Buffett buys into solar for $2bn
Has the starting gun for major investment in the green sector just been fired?
Yes and no. Warren Buffett isn't suddenly going 'green' out of concern for the environment, or because he feels solar power is a new utility silver bullet. Attached to his decision are lucrative tax breaks. US tax credits for wind power will expire in 2012 while solar tax credits will continue to run well into 2015.
Long on CO2
Additionally, this is likely to be a power plant that generates decent amounts of cash-flow, probably for many decades into the future. Whether this power plant is solar powered or not, Buffett likes clear, regular cash-flow for shareholders, as well as companies whose operational model is a cinge to understand (most people need power). Borrow wisely (especially when rates are low) and reap the benefits. Utility companies are a good fit.
Utilize utilitiesAnd with tax-breaks sprinkled on top, it makes Topaz that bit more shiny - especially when Topaz owner, First Solar, has endured a sharp price in its share price. Keep it simple, then, and don't get too close to the fancier side of the utility sector (cross-selling, trading, transporting, etc).
Buffett is also likely to be on the right side of any future change in pollution/CO2 emissions regulations while environmentalists continue to gun for coal and nuclear.
Green energy, in the end, is just another utility, but one whose timing looks increasingly relevant. Please could Buffett tell David Cameron. Cameron recently slashed the popular solar 'Feed-in Tarriff' subsidy, causing one solar panel operator, Carillion, to give notice to thousands of its 4,500 staff, making 'green' investment in the UK that bit harder and risky.