15% Return on Solar Investments Attracts Buffett, KKR and Google

by InvestorPlace Staff | March 20, 2012 10:02 am

Solar panels[1]Is the sun setting on the solar industry? Don’t bet on it. Bloomberg reports[2] that U.S. solar developers are luring cash at record rates – and that investors include Warren Buffett’s Berkshire Hathaway (NYSE:BRK.B[3]) and the innovators at Google (NASDAQ:GOOG[4]) among others.

Why? Because the return on investment can be a cool 15%.

Those returns have also brought some unconventional backers, too, including private equity company KKR and insurer MetLife Inc. (NYSE:MET[5]).  Collectively these investors poured more than $500 million into renewable energy in the last year, with solar at the top of the list.

“The long-term nature of solar power-purchase deals make them similar to some bonds,” Bloomberg reports. And with government Treasuries yielding a paltry 2% for 10-year notes right now and corporate debt not much higher than that, it makes sense for some investors to look elsewhere.

The pricey crude oil of late has also shined light on the potential of the solar industry. The fact of the matter is that eventually we will need to develop alternative energy sources, and solar remains one of the most viable options in the face of $100 crude oil and the prospect of $5 gasoline[6].

Returns aren’t guaranteed, of course. But the Stanford University’s center for energy policy and finance estimates an average return of about 15% in the sector. That has attracted a wider community of investors – including the likes of Buffett and KRR.

“A solar power project with a long-term sales agreement could be viewed as a machine that generates revenue,” Marty Klepper, an attorney who h helped arrange a solar deal for Buffett, told Bloomberg. “It’s an attractive investment for any firm, not just those in energy.”

  1. [Image]: https://investorplace.com/wp-content/uploads/2011/12/SolarPanel.jpg
  2. Bloomberg reports: http://www.bloomberg.com/news/2012-03-20/solar-15-returns-lure-investments-from-google-to-buffett.html
  3. BRK.B: http://studio-5.financialcontent.com/investplace/quote?Symbol=BRK.B
  4. GOOG: http://studio-5.financialcontent.com/investplace/quote?Symbol=GOOG
  5. MET: http://studio-5.financialcontent.com/investplace/quote?Symbol=MET
  6. the prospect of $5 gasoline: https://investorplace.com/2011/01/5-dollar-gas-prices-crude-oil-gasoline/

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