How 5 billionaires are betting on electricity
Billionaires have the luxury of choosing how they risk their fortunes.
So what does it say about the traditional electricity business model and the promise of cutting-edge technologies when not a month seems to go by without another deep-pocketed tycoon choosing to make an electricity industry play?
Take a look and see how these five mega-rich billionaires—including four of the richest men in America—are investing in electric power:
1. ELON MUSK
Net worth: $6.7 billion
The founder of PayPal and current CEO of both SpaceX and electric car maker Tesla Motors, Elon Musk is also the brain behind SolarCity. Musk is the company’s chairman of the board and its largest shareholder.
SolarCity is the biggest provider of solar power systems in the U.S. with a business model that largely eliminates the upfront cost of a photovoltaic system for a residential customer through its leasing program. Operating in 14 states and the District of Columbia, SolarCity also offers residential customers an energy storage option via an 8 kilowatt-hour battery system.
The company expects to deploy 270 megawatts of solar systems in 2013. In 2012, Musk said SolarCity and Tesla Motors would collaborate to use electric vehicle batteries to smooth the impact of rooftop solar on the power grid.
2. DAVID KOCH
Net worth: $36 billion
David Koch and his brother Charles had the good fortune, well, to inherit a fortune. The Wichita, Kansas-based privately held multinational company has its roots in the energy industry—oil refining, to be precise. Today, the diversified company’s businesses include wood products, chemicals, coal, refining, oil and gas pipelines, fertilizer, industrial equipment and cattle ranching as well as a global energy supply and trading operation.
Earlier this month, a unit of Koch Energy Services Industries said it would buy a natural gas-fired power plant in Texas. The purchase of the 1,055-megawatt Odessa Power plant from Energy Capital partners for an undisclosed sum is the Kochs’ first venture in power generation.
Energy Capital Partners bought the plant in 2011 for $335 million from PSEG Power, the merchant arm of Public Service Enterprise Group. Koch sees the plant as complementary to its natural gas business.
3. LARRY ELLISON
Net worth: $41 billion
Oracle Corp. co-founder Larry Ellison has a dream of energy independence for the Hawaiian island of Lanai, of which he bought 98% in June of 2012 for an estimated $300 million. The 141-square mile island has two resorts, golf courses and 3,000 residents and acres of former pineapple fields.
Ellison’s vision is to turn the island into a ”model for sustainable enterprise,” powered by the sun and whose roads will be filled with only electric cars.
He plans both solar photovoltaic and solar thermal power systems, not just to power the island’s homes and businesses but an ambitious desalinization plant to convert sea water to fresh water. The planned conversion of up to 10 million gallons per day would allow the island to reinvigorate its farming economy and its output.
4. WARREN BUFFETT
Net worth: $58.5 billion
The Oracle of Omaha has controlled almost 90% of MidAmerican Energy Holdings Co. since 1999, using the business to invest in renewable power plays and most recently, NV Energy, the largest utility in Nevada.
MidAmerican owns Iowa utility MidAmerican Energy and since 2006 has owned Northwest power company PacifiCorp. It, in turn, owns utilities Pacific Power and Rocky Mountain Power as well as merchant generator PacifiCorp Energy. Other MidAmerican Holdings include MidAmerican Renewables, with separate solar, wind, hydroelectric and geothermal generation units.
The purchase of NV Energy for $10 billion will complement Buffett’s renewables business and perhaps help the utility retire some of its coal-fired generation.
But not everything Buffett has a hand in turns to gold. In 2012, he told his Berkshire Hathaway shareholders that the company was taking a major hit on its $2 billion investment in the bonds of Texas power company Energy Future Holdings. He predicted that “if gas prices remain at present levels, we will likely face a further loss, perhaps in an amount that will virtually wipe out our current carrying value.”
5. BILL GATES
Net worth: $72 billion
Microsoft founder Bill Gates, the richest person in the US, has his hands in a number of innovative energy companies. He told an audience in 2012 that "crazy people" are needed to come up with "energy miracles" in nuclear power, carbon dioxide capture, solar, wind and biofuels.
Most recently, in late September, Gates was part of an $8 million investment, along with Khosla Ventures, in Varentec, a San Jose-based maker of power control technology for the grid.
In 2006, he founded TerraPower, whose mission is to create a new nuclear power technology that would also consume its waste uranium, thereby assuaging concerns about nuclear proliferation that prevent nuclear power from being used in many areas of the world.
But what Gates seems to like most is battery storage. In April, he was part of a $35 million infusion in Aquion Energy, whose batteries use salt water instead of acid or alkaline to store electricity. Gates also has invested in LightSail Energy and Ambril, also developers of energy storage technologies.
Enjoyed what you read? You may also want to read Utility Dive's look at FERC chairman Wellinghoff's explanation of why utilities must adapt or die.