Warren on Wind power wouldn’t make sense without subsidies

Описание: WARREN BUFFETT: OK. Station 4.

AUDIENCE MEMBER: Good morning, Mr. Buffett, Mr. Munger. My name is Verne Fishenberry (PH), and I ask this question on behalf of a group of investors that made the trip up from Overland Park, Kansas.

MidAmerican has a large investment in wind and solar power. What effect do subsidies and incentives have on that business, and could you share your thoughts on a sustainable energy policy?

I gather we should be conserving our natural gas. What is the most appropriate use of that resource?

WARREN BUFFETT: Yeah. Well, I believe the — on wind — and we’re much bigger in wind than solar, although we’ve entered solar in the last six months or so. We’ve got two solar projects that we own about a half of each one of them.

But we’ve been doing wind for quite a while, and I think the subsidy is 2.2 cents for ten years per kilowatt hour, and that’s a federal subsidy.

And there’s no question that that makes wind projects — in areas where the wind blows fairly often — that makes wind projects work, whereas they wouldn’t work without that subsidy. The math just wouldn’t work out.

So the government, by putting in that 2.2 cents subsidy, has encouraged a lot of wind development. And I think if there had been none, my guess is there would have been no wind development. I don’t think any of our projects would make sense without that subsidy.

In the case of solar, the projects we have have got a commitment from Pacific Gas and Electric to a very long-term purchase commitment.

How that ties in with their particular obligations or anything, I mean, there may be some subsidy involved in why they wish to buy it at the price they do from us. I’m sure there is; I don’t know the specifics of it.

But neither one of those projects, neither solar nor wind — if Greg Abel is here and wants to go over to a microphone and correct me on this, it would be fine — but I don’t think any solar or wind would be working without subsidy.

And, of course, you can’t count on wind for your base load. I mean, it works and it’s clean, but if the wind isn’t blowing, you know, it does not mean that everybody wants to have their lights off.

So it’s a supplementary type of generation, but it can’t be part of your base generation.

Charlie, do you have any thoughts on that? And Greg, do we have Greg up here? Go ahead, Charlie.

CHARLIE MUNGER: Well, I think, of course, it — eventually we’re going to have to take a lot of power from these renewable sources and, of course, we’re going to have to help the process along with subsidies.

You know, I think it’s very wise that that’s what the various governments are doing.

WARREN BUFFETT: Yeah, you could say the future is subsidizing, you know, oil and natural gas now, in a sense.

Is Greg up there?

CHARLIE MUNGER: He needs a mic.

WARREN BUFFETT: He needs a mic.

GREG ABEL: Zone 7. Yeah.

WARREN BUFFETT: Yeah.

GREG ABEL: Just to touch on the — both the wind projects and the solar, Warren, you were exactly right. Obviously the subsidy associated with the wind has allowed us to build, now, 3,000 megawatts across our two utilities.