Pickens Plan
I think he should get Billy Mayes to be his spokesperson!
What do you guys think of the Pickens Plan? I like that someone has pulled a Perot and decided to take it to America to get things done instead of expecting the government to do something. Throw in the fact that he is an oil tycoon (and yes I know he is now heavily invested in wind power) and it is promising. This is a great opportunity for America but I am not sure that it can happen as the midwest would have to become the power center for the US while the rest of the US did what?
July 24th, 2008 at 8:53 am
One of my clients wants us to investigate renewable energies (solar, wind, biofuel, etc.). At this point, I’m willing to put solar panels and windmills everywhere. Sure, the payback is a over 5 years, but in the end it is free power. I also think that having wind ‘generators’ all over the country would diversify the effect of the wind changing. So, the more we have, the more reliable the power.
On a side note, I now know how to build a solar power generator with a solar cell, a battery, and some controls. I’m going off the grid as soon as I can give up HVAC, TV, Wii, amplifiers . . . you know, electricity.
July 24th, 2008 at 9:05 am
yes, yes buy solar!
July 24th, 2008 at 9:30 am
I looked through link you provided. Then I scratched my head a bit. Then I saw the link at the bottom that said “The Plan”. Then it took me to same page I was already on. I scratched my head a bit more.
What exactly is the plan? Other than “Wind.” It’s like a much less hilarious and slightly scary version of “Strategery.”
Seriously, Pickens is not just betting on wind. He’s betting on huge-fricking government subsidies, so it’s not really like he’s working around the government.
But as far as using wind goes, I’m all for using as much as can be done economically and reliably within our current grid. The more power we can get from wind, the less fuel, of some type, we’ll have to burn for electricity, which leads me to…
The rest of his spiel is about 1/4 fact and 3/4 pure,
political bullshitUsed-car-salesmanship.- The point about wealth transfer is mostly BS, because most, or ALL, of that money will come back in some form.
- Peak production in 2005? That’s not what BP says.
- He wants to spend 1.2 trillion on windmills. He calls it a one-time cost, which it is not. He then compares that cost to the $700 billion spent on foreign oil annually and declares it a bargain. However, that’s not an apples-to-apples comparison. If wind is generating 20% of our electricity, that amount of electricity is only worth ~90billion a year.
- His statement about a 3MW wind turbine producing 12000 barrels worth of energy in 1 year looks to be optimistic. Either he’s assuming the wind turbine is operating at like 75% of capacity, which almost never happens, or he’s assuming that the oil is being turned into electricity at like a 30% efficiency.
- a “revival” for rural America. That’s almost a contradiction in terms. When was rural America ever really thriving? Anyway, he says “In addition to creating new construction and maintenance jobs, thousands of Americans will be employed to manufacture the turbines and blades. These are high skill jobs that pay on a scale comparable to aerospace jobs.” Construction is temporary, maintenance won’t provide that many jobs, and manufacturing probably won’t be rural.
- Natural gas is cheap, but it also based on the market. And it is also much harder to store. Prices fluctuate much more greatly than oil. If we start to use a lot of natural gas cars, the likely result is that oil and natural gas prices will equilibrate.
- Would wind power take natural gas firing electrical plants offline? It’s hard to say. It’s possible. But it may well also take coal plants offline, especially if CO2 emissions become expensive.
July 24th, 2008 at 9:43 am
See…..I knew that Nobrainer would bite
And what is this “BP” that you speak of…..I know nothing of it.
July 24th, 2008 at 10:22 am
I’ve posted a far less rational argument for the Pickens plan on my blog. It has a bunch of pretty pictures and cool ideas!!!
I, too, kept looking for “The Plan.” Apparently, it’s more like a mission statement or an idea.
I’d still give it a shot. Why not, we’re all doomed anyway.
July 29th, 2008 at 2:58 pm
Alright, it’s been a long time but I’ll take the shot back at Nobrainer. For starters, the wealth transfer truly is uni-directional. Go add up what we export to every gas producing nation in the world and you’ll be so far short of what we send their way it could make you cry. We simply don’t produce that much anymore. Along with that, there are very few products made these days that is not in some way or another influenced by oil either through chemical inputs or energy inputs.
While your right, and no energy source is a one time payment because of maintenance, wind energy does have the capability to produce large amounts of energy on land that is also used as farmland. Anytime you have a dual use for a single source of property you have greatly improved your productivity. If you look at a wind map there are regions of the nation that do have almost a 70% wind rate, though by no means is this a large amount of the country. And one of the benefits of us having a high wind rate in the center of the country is that we also have a highly constant wind rate on the coasts off shore. This means that with a combination of the three we have a good chance at reaching 20% wind.
And to counteract the argument that turbine production won’t be built in some rural town, where else would we put it. If you look at the concentration of the new production facilities being created in the US they are primarily in small towns. This is a result of lower taxes and manufacturing costs associated with being in low density locations. And since there is a global shortage of wind turbine blades, any production capabilities in this area would be a long term benefit for the economy. As a high technology product this is also something that we won’t see off-shored soon.
July 30th, 2008 at 6:00 am
Regarding the transfer of wealth:
First point: A transfer of wealth, at least from my perspective, includes instances such as taxes and charity; trade, nearly by definition, is not a wealth transfer.
Second point: Whatever we label the money we use to buy oil, there are really 2 options for what can be done with it. 1) it is used, eventually, to buy dollar denominated products. For example: we buy oil from BP, who in turn buys land and builds big solar plants in the US. Or maybe the oil producers just buy stuff that we export. We, the US, by the way, are still among the biggest exporters in the world, trailing only Germany, the entire European Union, and China. We’re also the single biggest manufacturer, as a nation, as late as 2005 (link 1, link 2) Of course, maybe our trading partners don’t spend the money. Ever. Which is even better! It’s better because we will have received billions or trillions of dollars worth of oil and given them, effectively, nothing but pretty pieces of paper. That would be a real wealth transfer, and we would be the recipients. It’s like trading some useless beads for Manhattan. From Milton Friedman in Free to Choose:
I.V.’s second paragraph I don’t really disagree with. In fact, I’ve been wrestling with ideas about how much wind we should have.
In general, every wind turbine put into service helps reduce electricity prices and fuel demand (which also helps reduce electricity prices). That seems good for everyone. But, each new wind turbine also makes the payback period of every generator connected to the grid a little bit longer and it makes the investment potential for each new unit a little bit worse.
So, should we just build all these 300,000+ turbines, economics be damned? You can definitely make the case that the savings from having large amounts of fuelless generators will dwarf the costs of building those generators. But, as they say, there’s more than one way to skin a cat. There’s more than one way to save money. I think that there’s a pretty good chance that a government mandate for 20% wind will have serious side effects, such as significantly reduced demand for solar.
Basically, I stand by my earlier statement that we should let investors invest how they see fit, and that we should let the market settle things, and that government should stay out of it. Otherwise, the net result will be far from optimal.
It basically sounds to me like Pickens is trying to use the government and current high oil prices to guarantee long-term profits on a scale that cannot be supported by the industry.
Regarding the small towns, I think you’re right that that new turbine plants would show up in rural areas. However, comparing the number of small towns and rural areas to the number of turbine production plants that will be needed, I think it’s obvious that most of those areas aren’t going to get their own plant, so where’s the revival?
Although, I guess you could argue that the landowners, to which the royalties will accrue, will be flush with cash and that cash may bring in more outsiders and help add to those local, rural economies. However, I have a hard time believing that because the benefits would likely be so distributed (or if they are somehow concentrated, again most of the rural areas won’t benefit). Estimates say you need 6 full time workers for each 100MW of installed wind capacity. Pickens’ entire scheme, would require ~30,000 full time workers. It would also generate lease payments of about $900 million per year ($1/mw-hr). Distribute that among the hundreds of thousands of square miles we’re talking about, and the millions of rural residents, and then it doesn’t look so good.
July 30th, 2008 at 11:03 am
I still say that Nobrainer, aka Professor Chaos, just doesn’t have a heart. Without heart, we can’t bring forth Captain Planet! Who’s going to fight the evil mutant polluters?
I really do wish this plan would work . . . but I’m tired of washing off my left hand, too.
Thanks for the arguments, fellas.
August 5th, 2008 at 5:26 am
Guess what? I’ve got some more commentary.
Pickens refers to natural gas as “domestic” and then defines domestic as “North America.”
So when talking about natural gas, Canada and Mexico are domestic. But when we talk about oil, they are foreign. Using his broad definition of domestic, we import about 50% of our oil from “foreign nations.”
He also refers to natural gas as “cheaper”.
I’m sure that’s great if you live in Utah or Oklahoma. They give a link to check local CNG prices. So if you live in Northern VA, like me, you have one option and the cost is $3.38. Woo! Look at those savings! Like I said before, once stations are actually built to sell the stuff, and once it becomes popular, then the differential between gasoline and NG will probably disappear.