The solar world is all abuzz this morning with news that billionaire Warren Buffett is taking a big bet on solar energy with his decision to buy a $2 billion solar power plant in California, a 550-megawatt project called Topaz, and what it might mean for the embattled sector. (English article) What it says is that under current conditions, which include healthy government incentives, this kind of investment will yield solid enough returns to satisfy someone like Buffett, who known to carefully analyze all of his investments before plunking down his shareholders’ dollars. That decision should prove encouraging to other potential investors in and builders of solar energy farms, and theoretically could provide huge new demand for solar panel makers who would supply those projects. The main problem, of course, is that this particular project is in the United States, where last week a trade panel made a preliminary ruling that China unfairly subsidies its solar panel makers — a decision that could result in big punitive tariffs for Chinese firms like Suntech (NYSE: STP), Trina (NYSE: TSL) and Yingli (NYSE: YGE), which collectively supply over half of the world’s solar panels. (English article) That uncertainty was apparent in shareholder reaction to Buffett’s move, with Trina shares unchanged in Wednesday trade, while Yingli was up slightly and Suntech gained a healthy 6 percent. Beijing has lobbied strongly against the punitive tariffs, and considering the importance both Beijing and Washington place on developing alternate energy, I’m fairly confident they will find a solution that will avert a prolonged solar trade war. That said, this latest Buffett investment looks like good news all around for solar cell makers in the longer term, though they could suffer in the shorter term when the US issues punitive tariffs, which looks almost inevitable.
Bottom line: Warren Buffett’s new investment in solar energy bodes well for panel makers in the long term, but they will still suffer short-term when the US issues punitive tariffs in a trade dispute with Beijing.
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