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Isn't this something of a contrarian bet on solar technology, and energy technology more generally? If you anticipate technology improving or prices for energy
by klochner 14y ago
Isn't this something of a contrarian bet on solar technology, and energy technology more generally?
If you anticipate technology improving or prices for energy coming down, you wouldn't invest in today's technology.
- mmanfrin 14y agoPrices come down due to scaling of existing manufacturing -- which benefits the players who bet early to invest in those processes. You're mixing the cost to the consumer with the investment return.
- klochner 14y agoHe didn't invest in a solar cell manufacturer, he bought a couple of solar energy plants - mostly fixed cost, variable revenue. If energy prices come down, he will lose money.
- justincormack 14y agoI think all the production is pre-sold to the local power utility, possibly at fixed price. Its hard to get the details of these contracts though.
- fennecfoxen 14y agoThen you could look at this move as a hedge against rising energy prices, not entirely unlike his purchase of Burlington Northern Santa Fe. Energy prices are, of course, a hard game to predict, with above-average political risk, especially in the renewables arena...
- joeag 14y agoFixed revenue usually. Actually to be more precise, fixed price, but declining revenue because the production goes down as the panels (and inverters) degrade. Usually assumed to be .5% per year. The contracts with SCE are typically not based on market prices.
- klochner 14y agoThanks - that's helpful to know.
- fragsworth 14y agoPerhaps it's undervalued because of an overreaction to this?
- justincormack 14y ago1. Investment is a contrarian thing. Else you overpay. 2. If it makes sense now as a profitable, you go for it. He probably pre-sell a lot of the output at fixed prices, or you hedge or whatever. Technology always improves, but future money is worth less than money now.
- Alex3917 14y ago"If you anticipate technology improving or prices for energy coming down, you wouldn't invest in today's technology." Why not? The amount of profit he makes is already basically fixed up front, and more generally the amount of profit these investments generate will probably only decrease as the technology improves.