SolarCity Corporation to Leave Nevada as Law Favors Warren Buffett’s NV Energy
In the latest installment of the clash of the billionaires, Elon Musk loses a major battle to Warren Buffett, as the former’s SolarCity Corporation (NASDAQ:SCTY) has announced that it will cease all operations in the state of Nevada. SCTY stock isn’t looking as healthy after this loss.
SolarCity will have to contend with the fact that Nevada’s Public Utilities Commission (PUC) decided that all household-based solar energy producers no longer have access to credit lines and financing. SolarCity stock appears to have managed the blow for the time being, as it continues to trade around $51.00, which is much closer to its yearly high of $63.79 than its low of $24.07.
Elon Musk is SolarCity’s chairman and major shareholder, while a unit of Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.A) bought NV Energy in 2013. NV Energy will be the main beneficiary of the rule that penalizes generating electricity from household photovoltaic panels or small commercial installations.
In other words, Nevada has decided to follow Warren Buffett’s suggestion that individual solar energy producers be subject to a “sunshine tax.” (Source: “Early Christmas Only a Delusion for SolarCity Investors,” Bidnessetc web site, December 23, 2015.)
Should other states adopt the solar tax, such as Arizona already has, or take another similar approach to individual solar energy producers, this would reduce the incentive for consumers to switch to photovoltaic power—a definite negative for SCTY stock.
In this case, NV Energy should emerge as the main beneficiary of the PUC’s decision, which, it should be noted, is not against solar power. Rather, the PUC’s ruling penalizes generating electricity from household photovoltaic panels or small commercial installations in favor of utilities managing its generation and supply.
According to The Los Angeles Times, “in a unanimous vote Tuesday, the PUC of Nevada has increased the fixed charge for owners of solar installations, both residential and commercial small scale, all the while reducing the compensation for electricity generated and sent to the grid.” (Source: “SolarCity to leave Nevada after PUC cuts rooftop solar benefits,” The Los Angeles Times, December 23, 2015.)
Nevada PUC Casts Shadow Over Retail Solar Energy
SCTY stock, therefore, may have a bit of shade to hamper its performance in 2016. SolarCity is the largest solar energy provider in the United States and claims to have created more than 2,000 jobs in Nevada since 2013, but the PUC’s new regulations and the resulting underfunding potential may end up killing the retail solar sector in favor of the utility industry.
“This is a very difficult decision, but governor (Brian) Sandoval and PUC leave us no choice,” said SolarCity’s CEO Lyndon Rive in a statement to the press, adding, “The people of Nevada have consistently chosen solar, but yesterday the state government decided to end the choice of customers, damage the state’s economy and endanger thousands of jobs… These actions are certainly not ethical, unprecedented and possibly illegal. While the rest of the country embraces a clean energy future, Nevada is moving backwards.” (Source: Ibid.)
For its part, in a press release, the PUC said the move was designed to reduce inequalities between net metering customers.
As noted in an article by Oil Price, Musk and Buffett’s match in Nevada was over net metering. Critics of Nevada’s policy, in favor of NV Energy and other utilities, consider net metering, a policy that allows homeowners with solar panels to be paid for the power they produce, as central to solar economics. (Source: “Warren Buffett Beats Elon Musk In Nevada,” Oil Price, December 29, 2015.)
Nevada has the fifth-largest installed solar capacity in the United States and is home to Tesla’s “Gigafactory,” which, when completed, will manufacture Li-ion batteries for electric vehicles.
So it appears as though Warren Buffett and NV Energy won this round, but SolarCity Corporation and Elon Musk aren’t going to give up the war. SCTY stock isn’t one to cast off just yet.