-
Want to remove ads? Register an account and login to see fewer ads, and become a Supporting Member to remove almost all ads.
- Status
TheTalkingMule
Distributed Energy Enthusiast
I refuse to believe Warren Buffett doesn't follow the European utility industry. If he nixes the building of that plant then he's admitting that solar is wildly cheaper and has no rationale for the strategy currently employed. If solar is allowed into the market without resistance, the whole thing goes south so that's simply not an option. Hence, here we are....
jhm
Well-Known Member
It just does not add up. Did Buffet buy NV Energy so cheap that a few years of profits before going bakrupt would yeild an adequate return? Or are his other businesses profiting off this deal such that Buffet is willing to sacrifice NV Energy for these other profits? Or maybe Berkshire Hathaway is just an elaborate Ponzi scheme so that the short term earnings simply create the illusion of a profitable portfolio. Adding a $900M asset allows NV Energy to boost annual profit by $90M. This can create the illusion of growth for a few years until the whole thing implodes. So is this all just a sham?
TheTalkingMule
Distributed Energy Enthusiast
Well they're all intertwined, right? I don't know how deep Warren is into extraction or other pieces of the methane world, but I wouldn't doubt there are plenty of concerns other than just the NV Energy profits. I think it's more likely he just didn't see this coming so fast and being so disruptive.
Due diligence to buy NV Energy was done in 2012, German utilities were still in denial and making a profit at that point, by the end of 2013 it was all over. That's how fast solar went from a future concern to a current nightmare. Warren bought at just the wrong time and likely didn't realize it until mid-2014. Today's desperation is simply the only option left other than giving in and making the best of a rapid downward spiral.
You're talking as if Warren cares about the waste and inefficiency of building another 900M methane plant. If NVE goes broke, who cares if there's another 900M on the books? I think he sees two options and is picking the one that is more profitable even if it means taking a whole bunch of illogical and potentially illegal actions.
Just logged into my new trading platform and was reading the linked stock analysis for SCTY. Capitalcube says SCTY is "overvalued", that Solar City isn't really earning much, is overextended, is spending a lot on getting new customers, is growing, is getting revenue, and isn't doing as much as others on reducing costs; is "betting big on the future" they said.
The way I see it, SCTY wants to single-handedly manufacture, sell, install, operate and maintain the future of energy, distributed across both rooftops and generation land (i.e., large installations). They're building factories, marketing big to land holders, financing the installations, and doing the operation of these panels that quickly fall in cost to put in new in the future for new installs. This is a real save-the-earth moment, so everything SCTY is doing helps save humanity from pollution and oil wars. However, financially speaking, it might be big gamble; that's where I agree with Capitalcube's analysis. But the gamble is this: in the future, their solar panel factories will still give them more market share, more sales, more revenue, and at the same time, at a certain point, the market will eventually saturate, then SCTY will sit there and just nurse whatever they've installed. My question is this: considering that factory building should be calculated for the eventual output of the factories and the cost basis that brings them in the future, what is their total cost of installation and maintenance (including sales, financing interest, and all that jazz), and their total revenue, after the factories are used up and all the solar panels from the factories are installed and have run their entire useful life and have stopped producing energy at a maintainable viable level?
I keep an open mind, especially since I don't have those numbers, analysis of those numbers, and comparisons to other competitors, in front of me. I do say good for Capitalcube for at least comparing SCTY to their competitors and stating that they did so; at least it's apples to apples (even though I'm the first to remind everyone not all apples are the same --- most the ones they used to sell in stores were awful).
As for the stock price ... overvalued, perhaps, but certainly a better buying price than where it was a month or so ago. I'm too new of an investor to get that feeling right right now.
The way I see it, SCTY wants to single-handedly manufacture, sell, install, operate and maintain the future of energy, distributed across both rooftops and generation land (i.e., large installations). They're building factories, marketing big to land holders, financing the installations, and doing the operation of these panels that quickly fall in cost to put in new in the future for new installs. This is a real save-the-earth moment, so everything SCTY is doing helps save humanity from pollution and oil wars. However, financially speaking, it might be big gamble; that's where I agree with Capitalcube's analysis. But the gamble is this: in the future, their solar panel factories will still give them more market share, more sales, more revenue, and at the same time, at a certain point, the market will eventually saturate, then SCTY will sit there and just nurse whatever they've installed. My question is this: considering that factory building should be calculated for the eventual output of the factories and the cost basis that brings them in the future, what is their total cost of installation and maintenance (including sales, financing interest, and all that jazz), and their total revenue, after the factories are used up and all the solar panels from the factories are installed and have run their entire useful life and have stopped producing energy at a maintainable viable level?
I keep an open mind, especially since I don't have those numbers, analysis of those numbers, and comparisons to other competitors, in front of me. I do say good for Capitalcube for at least comparing SCTY to their competitors and stating that they did so; at least it's apples to apples (even though I'm the first to remind everyone not all apples are the same --- most the ones they used to sell in stores were awful).
As for the stock price ... overvalued, perhaps, but certainly a better buying price than where it was a month or so ago. I'm too new of an investor to get that feeling right right now.
TheTalkingMule
Distributed Energy Enthusiast
Read the last 150 or so pages of this thread and you should have a good base for decision-making.
This is where PUC, PG&E, et al painting with a broad regulatory brush can really hurt things in my view. Let me explain:
Today in under-developed neighborhoods with insufficient solar panels to power the total net energy of the neighborhood (considering storage inefficiencies, of say, PowerWalls and various distant wind farms and such):
During the day, solar panels produce more energy than the home uses. The energy goes out on the wire to other homes in the neighborhood. This cost isn't zero, but it is not much more than the already-calculated cost of the grid being there in the first place. Today, there's a problem with Power Factor/kvar/power waveform/etc., but if I get my way, all generators (including solar, and especially solar inverters since they can do all sorts of things in software) will solve this. Let's hope. So today, there's a little bit of extra cost dealing with the power factor stuff, but not a lot. On dark days, the power company has to import energy from far away, so this standby power costs money. The grid for that standby costs money. That is similar to nighttime. Let's talk about nighttime. At night, the power from the power company has to come to the home, from whereever it gets it (batteries, windmills, hydroelectric plants, solar panels on the other side of the planet via big superconductors that circumnavigate the planet, geothermal, nuclear, coal, oil, natural gas, etc.. mostly natural gas), across the grid, to the home. Once again, all that costs money. But not some essoteric amount of money; a bunch of small little particular amounts of money derived from the portions of assets they're coming out of. So, once that gets to the customer, it gets used. Let's hypothetically say the home sends out and receives identical amount of energy at their meter, and gets a net metering bill of 0. The way I see it, the system has failed: the specific costs of the grid, of distant fossil fuel plants, etc., are not being disincentivized to the home who, after all, could install MORE solar panels and MORE batteries in their home. What if the home sends out more energy to the grid than it receives, but not much? Ok, they should pay the grid, the generators on the other side of the grid, etc.. How much? I say it should depend on the cost of the grid to THEM, such as how long the wires are. If PG&E strung up wires that take 1,000 miles to reach only 3 miles from generator to home, then the home should pay the 1,000 mile cost, see the big bill, and be incentivized to get more local generation. That's the right way to do it now. Back when PG&E was the generator, PG&E should be penalized for not keeping costs relatively fair across the civilization. But now, since PG&E isn't the generator, the actual costs should be exactly borne by everyone, not communalized, because communalized costs make the market fail. Of course, if the home gets their energy from the grid from the house 3 homes down that has a PowerWall bank double the size they need that they charged up from their double size panel farm, PG&E ought to charge the home for the distance of that energy, which isn't as much as the distance from the 1,000 mile or 10 mile or 50 mile lines (more typical is the 30 to 60 mile range around where I live since I live close to Moss Landing). What if the home ends up selling energy 24-7 to the grid, because of 10x needed solar panels for their own needs and a whole bank of batteries to time-shift that energy and a bunch of good power-factoring inverters? OK, now the rest of the neighborhood should pay PG&E for the grid to get half a mile from that generator home to their own homes for as much of their bills as they get from that generator home, which isn't much for the grid. But the energy should be paid to that home according to that home's cost of energy, too. That is a pretty high cost. I think they should be paid a lot. But: not by PG&E; by the other homes in the neighborhood. What if those homes don't want to pay that cost? Then they can pay the cost of the 40 mile away natural gas plants. If there's any sort of solar incentive, then that has to be somehow calculated. What is the incentive for? Environment? Calculate the environmental cost of the alternatives and add those costs to those alternatives, and alternatively subsidize the price of the cleaner alternatives directly according to each piece of energy produced by the panels. The grid is a cost that should be paid for according to the particular costs of the grid: distance, etc.. The meter costs money too. Even billing is a cost. Is PG&E, PUC, inverter manufacturers ready for this? Whatever the market is doing should push them toward this.
Now, let's look at a new case: a neighborhood that produces more energy than it uses, net, all year. So, during times when the neighborhood is producing more energy than it uses, the grid is sending energy long distance to other parts to sell that energy someplace. The cost of that grid should be paid for, according to how far it is being sent. But should it be paid for by the generators? No, I say: it should be paid for by the users of the energy, as I said above. Then, during times when the neighborhood is producing less energy than it uses, it is the buyer of grid energy, so the homes of the neighborhood should be paying their respective costs for each using the grid and the amount of energy from wherever they're getting the energy from.
Problems:
* What if a home doesn't accept the price of Joe's nighttime battery juice that he charged up on his solar panels he installed back when panels were expensive, which is just across the street from it, but prefers the natural gas from Moss Landing, about 50 miles away by wire? If he doesn't buy Joe's energy, and Joe doesn't get paid for his energy, then Joe shouldn't put his battery juice into the inverters into the grid, because no one bought it. During the day, same thing: if a home doesn't want to buy Joe's expensive solar panel energy, Joe just stores it in his batteries, or drops it on the floor if no one buys it and his batteries are "full" (at which point his cost goes down and someone undoubtedly will want to buy it at that point, unless Joe now lives 50 miles from his nearest neighbor and grid is an expensive component due to distance, but let's return to the neighborhood view). But what if Joe does find a buyer for his energy across town and the across the street neighbor is using 50 mile away natural gas, and both want to use the same grid in their neighborhood? Joe puts his energy for the cross-town buyer on the grid, and the neighbor orders the natural gas energy across the grid from Moss Landing or whereever, and then what actually happens is some of the natural gas grid energy goes to the cross town guy who paid for solar energy and the across the street neighbor is using solar energy who paid for natural gas energy. If the cross town guy is closer to the natural gas generator than Joe's neighbor, then this is a net win for both the grid operator and the environment, but if the cross town guy is further from everything than Joe's neighbor, then it kind of washes out since either way it's about a similar amount of energy. At some point, the cross town guy will stop trying to go out of his way to buy Joe's cleaner energy and just get cheaper more local to him cleaner energy, and a certain amount of balancing will happen as people trust in the system to work itself out more and more, and trades will happen according to cheapest energy.
I didn't really find a problem in my list of problems.
The only problem I perceive is if the costs are, as I said, communalized, generalized, and made non-specific, non-per-use, non-representative.
These are things that create value:
+ Booting up clean energy for efficiencies of scale. An equation of cost can be applied to that rather than the gross blunt hammer of regulation.
+ Figuring out the incremental actual costs of pollution and applying them appropriately to the various generators via tax or mandatory payments to those affected (I prefer the latter: get a NOAA map of where the pollution made landfall and give those people healthcare money directly from the polluting generators, for every particle of dust, according to each particle's effect on health, as close as possible without making accounting cost too much). These taxes and/or direct payments can either be against the polluting generators, or some sort of communal tax credit (problem: who pays the taxes???! that's crazy unfair) to those who get less and non-polluting forms of generation (remember: where is the cost of pollution paid for the pollution made making the panels? In my plan of paying downwind residents pollution costs, the solar factories already paid for the solar panel manufacturing pollution, and that question is solved, and no more taxes or tax credits are necessary, and the market is clean).
+ The energy from the solar panels.
+ The grid.
+ The equipment that makes everything work. (I think equipment should be charged for at the cost of the equipment like everything else, per-portion of use. If it was over-built, the per-portion cost would skyrocket, and users would divert around that equipment more and more, and less over-built equipment would be put in.)
+ Old polluting generation and junk. Yes, it still has (diminishing but existent) value.
+ Old cleaner generation. (Hetch Hetchy, nuclear, etc.). Each according to their cost!
So, what I'm describing above is a combination of relatively permanent free market principles (for trading energy and transmission at cost plus profit margin), and relatively permanent regulatory principles (for paying people for the exact cost of pollution, not essoteric penalties and fines like EPA and other local government agencies do today which are totally totally bogus and hurt everything in a market), and temporary diminishing market-starting economies-of-scale-causing tax credits (communal based) to spur innovation and manufacturing of clean energy (solar panels). That's the right way to do it.
Your final question prompted my answer. There are real costs, but your question even demonstrates a lot of the problems we currently face: your question itself, and the common answers to it, are usually blunt hammers to the heads of anybody with the correct answer, which I attempted to describe as best I can, which is a lot better than the way it is now, but not as good as it should be since I'm just an armchair engineer.
Last edited by a moderator:
doggusfluffy
Closed
Ok, thanks.
- - - Updated - - -
OMG! 11 degrees Fahrenheit right now where that article is published! And same forecast for the whole week. Now THAT's not a California PUC regulatory environment that I would want to deal with (see my rambling post above for why). If I were paid for my ramblings (say, in interpreting them into software for secure inverter energy trading platforms that work with grids and electricity generators and users, written in inbeded software and control systems), THEN I'd want to go the extra distance to figure out how to deal with that kind of heat demand in an energy marketplace that works well in civilization. As it is, here in California, that's less of an issue. It's pretty hard to use northern hemisphere close-to-polar solar panels when the sun is over the southern hemisphere to heat-pump geothermal nets of ground warmth into 16" exterior rigid foam board insulated homes if the homeowner is actually a homeless welfare recipient. It's almost as if the homeless person needs welfare to put them in a home with the energy paid for by the home welfare institution, such as a homeless shelter, or alternatively, the homeless person who gets welfare gets energy vouchers they can trade in for tickets to Florida. Sending welfare recipients to Florida is not a bad idea: lots of alligators. Either they'll kill the alligators, or the alligators will.
Nvbob
Roadster 1256
jhm
Well-Known Member
Ok, that make more sense. If Buffett did not anticipate back in 2012 how quickly solar would disrupt utilities, that is a fair point. Any of us can find ourselves in investment that go differently that we expected. The question is how we respond to such changes. The only way to respond to technological change is to catch up, and at a minimum to reduce exposure technologies most at risk to that disruption. So it is deeply problematic that, if NV Energy knows that a $900M investment would most likely destroy capital, it would commit that capital anyway. This very well could be a fraud against lenders and bond investors. NV Energy should give consideration to alternative investments they are otherwise giving up. Consider for a moment what NV Energy could do with $900M. For example, they could deploy battery storage across their service area to minimize their transmission and distribution cost while providing for peak capacity and optimizing the value of distributed solar provided through NEM. Such a project would reduce systemwide costs including whatever costs they perceive as stemming from NEM. Reducing systemwide costs would enable NV Energy to cut or hold down rates for all ratepayers. Now if this is not enough to avoid bankruptcy, so be it. At least for bond investors financing batteries, those assets are largely redeployable. Batteries can be sold into other markets, but a brand new gas peaker is very costly to move into another market that needs it. So NV Energy could have renewed the PPA for that existing peaker, and then moved to make that capacity unnecessary by integrating distributed solar with batteries. This would have put the risk of disruption on the independent power producers, while minimizing the total exposure of capital to a generator capacity glut. If Buffett is uncomfortable investing in technologies that he does not understand, then he really needs to get out the utility business now.
TheTalkingMule
Distributed Energy Enthusiast
This is what happens when you send engineers to do interviews, it leaves you open to the most rudimentary of attacks. Send Radford Small the SVP of Business Development and Investor Relations next time.
jhm
Well-Known Member
Bwa, just a few points.
Net Energy Metering is a mechanism that allow customers with surplus solar power to time shift the consumption of the energy they produce. That is, they generate the most power when power is in in high demand with high wholesale prices and high congestion in the distribution network. So solar customers first offset demand at peak demand and may feed in surplus. Then they receive back their energy contribution generally when demand is lower. This exchange is beneficial for keeping down costs for all ratepayers. It is a bit like an air traveler who travels on standby. They yeild their seat when demand is high and take a seat when demand is low.
Next we can see how undermining NEM is actually counterproductive for all ratepayers. If the utility attempt to force the solar owner to sell at a low price and buy at a substantially higher price, this induces solar owner to consume more other surplus power or to store it in a battery. Both actions contribute to increasing net demand when power is in high demand and decreasing net demand when power is in oversupply. This drives up costs for all ratepayers.
The final point I would make is that total capacity required is based on the maximum net demand throughout the year. In most areas this peak net demand occur on the hottest days in the summer, a time when solar production is also at its peak. Thus, distributed solar reduces the peak annual net demand.
It is pure utility propaganda that solar does not pay its fair share for the grid. Solar reduces the peak demand requirement for the grid both for peak generation capacity and peak transmission and distribution capacity. So solar allows demand for power to grow without having to expand capacity to support that growth. The problem for the utility's however is that demand for power is not growing. So they utilities, under street from declining revenue, are seeking to extract more revenue from solar owners. A more adaptive response for utilities would be to find ways to cut cost in the face of a revenue shortfall. Smart use of batteries is actually a very good way for utilities to derive more value from distributed solar while cutting network costs. So their are many ways utilities can put the best interest of ratepayers first and create value working with solar owners. However, when they go down the path of trying to put costs onto solar owners, it easily becomes counterproductive compounding costs for all ratepayers.
Net Energy Metering is a mechanism that allow customers with surplus solar power to time shift the consumption of the energy they produce. That is, they generate the most power when power is in in high demand with high wholesale prices and high congestion in the distribution network. So solar customers first offset demand at peak demand and may feed in surplus. Then they receive back their energy contribution generally when demand is lower. This exchange is beneficial for keeping down costs for all ratepayers. It is a bit like an air traveler who travels on standby. They yeild their seat when demand is high and take a seat when demand is low.
Next we can see how undermining NEM is actually counterproductive for all ratepayers. If the utility attempt to force the solar owner to sell at a low price and buy at a substantially higher price, this induces solar owner to consume more other surplus power or to store it in a battery. Both actions contribute to increasing net demand when power is in high demand and decreasing net demand when power is in oversupply. This drives up costs for all ratepayers.
The final point I would make is that total capacity required is based on the maximum net demand throughout the year. In most areas this peak net demand occur on the hottest days in the summer, a time when solar production is also at its peak. Thus, distributed solar reduces the peak annual net demand.
It is pure utility propaganda that solar does not pay its fair share for the grid. Solar reduces the peak demand requirement for the grid both for peak generation capacity and peak transmission and distribution capacity. So solar allows demand for power to grow without having to expand capacity to support that growth. The problem for the utility's however is that demand for power is not growing. So they utilities, under street from declining revenue, are seeking to extract more revenue from solar owners. A more adaptive response for utilities would be to find ways to cut cost in the face of a revenue shortfall. Smart use of batteries is actually a very good way for utilities to derive more value from distributed solar while cutting network costs. So their are many ways utilities can put the best interest of ratepayers first and create value working with solar owners. However, when they go down the path of trying to put costs onto solar owners, it easily becomes counterproductive compounding costs for all ratepayers.
McMuggets
Member
SCTY investor here, recently dove back in during the big fall recently because of Nevada after a nice trade in $55 range. The fall the other day to 30's was overdone IMHO. I thought I would just leave this article here to show people that solar and oil seem to be decoupling from each other:
Solar and Wind Just Did the Unthinkable - Bloomberg Business
Solar and Wind Just Did the Unthinkable - Bloomberg Business
Sigh....
- - - Updated - - -
900M methane plant also means jobs, taxes, and thus political favors. Hard to ignore a 900M single asset dropping in your lap.
- - - Updated - - -
I'm not sure how much he understands the engineering, but I'm sure he understands the economics of a 900M single asset, and how to leverage it. Witness his "donation" to Bank of America at the height of the recession. He was backing the company with his money, and his good name. And came out with a pretty sweet deal for himself/Berkshire.
jhm
Well-Known Member
Ok, so a $900M plant means pushing about $90M annually onto 700,000 ratepayers. This is a cost shift of about $11/month onto every ratepayer. It's so nice of NV Energy shift this cost just so they can get political favors.
What Buffett does not understand is the sort of technology that SolarCity, Tesla, Google and many others are bring to market that will render his gas peaker plant obsolete. If he failed to see the rapid advances rooftop solar has brought to Nevada in the last three years, he really is out of his league to anticipate what the next five years will bring. That's why he should get out of the utility business.
Now you have to remember that this is only my cynical interpretation. And yes, I will be helping to pay for an obsolete plant for a long time. And yes, PUC ("after much debate"), decided for NV energy and against solar. Even retroactively against solar. I wasn't really sure why Berkshire bought NV Energy when they did, but I just knew I had a bad feeling about it. When smart people buy energy companies they will try to do "smart" things with it (for themselves). Wasn't Enron run by really smart people? Sigh...
Maybe more appropriately, not smart people, smart investors...
Last edited:
jhm
Well-Known Member
Ah, sorry, I did not pick up on the sarcasm.
Yeah, Enron used to strut about as if they were the smartest guys in the room. It was just a rouse. In reality they were fraudulent market manipulators who could only "win" by cheating and could only report an "income" by engineering accounting deceptions with the help of Arthur Anderson. They were so smart that they annihilated both Enron and Anderson with fabrications.
NV Energy is not that kind of smart. They just think they are entitled to make a profit on the backs of captive ratepayers. And they believe the government will always protect them from competition. That's pretty dumb. Nevada voters are too smart to put up with that.
Last edited:
doggusfluffy
Closed
- Status
Similar threads
