Some might say that Warren Buffett thinks that solar energy is definitely the next big growth area. Or is it a case of Buffett just being opportunistic?
Towards the end of last year, Buffett made his second big investment in solar energy. His MidAmerican Energy Holdings agreed to buy a 49 per cent stake in NRG Energy's $US1.8 billion Agua Caliente solar project in Arizona. The 290MW plant expects to complete the installation of the panels by 2014 and will be more than three times the size of the world's largest PV project currently operating, in Italy.
Does that mean solar is the future? That's problematic with Forbes telling us that the industry is heavily dependent on US government funding. The 1603 Treasury Program, which lets a 30% investment tax credit for renewable energy projects be taken as a cash grant, has been driving much of the growth.
And as Bloomberg points out, there is a time limit on that support. It says that the Buffett solar plant may be the last large solar farm to qualify for the US Treasury Department incentive program, which is set to expire this year. That will put it in a position where it can sell power at a higher price.
Buffett is being opportunistic. For the rest of the solar industry, there are still big risks.
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