Buffett’s $2 Billion Solar Bet Receives ‘Attractive’ Power Rates
Warren Buffett’s Berkshire Hathaway Inc., which is buying a $2 billion solar project in California, may have picked the right time to invest in the industry.
The 550-megawatt Topaz project will qualify for a federal incentive because construction began last month, and it will sell electricity under a long-term contract that was completed before prices for solar panels fell 44 percent in the last year. Berkshire’s MidAmerican Energy Holdings utility unit and First Solar Inc., the project developer, announced the deal yesterday.
Topaz, which will use First Solar panels, may be the last large solar farm to qualify for the U.S. Treasury Department incentive program, which is set to expire this year. It will likely sell power at a higher price than projects that are seeking contracts from utilities now, said Paul Clegg, an analyst at Mizuho Securities USA in New York.
“The smart guys are getting into these early projects because they have very attractive power-purchase agreements,” Clegg said in an interview. “Financing won’t be as easy at the rates being signed for the latest ones.”
First Solar projects that are currently being built will sell power for 14 cents to 16 cents a kilowatt-hour, said Alan Bernheimer, a spokesman for the Tempe, Arizona-based company. By 2014, he expects its solar farms to sell power at 10 cents to 12 cents a kilowatt-hour, he said.