Warren Buffett Downplays His Battle With Elon Musk in Nevada Over Solar Power
The world's third-richest man says "We don't have a problem with net meters." Nevada citizens disagree.
Elon Musk has his fingers in many pies. One of those pies just happens to be Warren Buffett’s pie. These two billionaire gunslingers are duking it out in the Wild West — Nevada, to be precise — over the solar power market. Buffett, in a three-hour interview with CNBC that aired on Monday, spoke about their quarrels.
After PayPal, about a decade ago, Musk started a company called SolarCity with two of his cousins. SolarCity, which made its way into Nevada in 2014, initially made it very easy for homeowners to transition to solar power. SolarCity would lease and install solar panels, at no up-front cost, to homeowners in Nevada who wished to make the jump. Soon, 17,000 people had made the investment. And all 17,000 anticipated significant and expeditious returns on that investment.
Solar power is subsidized. Homeowners who harness solar energy get discounts and tax incentives. “The reason the society believes in subsidizing solar and wind is because of damages to society that may result over decades from carbon emissions,” Buffett explained to CNBC. “Society has an interest in it, and, subsidized by the Federal Government, society is — in effect — paying for it.” These homeowners also get to participate in “net metering,” an incentive program through which solar-power-generating homes can sell their excess energy back to the power grid. Paired with SolarCity’s sign-on incentives, the decision became a no-brainer.
But this excess energy, due to incentivizing regulations, cost the grid more than electricity proper costs. And therein, Buffett claims, lies the problem. Buffett is the CEO of Berkshire Hathaway. Berkshire Hathaway owns NV Energy, the top utility company in Nevada. NV Energy sells electricity (and also has its own solar program). In Buffett’s eyes, then, this subsidization was unfair to electricity consumers who did not have solar, who, aware or not, were paying an artificially inflated price for their electricity. No doubt it seemed more unfair to Buffett himself, whose company was aware that they were paying artificially inflated prices when buying back excess power from the grid.
So Nevada turned the tables on Musk, SolarCity, and these 17,000 new customers: In late December, Nevada’s Public Utilities Commission played the grinch when it decided to overcharge solar-powered homes. These homeowners’ long-term investment plans evaporated overnight.
Buffett, in an interview with CNBC on Monday, responded to viewer questions about this clash (a clash that Bloomberg Business intensified with a cover story): two viewers asked why Buffett’s companies are preventing and deterring net metering in Nevada. Buffett responded:
“We don’t have a problem with net meters, and we’re the leading in renewables in the country among regulated utilities. The [unintelligible] we do not want our million-plus customers that do not have solar to be buying solar at 10 and a half cents when we can turn it out for them at 4 and a half cents or buy it at 4 and a half cents. So, we do not want the non-solar customers, of whom there are over a million, to be subsidizing the 17,000 solar customers. Now, solar customers are subsidized through the Federal Government — as we are, with our wind and solar operations ourselves. …
“In Nevada, [Musk’s company, SolarCity] had an arrangement for a very limited number of people — and the public utility commission decides this — they had an arrangement where the utility had to pay way above market for solar produced by these 17,000 homes, and that —“
The interviewer interrupted to clarify: “For instance, if I have solar electricity that I’m producing, that’s more than I need, I can sell it back to you…”
“At 10 and a half cents. When we could buy someplace else for 4 and a half cents, or make it ourselves for 4 and a half cents. And that costs the million-plus customers a price. And the public utility commission — there’s three utility commissioners — the public utility commission decided that was unfair to the million-plus people who didn’t have solar, and they said ‘It’s fine to sell it back, but sell it back at market price.’”
But the issue may be greater than Buffett lets on. The Public Utilities Commission’s decision forced SolarCity to pack up, terminate over 550 jobs, and move out. And the 17,000 customers, painted villains by Buffett and NV Energy, are — for now — left out to dry.