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September 26, 2018

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For Warren Buffett, a house divided on climate change

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Nati Harnik / AP

In this May 2, 2011, file photo, Warren Buffett, chairman and CEO of Berkshire Hathaway, gestures during an interview in Omaha, Neb.

On Nov. 17, two dozen clean energy activists arrived at the headquarters of Warren Buffett’s Berkshire Hathaway in Omaha, Neb.

The band of activists, known as Bold Nebraska and bankrolled by a long-time friend of Buffett, walked into the modest 14-story building and handed a duo of security guards a thumb drive in the shape of Olaf, a buck-toothed snowman from the Disney film “Frozen.”

The storage device held a petition signed by 100,000 renewable energy advocates and Berkshire shareholders from Nevada and other states. The document urged Buffett, who owns a mix of fossil-fuel and renewable power plants, to ease what they cast as his company’s opposition to solar power.

Buffet is a study in contrasts. Berkshire Hathaway owns power companies, natural gas pipelines, coal plants and large chunks of oil companies. Buffett’s electricity providers are fighting across the country in courts, legislatures and utility commissions against policies that mandate utility companies pay rooftop solar customers for the energy that they provide.

Conversely, Buffett and his company have invested $15 billion into renewable energy since 2000. He is a dominant wind provider in the Midwest. His Nevada utility has a portfolio that’s one-fifth renewables. In July, Buffett promised the White House he would double what he’s already spent to build more wind farms and solar arrays, close coal plants and reform the nation’s power grid.

Buffett’s past and future commitments to renewables — a more than $30 billion investment — equate to roughly 22 percent of his net worth. But that is not enough for some activists. Actions, they say, speak louder than words.

“You can’t say you’re going to tackle climate change and then put up barriers to clean energy," said Jane Kleeb, Bold Nebraska director and founder.

THE BIG PICTURE

For Buffett, investing isn’t about championing causes. It’s for making money, said Jeff Matthews, an investor who has written three books about Berkshire Hathaway and Buffett. “He isn’t going to divest in companies because it conflicts with a left-wing view of global warming — even if he is worried about it,” he said.

When it comes to climate change, activist say that Buffett could — and should — be doing more. He disagrees.

“I don’t think that when making an investment decision on Berkshire Hathaway (…) that climate change should be a factor in the decision-making process,” Buffett said at his annual shareholder meeting in May 2014.

In the last year, Buffett took a 22 percent ownership stake of Canadian oil sands company Suncor and a 10 percent stake of oil refiner Phillips 66. His Burlington Northern and Sante Fe rail company, purchased in 2009, hauls enough coal to power 10 percent of the United States.

The centerpiece of his energy holdings is Berkshire Hathaway Energy, which which includes PacifiCorp, Rocky Mountain Power, NV Energy and MidAmerican. It spans a 219,000 square-mile service area in 11 states. The holding company owns $82 billion in assets, serves 11 million people and has holdings in parts of Canada, the United Kingdom and the Philippines. It is currently partial or full owner of 19 coal-fired power plants and 3 coal mines. It ships enough natural gas to meet a tenth of U.S. daily consumption.

With a growing demand for renewables and President Barack Obama’s regulations to limit emissions, Berkshire Hathaway Energy has been working to green itself for more than a decade. The efforts are not cheap.

After spending more than $6 billion, MidAmerican currently owns more wind projects than any other utility and Rocky Mountain Power is number two , according to the company. Berkshire Hathaway’s utilities have spent more than $2 billion on emission reduction equipment at its coal fired power plants. By 2025 it will cut its coal fleet down to 10 power plants — cutting the equivalent of 1.5 million homes. The conglomerate recently shuttered parts of power plants in Nevada, Utah and Wyoming. By 2017, NV Energy will have 45 renewable energy projects producing up to 1,500 megawatts.

In addition to renewable sources of energy, Buffett’s holdings have increased their use of natural gas. The commodity’s price dropped after a recent drilling boom. Berkshire utilities currently plan to increase their natural gas use by more than a third in states like Nevada, Washington, Utah, Wyoming and Oregon, according to plans the company filed with regulators in those states.

Buffett’s conglomerate is a “house divided,” said Bill Corcoran, a western regional campaign director for the Sierra Club. The company makes gains with wind in places like Iowa and shutters coal in Nevada but then it signals a large push for fossil fuels in the west.

“They’re chasing the dollar,” he said. ”That’s why there is a lack of long-term vision on climate disruption and their investments.”

INVESTOR ACTIVISTS

Some of Buffett’s peers in the investor world applaud the efforts, but they want more action.

Investors-activists want Berkshire to disclose emissions annually and set reduction goals for the future. For the past three years, investor-advocates like Bruce Herbert have pushed companies like Berkshire Hathaway, Exxon and Chevron to map out a longer term future

Herbert, chief executive of a $100 million pro-renewable investment fund known as Newground Social Investment, said it was time for Berkshire Hathaway’s shareholders to address climate change, but Berkshire hasn’t budged.

“They are a good company with excellent leadership,” he said, “But they are not cognizant. They need to step up to the plate.”

Berkshire Hathaway declined to introduce an emission reduction measure at its 2015 shareholder meeting. In 2014, less than 10 percent of company’s shareholders voted to adopt a similar measure.

“Buffett is in a position to set a policy tone,” Herbert said. “He’s not.”

ROOFTOP RUCKUS

In Nevada, rooftop solar advocates say Buffett’s tone is clear.

The state is an arena for one of the nation’s most publicized solar battles.

NV Energy and the other Buffett utilities have fought against net metering, which pays rooftop solar customers for the energy they provide to the grid. The policy has helped cut the power bills of some Nevadans by more than 90 percent. It’s also created 6,000 jobs in a state with 300 days of sunshine per year.

The nationwide battle over the policy has led members of the renewable industry to cast Buffett as the billionaire puppet master whose goal is killing rooftop.

Berkshire Hathaway Energy employees describe the company’s structure differently, detailing it as a company where local management runs the operations. The company’s CEO Paul Caudill said that a week may go by where he doesn’t talk with anyone from the company’s headquarters.

“We make 99 percent of decisions that affect our customers in the state right here,” he said.

The reason Buffett’s utilities fight, according to rooftop companies like SolarCity and Sunrun, goes like this: Power companies owned by Berkshire Hathaway Energy are regulated monopolies allowed to earn a return on equity on infrastructure projects. As more and more consumers install solar panels on their homes, power bills decline, as does the need for utilities to build big power plants and other infrastructure diminish — along with their revenue.

Power companies argue that feeding the grid via net metering and rooftop solar imposes a cost on non-solar customers.

In Nevada, there have been multiple studies to research the costs. One paid for by the Public Utilities Commission said that rooftop solar isn’t a cost shift. The study concluded there was a $36 million net benefit to all customers over a 25-year period.

NV Energy argued there were flaws and commissioned its own study that alleged there was a cost shift.

The cost shift is a straw man, said Bryan Miller, Senior Vice President of Public Policy & Power Markets Sunrun, a solar leasing and installation company that provides more than 1,000 rooftop jobs in Nevada.“The only logical conclusion here is that Berkshire Hathaway Energy is waging incessant, unfounded attacks on rooftop solar in Nevada and across the West because it directly competes with its energy monopoly,” Miller said.

After a nearly year-long battle, the state’s Public Utilities Commission will decide by Jan. 1 on a permanent net metering plan. A NV Energy-backed proposal would cut the amount of money solar consumers receive and add new fees to their power bills. Miller, along with other solar advocates in Nevada, have hosted rallies, bought billboards and jammed the hallways of government buildings with their supporters, saying that a change to net metering could cost the state’s solar workers their livelihoods.

Caudill, who came to NV Energy in 2013 after working for MidAmerican Solar, said the rooftop debate is not about killing jobs or shipping profits to Buffett.

“We stand in no way to benefit from the proposals we make,” he said. “These are all cost-based decisions. It is not about Berkshire Hathaway and Berkshire Hathaway Energy and what they want. The solution we fashioned was designed for our customers’ needs in the state.

This is all about how you allocate costs.”

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