BHE & Solar

[Guest longinvestor]

https://www.bloomberg.com/news/articles/2016-12-15/world-energy-hits-a-turning-point-solar-that-s-cheaper-than-wind

 

This has been posted in the General Topics as well. Wanted to start a thread here given how big this is for BHE.

 

What does the falling Solar cost mean for BHE going forward? What's the strategy, the next acquisition etc.?

 

Here's what we know about their approach so far,

 

1) Expand into contiguous regions. Footprint is Western USA to Iowa.

2) Own transmission assets (Alberta, CA, NV, AZ, TX currently); Is there DC transmission in their plan?

http://www.lowtechmagazine.com/2016/04/slow-electricity-the-return-of-low-voltage-dc-power.html; How nice would it be for bright sunshine in NV / TX to light up Washington and Idaho? And Illinois?

3) 100% renewable goal (IA is rapidly getting there)

4) Embrace the ISO model for matching production to demand(real time, market based pricing); CaISO is work-in-progress. 

 

Interested in discussing this further. Would be great to hear from Utility insiders about what this means?

 

 

 

 

 

 

[Guest longinvestor]

 

CA is often producing way more solar power than they can consume. They are looking to ship that eastward, the hurdle is the legacy patchwork of Western state regulatory bodies. Some 38 of them. If it was all market based, the proper thing to do would be to shut down coal plants versus renewables, no? Incremental cost of solar is lower than coal, no?

 

Smells like BHE has a role to play. They are all east of CA! ;)

[Uccmal]

 

CA is often producing way more solar power than they can consume. They are looking to ship that eastward, the hurdle is the legacy patchwork of Western state regulatory bodies. Some 38 of them. If it was all market based, the proper thing to do would be to shut down coal plants versus renewables, no? Incremental cost of solar is lower than coal, no?

 

Smells like BHE has a role to play. They are all east of CA! ;)

 

I am not sure if this relates but central Canada and the northern US states (PQ, Ont., ohio, penn, NY etc.) have an interconnected grid.  We got to see this first hand when an overload in ohio plunged the whole region into a multiday summer blackout in 2005/2006. 

 

My son was getting an indoctrination into green energy at school.  I had to burst his bubble a bit.  Ontario allegedly uses no coal fired power anymore, but I explained to him that we buy power from Ohio, depending on needs, that is coal produced.  I also explained to him that we should be thinking of energy supply in a more holistic manner.  It makes more sense for northern climes to use gas for heating than trying to rely on solar.  We discussed this as we drove past a couple of snow covered solar panels. 

 

Those were interesting articles you posted. 

 

Since solar is already getting cheaper than any alternatives (in some places) the next piece of the puzzle is storage.  Explicitly, the price of storage.  This will be the big game changer.  Plants such as Tesla's Nev. operation will go a long way toward commoditizing storage.  Huge storage facilities would allow utilities, and individuals, to smooth their operations.  They then become less reliant on when the sun is out.  Since many of the places where solar can be produced are mostly vacant, space for storage is not a constraint.  Battery and transmission efficiency is not all that important if you can easily produce and store as mich as you need.  Only price. 

 

I am not sure what this means for BHE, except that they already have their foot in the door in alt. energy.  No one has ever accused Buffett of being stupid or short sighted.  Why would he continue to allow alt. energy developmemt for BHE in the face of short term losses from subsidy expiries? 

[Guest longinvestor]

 

CA is often producing way more solar power than they can consume. They are looking to ship that eastward, the hurdle is the legacy patchwork of Western state regulatory bodies. Some 38 of them. If it was all market based, the proper thing to do would be to shut down coal plants versus renewables, no? Incremental cost of solar is lower than coal, no?

 

Smells like BHE has a role to play. They are all east of CA! ;)

 

I am not sure if this relates but central Canada and the northern US states (PQ, Ont., ohio, penn, NY etc.) have an interconnected grid.  We got to see this first hand when an overload in ohio plunged the whole region into a multiday summer blackout in 2005/2006. 

 

My son was getting an indoctrination into green energy at school.  I had to burst his bubble a bit.  Ontario allegedly uses no coal fired power anymore, but I explained to him that we buy power from Ohio, depending on needs, that is coal produced.  I also explained to him that we should be thinking of energy supply in a more holistic manner.  It makes more sense for northern climes to use gas for heating than trying to rely on solar.  We discussed this as we drove past a couple of snow covered solar panels. 

 

Those were interesting articles you posted. 

 

Since solar is already getting cheaper than any alternatives (in some places) the next piece of the puzzle is storage.  Explicitly, the price of storage.  This will be the big game changer.  Plants such as Tesla's Nev. operation will go a long way toward commoditizing storage.  Huge storage facilities would allow utilities, and individuals, to smooth their operations.  They then become less reliant on when the sun is out.  Since many of the places where solar can be produced are mostly vacant, space for storage is not a constraint.  Battery and transmission efficiency is not all that important if you can easily produce and store as mich as you need.  Only price. 

 

I am not sure what this means for BHE, except that they already have their foot in the door in alt. energy.  No one has ever accused Buffett of being stupid or short sighted.  Why would he continue to allow alt. energy developmemt for BHE in the face of short term losses from subsidy expiries?

 

Battery and transmission efficiency is not all that important if you can easily produce and store as mich as you need.  Only price. 

 

I'm trying to learn on this subject by reading and am looking forward to learning from Electricity / Utility experts!

 

IMO, storage is an important piece of the puzzle but don't believe it is the next one. It may very well be for rooftop solar for a home to go off-the-grid. Some day every house in the USA will have a solar roof, if you believe Musk. I don't.  First he has to get the other 99% of Nevadans to adopt rooftop. Economics are stacked against that happening. Especially with solar cost falling. 

 

The distance that physics allow electricity to travel and within reasonable transmission losses is a key piece of the puzzle. I'm reading that 4300 miles is cost-feasible for DC transmission. That should do it for solar power to be transmitted from NV to NYC. And everything in between. ABB is installing a 1550 mile HVDC transmission line in Brazil. Would love to see BHE do a coast-to-coast transmission. Looks like they are on it.

 

There would be no need to store energy if it is all transmitted (exported) - supply matched with demand. Fossil fuel run power would then be limited to cover intermittency. But the USA is a very large place, if you throw in wind / geothermal etc., with assets spread out across the nation, what intermittency?

 

The reason for my original post is that the fact that solar is now cost-viable and as we are learning, enough is being produced to export it! Digging into this topic, it is not storage that is the hurdle but the collision of regional economic self-interests. For example WY and UT are vigorously opposing the pan-western sharing of the excess renewable power. WY is vested in coal assets. There is a brewing brawl in the western region, you can read more here http://www.caiso.com/informed/Pages/PapersProposals/Default.aspx. The core issue is the balkanization with 38 regional balancing authorities in the western states. This is a legacy issue rooted in the monopoly created by PUHCA. The rest of the country has 6!

 

BHE (I think) is stringing together the production and transmission assets in the western USA with the goal of eventually lighting up the whole country. It is not physics but the regulatory hurdles that they have to overcome! Capital is the constraint for much of the utility industry but not for BHE ;) The no-dividend -to-Berkshire policy works for BHE and is a key strategic advantage over the others in the field. Should free markets take full hold in the Utility world, BHE stands to win.