The Most Interesting Industry in the World

NEW YORK ( TheStreet) -- How would you like a monopoly on something people have to have, a simple distribution business that may change but will probably never go out of style?

Warren Buffett would. The Berkshire-Hathaway ( BKR.A) chairman signed off last week on the $5.6 billion purchase of NV Energy ( NVE), writes Bloomberg, giving those shareholders a 23% pop and making Berkshire the largest owner of electric utility accounts in the country.

NV Energy is a "bolt-on" to MidAmerican Energy, acquired for about $9 billion in 1999. MidAmerican has since become a big investor in renewable energy, especially solar, helping to power such suppliers as First Solar ( FSLR) and SunPower ( SPWR) to multi-year highs.

Yet, while Buffett is doubling down on this sector, others are running away. Efficiency is starting to cut demand and homeowners are starting to make their own energy with solar panels, demanding connections to the grid. The Edison Electric Institute, which represents the industry, has issued a report by Peter Kind calling renewables a "mortal threat" to the industry..

What's going on? Many utilities think they're in the power-generation business, but rooftop solar panels put them in the distribution business. This imposes costs -- such as accounting for small providers and storing excess power -- that utilities want to be paid for, just as they're paid up-front for adding, say, a new nuclear plant.

The result has been a series of battles, with utilities demanding that rooftop providers pay them for use of the lines. It's marked by alarmist reports such as this from Douglas Short at the Energy Collective predicting PG&E ( PGE) -- the utility most impacted right now by rooftop solar -- could go under without relief from these distribution costs.

Yet, amid all this doom and gloom, Berkshire is rushing in. Why?

One reason is a new Department of Energy policy, FERC 890, which assures a return for investments in energy storage. Storage allows utilities to maintain a steady stream of power to customers when they're buying "variable" inputs like solar or wind energy. It's also becoming a growth center for utilities like AES ( AES), which serves the Midwest.

Another reason is utility-grade solar is becoming a really good business. Nevada, where NV Energy is located, has lots of empty land and air-conditioner-driven demand that peaks along with solar output and prices. Utility-grade solar could be an $84.6 billion business in 2016, according to ReportsnReports. The total industry is currently running at $250 billion/year, according to the Department of Energy.

What's happening is the old business model -- getting paid upfront for inputs like nuclear power, then re-selling that at a price guaranteeing a return -- is giving way to a new model in which utilities are in the business of arbitraging various forms of supply and demand.

Those who are wedded to the old business model, like Zach Scheidt of InvestmentU, are freaking out, while people like Buffett are buying.

Who's right? Time will tell, but my money would be on the side that's usually right -- which is Buffett's side.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.