Pickens Plan: The Future of Wind Power
Posted on: September 11, 2008 - Email Article - Printable Version
T. Boone Pickens, the legendary oil tycoon with the Oklahoma accent, is at it again. And if history tells us anything, Pickens will succeed, again. As the founder and chairman of BP Capital Management, one of the nation’s most successful energy-oriented investment funds, and founder of Mesa Power, T Boone Pickens is “blowing” his ventures in a new direction, WIND. Earlier this summer, Pickens unveiled his plan, “Pickens Plan”, a renewable energy initiative focused on bringing wind energy to the forefront in the United States while decreasing the nation’s reliance on foreign oil.
If this summer has taught us anything, there certainly is a need to cut United States dependence on foreign oil. Around the world nearly 85 million barrels of oil are produced and consumed daily, 21 million of which is consumed in the United States. 70% of that consumption is imported from foreign nations up from 24% in 1970. At the current price levels, the United States will send approximately $700 billion in oil expenses overseas this year, an expenditure that is four times the annual cost of the Iraqi war. Interestingly, oil production has fallen despite the growth in demand, a fundamental driver to the increase in oil prices. What should we do? Trust T. Boone.
Pickens Plan
Department of Energy reports that 20% of America’s electricity can be generated from wind plants, while the state of North Dakota alone could power about a quarter of the United States. The entire Great Plains region has the largest wind energy capabilities in the world. According to Pickens, wind facilities that stretch from Texas to North Dakota could produce 20% of US electricity at a total one-time cost of $1.2 trillion. While that may seem like a heavy capital expenditure, remember that the US spends $700 billion on foreign oil annually and that is only at current price levels.There are numerous positive externalities to this plan aside from decreasing the country’s reliance on foreign oil. For instance, the development of wind in rural America will create jobs and economic growth in an area where growth has become stag. There will be new construction and maintenance opportunities across Middle America which will help revive their tempered economy. Even better, wind being a clean energy source, will have no impact on the staple agricultural businesses that the Midwest was built on.
In addition to the employment benefits, increasing dependence on wind power will allow the United States’ to use natural gas to power cars and machinery instead of to generate electricity. Currently, 22% of United States electrical generation comes from natural gas. However, if the country increases the percentage of electrical generation by wind, it can slowly diminish its use of oil and gasoline for transportation purposes. Natural gas only makes up 1% of transportation fuels today. Furthermore, 98% of the natural gas used in the United States comes from North America giving the nation one more way to decrease its dependence on foreign oil.
So with the plan laid out, what does T. Boone actually plan to do? For starters, he is building a 4,000 megawatt wind plant in Texas that could power up to 1.3 million homes. The plant, being built by Mesa Power, will be the largest wind plant in the world. The project, projected to cost $10 billion, will be the first step into implementing wind power within the infrastructure of the United States.
Wind, as an up and coming entity, does not have a major role in any particular utility company as we speak as wind currently only accounts for 1% of the United States’ electricity generation. However, the utility with the largest wind exposure to date is FPL Group (FPL) with a wind pipeline that totals 29,000 megawatts by the year 2013. The Florida-based utility, founded in 1984, has been actively and aggressively building its wind portfolio across the United States with many investments in the Mid-West region.
Despite its robust pipeline, FPL, along with other wind utility investments, may be still underdeveloped in today’s markets. In the case of FPL, the lackluster housing market in Florida coupled with rising commodity prices has impacted the stock substantially more than its growing wind portfolio. Year-to-date the stock is down 17.5%. However, it is definitely a stock to set aside and keep an eye on.
All in all, attractive wind utility investments just are not there currently. In the production chain, utilities are the last step in the development of the United States’ wind infrastructure. Land acquisitions, equipment development, and the construction processes all precede the part of the utility companies. However, with the initiatives presented in Picken’s plan, it will not be long until opportunities in utilities present themselves to take advantage of the energy infrastructure transition in the United States.
Sources: www.pickensplan.com
- T.J. Smith
Disclosure: The author does not hold a position in any of the stocks mentioned.
The Following Stocks Were Mentioned In This Article: FPL
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Wind should definitely be part of our future plan, unfortunately some of the technology is still off. Some of the new innovations like the new wind box design as well as more efficient grids should lead to long term grind parity between wind and standard electrical generation. Unfortunately that might take 5-10 more years.
Charles W. Petrediss last blog post..Strong International Exposure? Think Again
Yes, i agree. While the technology for wind is more of a work in progress than something tangible today, the fact of the matter is we have to get the ball rolling sometime to make wind a viable energy option in this country. It may take 5, 10, or 30 years before its fully operational but regardless i think with Pickens and similar projects to PickensPlan, we are making steps in the right direction.
Pickens is the man, the government needs to seriously look into building up our wind infrastructure. Put tax money into something useful instead of AIG. Not only is his wind idea great, I am a proponent of his approach to water management.