Warren Buffett's making big bets on energy through his recently renamed Berkshire Hathaway Energy unit. 

The strategy is an interesting diversion for Berkshire Hathaway (BRK.A -0.50%)(BRK.B -0.39%), which has a long history of avoiding capital-intensive businesses, especially utilities.

What's Buffett's play here?

What can you do with all that cash?
At the 2014 Berkshire Hathaway meeting, Warren Buffett, Charlie Munger, and Greg Abel, the CEO of Berkshire Hathaway Energy, outlined the company's future as a sponge for Berkshire Hathaway's growing cash pile.

Analysts and investors are particularly interested in the energy unit because it can swallow billions of dollars of investment capital each year.

Greg Abel laid out the economics of one major project at this years annual shareholders meeting:

"Generally we are the lowest-cost provider. We rarely have rate increases. Thus, regulators are very supportive of our projects. We are spending $1.9 billion in Iowa over the next two years, but we'll earn 11.6% return on our capital."

The bank of energy
I describe Berkshire's energy investments as a "bank" because they provide a safer place for Berkshire Hathaway to store capital and generate a return. 

Wooing the regulators might have been the reason the energy division now sports a new name, Berkshire Hathaway Energy. Buffett is cashing in on the valuable asset of his company's brand.

Energy presents a huge opportunity for Berkshire Hathaway. The company's insurance subsidiaries have a current float of $77 billion from their customers. Much of the float is fleeting -- a product of short-term insurance contracts at GEICO and its property and casualty insurers.

However, a full $37 billion of its float is longer-term, the product of its reinsurance business led by Ajit Jain. That float can, without a doubt, finance substantial investments in energy projects around the country.

And what better place to put that long-term capital to work than in a regulated project where you know what returns will be not just this year, but years down the road? An 11.6% return on energy projects easily exceeds most any other investment options for Berkshire Hathaway, especially since the returns are largely set in stone. A 30-year U.S. Treasury bond yields less than 3.5% per year, after all.

If you think about Berkshire Hathaway, and its insurance growth, Buffett's foray into capital-intensive industries isn't all that surprising. In the last 10 years, Berkshire Hathaway's reinsurance float has grown tremendously, from just over $15 billion to $37 billion. 

Buffett may be struggling to put Berkshire's growing cash piles to work, but energy presents a new opportunity Berkshire never had before. And with returns coming in at 11.6% on just one project, it's safe to say that Berkshire has plenty of opportunity earn respectable returns for years to come.