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MidAmerican Energy to buy First Solar plant -source


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Dec 7 (Reuters) - MidAmerican Energy Holdings, part of Warren Buffett's Berkshire Hathaway, has agreed to buy First Solar's 550-megawatt Topaz Solar Farm power plant in California, a source familiar with the transaction said on Wednesday.

 

Financial details of the transaction were not available.

 

First Solar had hoped to secure a loan guarantee from the U.S. government to help finance construction of the plant, which will be one of the largest ever built, but the company was unable to meet a government deadline at the end of September.

 

Neither company was immediately available to comment.

 

The Topaz plant, which will be constructed by First Solar using its thin film photovoltaic panels, is expected to cost more that $2 billion to build, according to analysts.

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I have a question. When they say 550 MW, is that 550W at peak time or 550 MW average trough the year?

 

BeerBaron

 

AFAIK, it usually refers to capacity. So when all solar panels are converting sunlight at their peak, it's 550mw. Capacity utilisation for a solar farm is much lower than 100%, though (obviously it falls at night and on very cloudy days), but it also times pretty well with hot days, so it can be very useful to handle peak load in places with a lot of air conditioning.

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It produces at capacity the same amount of power as a single large nuke.  Of course a nuke produces power 24 hours per day.  1 nuke costs around 7 billion.  Optimistically, the PV plant will produce the equivalent of 1/2 one nuke, which would cost 3.75 B.  That of course does not include the legacy costs of nuclear which will be millions per year for generations.  It doesn't include fuel costs which are cheap for nuclear but not near as cheap as PV.  It does not include maintenace costs which are vastly higher for Nukes.  Solar operating cost must be much cheaper than nuclear as well.  You dont need nearly the hardware, safety, and security with solar, as with nuke.  The only issue is consistency.

 

All in all it suggests that solar is cheaper than Nuclear now, especially when one buys at the bottom of the market, as Buffett has.  I would say this investment indicates that new energy paradigm has formed where solar is becoming cheaper than other sources of energy.  This is especially interesting in the context where some jurisdictions have stopped direct solar subsidies.  I would be curious how coal would stack up against solar if one counted all the indirect subsidies involved in coal production.

 

I just find this whole investment intriguing.  Buffett is not known for sanctioning money losing ventures.

 

 

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I would say this investment indicates that new energy paradigm has formed where solar is becoming cheaper than other sources of energy.  This is especially interesting in the context where some jurisdictions have stopped direct solar subsidies.  I would be curious how coal would stack up against solar if one counted all the indirect subsidies involved in coal production.

 

http://www.zerohedge.com/contributed/another-sweet-deal-buffett-%E2%80%93-who-pays-you-do

 

I don't necessarily agree with the tone of the article but it looks like the project has some hefty subsidies that allow it to achieve a more than acceptable hurdle rate especially for a profitable tax paying business like Mid American

 

 

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Nwoodman, The existence of subsidies is a given.  I am curious how direct subsidies of the solar energy would compare to the indirect subsidies the coal industry recieves, or the direct subsidies the O&G industry recieves.

 

For example, the roads that coal trucks drive on; pollution related issues with coal.  Alot of the infrastructure built for coal usage was built by society over time. 

 

O&G is subsidized during the E&P phase.  Oil has been massively subsidized over time as well.  The entire infrastructure favours oil usage.

 

I am guessing over the next year ot two as expertise grows and prices decline that solar will quickly become competitive to all the others.  This assumes that all subsideis for all industries are properly accounted for, something that coal and oil lobbyists seldom do.

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Berkshire Buys $2 Billion Power Project as Buffett Wagers on Solar Energy (Emphasis added)

 

Why does the press incessantly refer to investment decisions as "bets" or "wagers"? It just seems to me to cheapen the intellect of the individual who is purported to be betting.

 

-Crip

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I think without the direct subsidies solar is still uncompetive.  The article seems to imply that without the direct subsidy, the project would not have been done and there will be very few future porjects.  In addition, solar and wind have a huge subsidy that O&G do not in the renewable standards that have been adpoted.  These standards are a tax on power users to subsidize solar and other renewables.  Unfortunately, as the Exxon forecast mentions, the energy needs of the developed world will be flat to down and the developing world will be up and the developed world are the ones who can afford the subsidies.  Without the subsidies, which many parts of the developed world is now questioning due its costs and thier high debt levels (Spain, US, etc.), solar may have to take step back and develop a competitive product before wide spread implementation.

 

Packer 

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I hope this isn't too far off topic but...

 

Who is the natural constituency that can come up with the cash to "influence" a politician to vote for all of these solar subsidies?

 

With petroleum, natural gas and coal it seems obvious but is there a "Big Clean Energy" lobby that can match the well known "Big Oil" and "Big Coal" lobbies?

 

Al Gore is the only one I can think of... ;)

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The constituency is the whole solar industry and the environmental lobby as they would not be produced at such a scale if not for the subsidies.  When you are dependent upon a subsidy for your profits you lobby hard.  I would not be surprised if they hold more sway over the politians than the O&G industry as more of their profits and support is dependent upon them.

 

Packer

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In addition, solar and wind have a huge subsidy that O&G do not...

 

Huh? O&G is a hugely subsidized (direct) industry.  And I'm not even including the indirect subsidies such as the cost of having to stabilize oil rich nations with our military and foreign aid to keep the price of oil low and stable.  The codification of LIFO was largely a result of O&G lobbying.  They got their own inventory accounting method for God's sake!  C'mon.  I hear this argument all the time on Fox News and it really, really annoys me.  O&G just might be the most subsidized industry in the history of modern America if you look at it objectively.

 

 

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When you are dependent upon a subsidy for your profits you lobby hard.

Packer

 

 

Obvious cost:  solar subsidy

Hidden cost:  coal/oil/gas carbon pollution

 

What matters to me is which cost is higher, and I don't know.  My intuition is that the carbon pollution will be more expensive in the long term.

 

 

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Jsarbitrage, Those "subsidies" didn't even occur to me but you are wholly correct.  I am sure if one looked at all the externalities, O&g is comparable to solar.  In fact I am certain of it.  If you added up the real cost of oil there would be no need to subsidize solar.  Even more interesting is that solar is in its infancy so costs will still come way down and efficiencies will rise.

 

 

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The constituency is the whole solar industry and the environmental lobby as they would not be produced at such a scale if not for the subsidies.  When you are dependent upon a subsidy for your profits you lobby hard.  I would not be surprised if they hold more sway over the politians than the O&G industry as more of their profits and support is dependent upon them.

 

Packer

 

I guess I'm thinking I am a congressman in D.C. taking two appointments.

 

One appointment is an Exxon executive who tells me my re-election campaign coffers will be in good shape if my vote on a certain subcommittee is beneficial.

 

Now I KNOW where the billions that back him up are coming from.

 

But with my meeting with the solar executive I am wondering where HIS billions are going to come from.

 

Greenpeace?

 

Hollywood?

 

Recycled subsidy money?

 

That is where my confusion comes from. I can't imagine going up against XOM if I am a FSLR executive...

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Even more interesting is that solar is in its infancy so costs will still come way down and efficiencies will rise.

 

Today it costs $6.50 per watt for installed residential rooftop solar (without a subsidy).

 

GE thinks the price will come down to $3 per watt by 2015 (without a subsidy).

 

http://www.cleanenergyauthority.com/solar-energy-news/ge-working-to-cut-installed-cost-of-rooftop-solar-to-4-a-watt-103111/

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If the cost solar was obviously so cheap without a subsidy it would win hands down.  But that is not the case.  You would have more than Buffett funding this and you would not have to artifically create demand by legislating % renewable for electricity.  Is the whole decline in the share price of the solar cell industry by the market a fluke caused by subsidy for O&G?  I find that a stretch.  It is more likely a bubble subsidized by the gov't like the internet/railroads. 

 

O&G profitabilty may be enhanced by these subsidies but the underlying economics is not negative like it is for solar today.  You may have an argument about pollution but the interesting point about the Exxon forecast is energy demand is going to stabalize in the developed world and with efficiency and conservation we should be able to reduce pollution in the developed world.  As for green house pollution, in my mind if it is a cause the current costs to remedy it way outweight the benefits.  This may change in the future though.  If solar does get cheaper in few years, then the money spent on subsidies and % renewable standards is an expensive way to get there.  How much did Spain gain by subsidizing solar when they are going broke?

 

The other intersting point is that these solar subsidies are primarily for the rich and highly educated who in my mind do not need another subsidy.  The O&G subsidy at least helps the "blue collar" workers as the extraction and transportation process requires more of thier labor over time.

 

Packer 

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Packer, If you added back in the all the costs associated with oil would it still be profitable, in and of itself?  That is the real question.  I would say absolutely no way.  It would be relatively simple to check.  Add up all the cash flows from the worlds oil majors and subtract say 30 %of the money spent by the militaries, across the world, 5% of world health care costs (from pollution), and tack on all subsidies by all governments for oil exploration.  There is no way that oil is actually profitable in this context.  It is what we do with the cheap oil in terms of manufacturing that is profitable. 

 

As far as XOM and others.  These are energy companies.  If the grass gets greener elsewhere you can be sure the majors will be there but quick.

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Check these video out it states the argument for the "negawatt revolution" where the energy infrastructure can be change through improving efficiency, the using solar and Wind. He outline the problem with our current energy system we should not be using Oil and Coal for power but for other uses.

 

 

 

This is the argument for the other side of the debate.

The other way is already profitable just by taking advantage of the low hanging fruits of efficiency.

 

 

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Packer, If you added back in the all the costs associated with oil would it still be profitable, in and of itself?  That is the real question.  I would say absolutely no way.  It would be relatively simple to check.  Add up all the cash flows from the worlds oil majors and subtract say 30 %of the money spent by the militaries, across the world, 5% of world health care costs (from pollution), and tack on all subsidies by all governments for oil exploration.  There is no way that oil is actually profitable in this context.  It is what we do with the cheap oil in terms of manufacturing that is profitable. 

 

As far as XOM and others.  These are energy companies.  If the grass gets greener elsewhere you can be sure the majors will be there but quick.

 

Then on top of that add in the costs of sequestration.

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You are making a big assumption that the military costs are for oil.  I would say that there is more than oil that we are spending are military $s for.  If that was the case, why can't/don't we get Europe/China/Japan and others dependent upon oil to share the cost with us?  They would surely pay if they thought it was worth the price.  I would say that the health care costs from pollution are primarly due to non-hdryocarbon pollution and the cost to clean up global warming are very high for very little beneift (see Cool It and other studies).  Just some thoughts.

 

Packer

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I would say that the health care costs from pollution are primarly due to non-hdryocarbon pollution and the cost to clean up global warming are very high for very little beneift (see Cool It and other studies).  Just some thoughts.

 

Packer

 

Does he address the rising acidity of the oceans? 

 

http://en.wikipedia.org/wiki/Ocean_acidification

 

Thomas Lovejoy, former chief biodiversity advisor to the World Bank, has suggested that "the acidity of the oceans will more than double in the next 40 years. This rate is 100 times faster than any changes in ocean acidity in the last 20 million years, making it unlikely that marine life can somehow adapt to the changes."[20]

 

 

 

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He hasn't but the changes referenced in the Wikipedia article appear small and I wonder how they got accurate measurements before the Industrial Age.  It appears on the surface to be extrapolation of data over a short period of measurable time 1990 to 2010 to a longer time period of time.  I think the bigger question raised is spending money on CO2 pollution the best way to improve life on earth for its inhabitants?  In his book he has many more cost effective alternatives to spend money on before global warming  in terms of measurable cost and benefit.  Hopefully, someone will come up with a cost effective solution to CO2 pollution and maybe it will be solar but paying bleeding edge prices for technology has historically been a poor investment unless you need for other purposes (ie defense intelligence's use of satellites, etc.)

 

Packer     

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I think the bigger question raised is spending money on CO2 pollution the best way to improve life on earth for its inhabitants? 

 

Yes, probably.  Because it's very difficult to know what the effect of global warming could be, and there's some chance that it could result in the earth becoming much less inhabitable, causing famines or other nasty things to happen.  It seems like a really bad idea to take the risk of a really bad outcome occurring, when it's not that expensive avoiding that the chance of that outcome happening.

 

e.g. suppose I give you a 6-sided die, and say, if I roll a 1 on this die, you and your family will all die in the next 24 hours.  If I roll any other number, you and your family will be fine.  Would you pay something to avoid having that die rolled?  I think I'd be willing to pay a fair amount rather than gamble that I hit the 83%.

 

That said, I think humanity is likely to take the gamble, because as in general, we care much more about short-term benefits to ourselves than long-term esoteric risks.

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