumably, will continue to do so, based on the fact that the energy market is large, regulated and will continue to provide relatively high and consistent returns.

 

-He has stated that his investment decisions are, at least partly, based on the fact that "society" has "decided" to foot the bill concerning certain environment-related liabilities. (2016 annual report and others)

 

So one may or may not agree with the above for political or ideological reasons and it is important to look at the whole picture but it must be possible sometimes, for healthy discussion purposes, to separate the business and political debate.

 

Access to relatively low cost energy (so far mostly due to fossil fuels) has gone hand in hand with a massive and unprecedented global improvement in standards of living. But now, [glow=red,2,300]we[/glow] face a transition that may be (?) needed because of environmental concerns and that will eventually be inevitable because of natural depletion. In order to get through the transition, [glow=red,2,300]we[/glow] have to come to a satisfactory understanding about how this should be done and this will necessitate competitive collaboration at the business and political level. But, as far as this post is concerned, I am (and maybe others are) trying to decide if BH will continue to be a rewarding investment and understanding of the business underpinnings of its energy operations is an important component. I want to learn.

 

I really admire and respect Mr. Buffett but that does not mean tough questions cannot be asked. There is a grey zone between building strong and efficient operators that will "optimize" competition and drive out "sloppy" operators on the one hand and, on the other hand, the possibility of regulatory capture through potentially unfair practices versus already existing competitors and through potentially unfair tactics versus potential new entrants (ie residential solar). Maybe the best place for that discussion would be in the thread recently initiated by LC.

 

 

 

Concerning wind energy, my opinion is that, very long term, it is unlikely to be a winner because others forms of energy will continue to benefit from persistently decreasing costs whereas wind is likely to reach some kind of relative plateau. Whatever opinion or who you vote for, the reality is that wind energy is likely here to stay for at least some time.

 

So, it will be interesting to see if and how BH continues to invest in wind energy. I found a link (see below) that maybe was covered on this Board before and which describes the various operations in some detail that is helping to understand the business dynamics and that, maybe, can contribute to a constructive discussion.

 

https://www.berkshirehathawayenergyco.com/assets/pdf/2017-fiic-presentation.pdf

 

For those interested, here's a reasonable link:

http://mragheb.com/NPRE%20475%20Wind%20Power%20Systems/Economics%20of%20Wind%20Energy.pdf

 

There will be many challenges and conclusions are based on very long term assumptions.

There is clear possibility that some costs are vastly underestimated (transmission, storage).

The price for "collaboration" on the "smart" grid may be particularly high in some markets.

Food for thought.

 

[SharperDingaan]

This thread is about wind turbines - lets keep it that way.

 

Like it or not wind turbines are here to stay, and they will be subsidized until economies of scale get the per unit cost down to where a subsidy is no longer required. Local governments make the decision, citizens who object are free to move elsewhere.

 

The biggest producer of wind turbines in the world is China, & they replace coal generation. That China chose wind over nukes, and is reaping most of the benefit of the global economies of scale - is conveniently ignored.

 

To get the lowest cost/ton from fossil fuel, requires large scale mining; what gets mined depends on the realizable energy output to pollution mix. Most coal sucks for burning purposes, & comes in far down the list; tar sands also suck  - but at least perform a lot better because we can get other valuable products out of the bitumen stream. We measure energy output/pollution mix with price.

 

Coal is a dying business, around the world. It's a handful of very large producers selling commodity product, and a lot of others struggling to get by. And many of those struggling being kept alive with subsidies, to preserve a way of life. As it is human nature to try and preserve what you have - protesters will not be going away. However, their kids will be encouraged to go to other industries.

 

Our own view is that while US industry has been a powerhouse, the key words are HAS BEEN.

The innovation, quality, and creativeness of the capital stock has been allowed to run down to the point where much of it is no longer competitive in today's reality. We no longer live in a world where everything is the same (therefore mass produce), and both good enough (value/application) and sometime (waiting lists) were acceptable criteria. CHANGE.

 

SD

 

 

 

 

 

 

[Cigarbutt]

Interesting to note that the introduction of your post did not lead where it said it would.

It seems that the message slid into how the "one belt one road initiative" may be taking pre-emption on the "gunboat diplomacy".

Would humbly submit that the topic may need to be discussed and is an issue where I come to a very different conclusion.

Energy and Politics are indeed intertwined.

Back to wind turbines.

 

[John Hjorth]

Energy.gov: Renewable Electricity Production Tax Credit (PTC).

 

U.S Income Tax Credits for Berkshire the last three full years, ref. Berkshire Annual report, p. 65:

 

2016: USD 518 M

2015: USD 461 M

2014: USD 333 M

 

Those figures from the Berkshire 2016 Annual Report may include other U.S. Tax Credits than the PTC. [i don't know.]

[SharperDingaan]

Interesting to note that the introduction of your post did not lead where it said it would.

It seems that the message slid into how the "one belt one road initiative" may be taking pre-emption on the "gunboat diplomacy".

Would humbly submit that the topic may need to be discussed and is an issue where I come to a very different conclusion.

Energy and Politics are indeed intertwined.

Back to wind turbines.

 

We just took a holistic view.

1) Wind turbines are here. Accept it or move on.

2) Wind beats nukes. Disputed/not popular in NA - but the proven reality in many other parts of the world.

3) Price includes pollution. Wind on top, coal on the bottom - how much is a clean environment worth to your society.

4) NA view is really resistance to change. Not #1 anymore, fighting to maintain status quo, and not adapting to change.

 

The 'change' thing is not unique to the US or Canada; we see it in Europe and the UK 'Brexit' as well. We also see it showing up repeatedly in political discussion spilling over into other spheres. There is nothing wrong in that - but recognize that it both creates and destroys opportunities.

 

Don't try to fight Shiva (Hindu god) - just position yourself so as to benefit when she gets more energetic.

As Taleb would say - be 'anti-fragile'

 

SD

 

 

[gfp]

Energy.gov: Renewable Electricity Production Tax Credit (PTC).

 

U.S Income Tax Credits for Berkshire the last three full years, ref. Berkshire Annual report, p. 65:

 

2016: USD 518 M

2015: USD 461 M

2014: USD 333 M

 

Those figures from the Berkshire 2016 Annual Report may include other U.S. Tax Credits than the PTC. [i don't know.]

 

 

The Production Tax credits for those years were:

2016: USD 398 million

2015: USD 291 m

2014: USD 258 m

 

2.3 cents per kilowatt hour for a ten year period.

 

source is BHE's own 10K.

 

There are also Investment tax credits, which are utilized on projects not claiming the production tax credits.  Investment tax credits are deferred and amortized over the estimated useful life of the asset.  This is one of the reasons (along with huge bonus depreciation and other routine depreciation and amortization) that BHE, which reports about $2.5 billion in annual net income is actually able to bring in over $6 Billion in cash and make almost $6 Billion in new investments each year without cash inflows from Berkshire and the minority owners (Walter Scott & Greg Abel).

 

Here are some of the numbers concerning BHE's investments in these areas.  These are large investments and the planned large wind investments extend at least to 2019 -->

 

The Company's historical and forecast capital expenditures consisted mainly of the following:

•

Wind generation includes the following:

◦

Construction of wind-powered generating facilities at MidAmerican Energy totaling $943 million for 2016, $931 million for 2015 and $767 million for 2014. MidAmerican Energy placed in-service 600 MW (nominal ratings) during 2016, 608 MW (nominal ratings) during 2015 and 511 MW (nominal ratings) during 2014. In August 2016, the IUB issued an order approving ratemaking principles related to MidAmerican Energy's construction of up to 2,000 MW (nominal ratings) of additional wind-powered generating facilities expected to be placed in-service in 2017 through 2019. MidAmerican Energy expects to spend $826 million in 2017, $853 million in 2018 and $1.4 billion in 2019 for these additional wind-powered generating facilities. The ratemaking principles establish a cost cap of $3.6 billion, including AFUDC, and a fixed rate of return on equity of 11.0% over the proposed 40-year useful lives of those facilities in any future Iowa rate proceeding. The cost cap ensures that as long as total costs are below the cap, the investment will be deemed prudent in any future Iowa rate proceeding. Additionally, the ratemaking principles modify the revenue sharing mechanism currently in effect. The revised sharing mechanism will be effective in 2018 and will be triggered each year by actual equity returns if they are above the weighted average return on equity for MidAmerican Energy calculated annually. Pursuant to the change in revenue sharing, MidAmerican Energy will share 100% of the revenue in excess of this trigger with customers. Such revenue sharing will reduce coal and nuclear generation rate base, which is intended to mitigate future base rate increases. MidAmerican Energy expects all of these wind-powered generating facilities to qualify for 100% of federal production tax credits available.

◦

Construction of wind-powered generating facilities at BHE Renewables totaling $456 million for 2016, $246 million for 2015, and $286 million for 2014. The Marshall Wind Project with a total capacity of 72 MW achieved commercial operation in April 2016 and the Grande Prairie Wind Project with a total capacity of 400 MW achieved commercial operation in November 2016. The Jumbo Road Project with a total capacity of 300 MW achieved commercial operation in April 2015.

◦

Equipment purchases totaling $324 million in 2016 for the purposes of repowering certain existing wind-powered generating facilities at PacifiCorp and MidAmerican Energy and the construction of new wind-powered generating facilities at PacifiCorp and BHE Renewables. The repowering projects entail the replacement of significant components of older turbines. Planned spending for the repowered and new wind-powered generating facilities totals $323 million in 2017, $313 million in 2018 and $740 million in 2019. The energy production from the repowered and the new facilities is expected to qualify for 100% of the federal renewable electricity production tax credits available for ten years once the equipment is placed in-service.

•

Solar generation includes the following:

◦

BHE Solar acquired the 110-MW Alamo 6 project located in Texas in January 2017 for approximately $385 million.

◦

BHE Solar spent $56 million in 2016 and $3 million in 2015 for construction of the community solar gardens in Minnesota and expects to spend an additional $153 million in 2017 and $6 million in 2018. The completed project will be comprised of 28 locations with a nominal facilities capacity of 96 MW.

◦

Construction of the Solar Star Projects totaling $10 million for 2016, $689 million for 2015 and $1.1 billion for 2014. Both projects declared July 1, 2015 as the commercial operation date in accordance with the power purchase agreements. Final completion under the engineering, procurement and construction agreements occurred November 30, 2015 and project completion was achieved under the financing documents on December 15, 2015.

◦

Construction of the Topaz Project totaling $49 million for 2015 and $814 million for 2014. Final completion under the engineering, procurement and construction agreement occurred February 28, 2015, and project completion was achieved under the financing documents on March 30, 2015.

[John Hjorth]

Thanks for drilling this fact down, globalfinancepartners.