Pickens Plan Stirs the Debate

Issue 8 and Volume 113.

By Steve Blankinship, Associate Editor

Much has happened to change the outlook on renewable energy in the past year. A recession has lowered energy consumption, widening reserve margins for new generating capacity. That factor has probably affected the prospects of new coal, natural gas and nuclear more than it has renewables. But the financial crisis and lowered economic prospects inexorably entwined with a drastic economic downturn have impaired renewable development. That’s because renewables are far more dependent on subsidies than are other forms of power; and even then, produce more expensive electricity than from fossil, hydro or nuclear.

There’s perhaps no higher-profile example of the effects the current economy has had on renewables than T. Boone Pickens’ “Pickens Plan,” which marked its first anniversary in July. A year ago, Pickens launched a campaign to persuade policy makers and the public that Americans could reduce dependence on foreign oil by converting a significant percentage of our transportation fuel needs to natural gas and partially supplant that re-deployment with wind. The plan represented an initial investment of $60 million by Pickens, which included a media blitz that had everyone talking about his challenge to the way energy is produced and consumed.

A year later, the plan’s flagship component—building the world’s largest wind farm in the Texas Panhandle—is off the table. Originally touted as a 1,000 MW wind farm near Pampa, Texas, plans now call for five or six smaller projects spread across several states. The fact that transmission does not exist to carry wind-generated power to load centers was to have been overcome by Pickens building the lines himself. “It was a little more complicated than we thought,” Pickens said in a recent interview with The Dallas Morning News.

In May 2008, Pickens announced that his Mesa Power LP would order 687 GE wind turbines for the wind farm at a cost of $2 billion. He said he expected the farm to grow to 4,000 MW by 2014. But events set in that even Pickens’ past reputation as an oil baron and corporate raider couldn’t control.

Natural gas prices dropped 50 percent and more, eliminating the price advantage Pickens’ equation counted on to make wind competitive with gas-fired generation. “You had them standing in line to finance you when natural gas was $9 per million Btu,” he was quoted as saying. “Natural gas at $4 doesn’t have people trying to finance you.” The ensuing global economic and financial collapse made a bad situation even worse.

Pickens will start taking delivery on his wind turbines in 2011. That gives him about 18 months to figure out where to put them. Mesa officials are considering several states for deployment, including Texas, Oklahoma, Wisconsin and Kansas. Current plans are to build three or four wind farms made up of around 150 wind turbines each.

Pickens’ intention to substitute natural gas as a transportation fuel has morphed into something a bit different, too. The fact that infrastructure does not exist for broad conversion to compressed natural gas (CNG) across a large segment of American cars and trucks has produced a more realistic approach; namely, expanding existing transportation markets for CNG. Plans now focus on fueling existing automotive fleets. Also targeted are big trucks that log their miles on interstate highways, where it makes more sense to tap natural gas pipelines and build CNG compression facilities dedicated to fueling big rigs.

Among existing corporate fleets, the most common belong to governments and utilities: AT&T has the largest such fleet in the U.S. After meeting with Pickens, AT&T committed to spend $350 million to convert 8,000 of its vehicles to run on CNG. Pickens persuaded other companies and municipalities to buy CNG fleets, but the numbers remain small. Perhaps more importantly, Pickens amassed a legion of 1.6 million people, known as the Pickens Army, whose members write letters to their legislators, encouraging them to adopt the Pickens Plan.

While the Pickens corporate empire would no doubt benefit if his plan ever takes off, he insists he’s not in it for the money, saying if he were, he’d have kept his initial $60 million in his pocket. Still, Pickens invests in companies that produce natural gas. He also has interests in ventures that sell natural gas vehicle fuel and has a 49 percent stake in BAF Technologies, which converts gasoline and diesel-powered vehicles to CNG use.

On the legislative front, Congress has passed what amounts to the wind portion of the Pickens Plan, with handsome incentives. The stimulus bill includes money to upgrade the power grid. And in Texas, new transmission lines to accommodate more wind power will be built and paid for by electricity consumers to the tune of $5 billion. Unfortunately for Pickens, their route will be different from the one he needs for his Pampa wind farm.

Perhaps most importantly, Pickens has stirred debate about the complexity of energy production and use in the U.S. and elsewhere. If “soldiers” in his “army” think about and discuss the ins and outs of energy use, many will likely discover there are no simple answers, but rather solutions that must be fully considered, vetted, then adopted; but only if they pass muster.

And that’s a good thing.