How the ongoing trend of customers installing rooftop solar panels in their house affect would Berkshire’s utility business
Here’s a question for Charlie on a subject which I consider him an expert on, and I hope I don’t prove my ignorance by asking the question.
The question is about capital spending plans at your regulated utilities and a potential long- term risk to realizing returns on current and future capacity.
With the ongoing reduction in the cost of solar panels causing more utility customers to, at least, consider generating electricity from their own rooftops, some worry about a vicious circle of customers reducing their dependence on the grid, forcing utilities to raise rates, to maintain returns on the remaining customers who, in turn, are then incentivized to reduce their dependence on the grid, or even exit it.
I understand the risks are greatest to regulated utilities in sunny places like Arizona and California, but given how much solar power is generated in cloudy places like Germany, are regulated utilities in Iowa, the Pacific Northwest, the Rocky Mountains, and the UK really immune?
Well, my answer would be I don’t think anybody really knows exactly how this is going to play out.
I confidently predict there will be more solar generation in deserts than there is going to be on rooftops in cloudy places… and there’s a good reason for that.
And Berkshire’s big operations, as you… in solar… are in what amounts to desert.
And we get very favorable terms and incentives, and I think Berkshire’s going to do fine in solar.
I am skeptical, myself, about trying to run the utilities of the world from a bunch of little, tiny rooftops. I suspect there’s some twaddle in that… and some fancy salesmanship in that arena.
And of course, the people that did it early were foolish because the price came down rapidly thereafter. So put me down as not totally charmed by rooftops in cloudy areas.
We have Greg Abel here from MidAmerican Energy. If we can direct a spotlight down there, Greg can probably speak to this with a lot more intelligence than Charlie and I. I noticed that…
I noticed that… I noticed that Jonathan left me out of the thing entirely when he wanted to get an intelligent answer, but I’m not taking any offense at that. Greg?
Sure. Happy to touch on it.
Jonathan, I would touch on the fact you’re absolutely right. We’re seeing, when it comes to rooftop solar, a decline in the total cost of installing them.
At the same time, when you compare it to a regional tariff, or a specific tariff in most of those states, the utility is extremely still competitive.
And I would highlight that as you see more rooftops coming on, you’ll see a restructuring of the tariffs, but at the same time, there’s a lot of protection for the utilities.
So in the regions we’re supplying power, we will see some introduction of solar, but we’re absolutely comfortable our systems for the long-term are valuable both to our customers and to our shareholders… Berkshire shareholders… for the long term. Thanks.
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