Picking Apart the Pickens Plan - 5 Big Challenges

November 13 2008 / by Garry Golden / In association with Future Blogger.net
Category: Energy   Year: 2017   Rating: 10 Hot

Big Plans are susceptible to changes in the world around us, and even bold visionaries can have wrong assumptions about the future.

After blanketing the media landscape over the summer with The Pickens Plan, T Boone Pickens has announced that he is slowing down his plans to build a massive wind farm in West Texas. Pickens’ $2 billion order of GE wind turbines has not been affected, but scaling up of the project is likely to happen more slowly than originally hoped.

A changing world or wrong assumptions?
Pickens has certainly felt the pains of shifts in the market where money is now in short supply and the global economic slowdown has battered his energy intensive hedge fund. But there have always been flaws to his core assumptions that support the vision that have somehow escaped widespread critical thought or media scrutiny. Pickens deserves credit for his willingness to advance the energy conversation in the US, but it does not free his Plan from closer examination:

#1 Utilities won’t evolve without regulatory changes
#2 Wind needs storage to evolve
#3 Natural Gas is a globally integrated industry, no breaking ‘foreign’ dependency there!
#4 The Auto Industry’s problem is not oil, it’s the combustion engine.
#5 Building transmission lines in my backyard or ranch?! It’ll cost you!

#1 Utilities won’t evolve without regulatory changes

Pickens correctly identifies the electricity sector as ripe for innovative thinking in regards to our energy mix. The future of solar and wind has nothing to do with ‘Big Oil’, and everything to do with ‘Big Grid’. But he might underestimate how quickly ‘Big Grid’ entities are likely to change without a top down directive from state or the federal government.

The modern day utility (post 1950s) was built by the government with one goal in mind: bring power to American homes and businesses. Their strategy? Connect central power plants to wall sockets.

Utilities are notoriously conservative and among the least innovative players in the energy sector. They make big bets on big investments with the support of a strong regulatory framework that protects their capital investments and centralized grid infrastructure. The question now is – will this model work in the 21st century? Or might ‘Big Grid’ become the new ‘Big Oil’ target by the public?

Grid Priorities: ‘Smart’ before ‘Green’
Pickens’ bold vision assumed that utilities would change, but he may be miscalculating their investment priorities. The first priority is to increase reliability, not to add clean energy from wind and solar. It makes sense that utility leaders are more likely to invest in making their ‘grid’ ‘smarter’ and more resilient, before they open up their lines to renewables.

But beyond that, there is the unresolved issue of wind and solar’s biggest problem – intermittent production based on when the wind blows, and when the sun shines. Force utilities to add megawatts of renewables and the grid becomes ‘cleaner’, but less reliable.

#2 Wind needs storage to evolve
The wind industry is certainly capable of delivering utility scale electricity to the national grid (where it can connect!!) But if wind expects to become a ‘reliable’ source of grid energy, it must resolve embrace a key concept: storage.

Why energy storage?

To manage dynamics of ‘Peak Demand’ & ‘Base Load’

Because the wind turbines only produce energy when the wind is blowing! And grid providers need more reliability. They need to be able to maintain constant ‘base load’ (normal use), and also ramp up to meet ‘peak demand’.

The answer? Wind farms need to integrate megawatt level storage systems. There are many ways to store energy and electricity. There are novel ways like storing energy by pumping water uphill, but the most plausible forms of energy storage will tap the power of ‘megawatt’ batteries (electricity), hydrogen (storage via chemical bonds) and capacitors (physical charges). There are endless conversations about which format is best and we will save that debate for other posts! (But capacitors and hydrogen have key advantages)

#3 Natural Gas is a globally integrated industry, no breaking ‘foreign’ dependency there!
The Pickens Plan is one part Wind. One part Natural Gas. He doesn’t hide his affinity and vested financial interests in natural gas. But he avoids sharing the global nature of the industry with the public.

T Boone Pickens is a very smart person when it comes to understanding the dynamics of the hydrocarbon industry. He is not afraid to admit when the rules and dynamics of the game have changed. In recent years he has become outspoken on the likelihood of peak oil production (Post on IEA Report). But it is shocking that Pickens looks straight into the camera and says that domestic natural gas can bring America energy independence or break our ‘dependency on foreign oil’.

Pickens knows quite well that oil companies are fully engaged in developing natural gas projects around the globe. Yes, America has vast amounts of natural gas yet to tap, but it is misleading to say that the natural gas industry would be a purely ‘domestic’ industry.

Without protectionist policies, there is nothing that would keep a refinery in any part of America from accepting natural gas supplies from outside of the US. In fact, you can bet on it as markets do what they do best: reward lowest cost producers! That would likely include several nations from the Middle East, Russia and Canada.

What keeps the natural industry from going global now? Transportation challenges.

Natural gas is a ‘better fuel’ than gasoline because of its higher hydrogen content, but it is much more difficult to ship. LNG, or liquefied natural gas, has been the holy grail of the gas sector for decades but companies have found it impossible to get permits to build LNG plants onsite at existing facilities.

A potential solution? Offshore LNG plants that are far from metro areas. Ships pull up, offload gas, pipe it into existing refineries and gas networks as the ship sails away.

Energy independence via natural gas is hard to imagine. The same regions that provide our oil, have vast resources of natural gas waiting to reach our markets.

We’re waiting for someone to ask why his vision of this natural gas future does not leave America in the same ‘interdependent’ position it is today.

#4 The Auto Industry’s problem is not oil, it’s the combustion engine

As much as we try to link auto industry problems to gasoline, the real source of the sector’s problems relate to legacy issues, not energy geopolitics.

GM, Ford and Chrysler have too many factories operating below capacity, too many workers trained only to build one type of vehicle chassis, and too many retirees with pension liabilities.

Green is lean
The auto industry has to find a way towards leaner manufacturing that is not based on the combustion engine. The answer might be something more modular like wheel based electric motors powered by a combination of batteries, fuel cells and capacitors.

All things being equal, oil is the perfect fuel. It is a relatively clean, hydrogen rich source of energy, but when it is combusted in an 19th century mechanical heat engine the results are not impressive. The process is dirty and inefficient. Oil is a much more valuable feedstock for petroproducts than it is as a fuel for moving cars.

The real strategic opportunity is changing how we build cars, not fuel them. And building combustion engine platforms is parts and labor intensive. Electric motors and energy storage systems are modre modular. Yet Pickens does not say that the internal combustion engine must be ‘killed’, he simply replaces gasoline with natural gas. Even if natural gas fed cars was feasible, it would not change the dynamics of transportation fuel markets that limit competition to hydrocarbons. You can’t put electrons into a gas tank!

Ironically, the same wind power that Pickens advocates would be useless in the transportation sector, enabling another generation of vehicles to grow without creating an opportunity for electron producing energy to compete in the vehicle fuels market.

#5 Building transmission lines in my backyard (or ranch?)
America is no longer a nation of open fields, it is a nation of private property owners. The right of way to build our current transmission lines was secured decades ago before suburban and exurb expansion.

The final hurdle for renewables is opening up massive wind farms to the national utility grid is ‘access’ through the vast network of private properties and communities that now define our once ‘rural’ landscapes. [Post from 2/28/08 “Future Power Infrastructure & the Not In My Back Yard Effect. The alternative is going around the grid entirely, by tapping the power of solid state energy storage! But we’ll save that idea for another post!!

Image TomSaint11 Flickr CC License

Comment Thread (10 Responses)

  1. There is so much to choose from when it comes to pickin’ apart Pickins’ energy efforts. You are quite correct to point out the lack of serious examination T. Boone’s activities have received. My own objections to his instigations have most recently been raised on these very pages.

    Previous to that my initial objection was over his casting himself as some sort of national savior based upon the discredited notion of “peak oil” (if you wish to dispute that assertion, take it up with The National Post who’s article I link to and British Petroleum who’s figures the article quotes). Pickins’ public statement makes it obvious that his intent is to position himself as recipient of government largesse (and expressly not more ordinary business profits) via direct tax credits or “carbon credits of some type”.

    After hedging his bet with Texas state monies, Pickins went further. This excerpt from the wikipedia entry for Pickins plan is illustrative:

    “Pickens’ motive

    The CATO Institute, a libertarian think tank, says that the Pickens Plan amounts to market rigging in favor of his business interests and would raise energy costs for consumers. The institute believes the best energy plan is to remove all energy subsidies and let market forces decide. [25][26] [27] However, Pickens insists his interest is more in the country’s future, than his personal wealth.[28]

    According to an article in Popular Mechanics, if the plan is accepted, Pickens stands to reap a significant profit by building pipelines to pump billions of gallons of water from an aquifer under land in the Texas Panhandle, for which he controls the water rights. The proposed pipeline could follow the same 250-mile corridor as the electric transmission lines from the wind farm, which would be seized for utility use from private owners through eminent domain.[29] Pickens owns more water than anyone else in the U.S.[30] However, Pickens claims he has no need for the money,[31] and that Texas law provides alternative ways for public water supply districts (such as the one formed by Pickens32) to obtain pipeline right-of-ways.[29]

    In mid September 2008, it was reported that Pickens had suspended the water pipeline plan. Jay Rosser, a spokesman for Pickens, claimed there was no immediate buyer for the water and Pickens was more interested in focusing on the power transmission lines.[citation needed] Rosser also claimed that “this has nothing to do with a Department of Justice ruling in August on the Roberts County Fresh Water Supply district”.

    (my bold)

    There are numerous links embedded in the entry, readers are urged to follow them for greater detail.

    While he has temporarily suspended his activities, he remains positioned to manipulate the US and Texas electrical and water distribution systems whenever the opportunity permits. Further, even though inactive, his presence assures his continued influence over any future decisions made in regard to develpment of the existing systems into the future whether or not he proceeds with his plans.

    Energy generation and distribution will remain pressing political topics into the next term (and likely into several more after that). T. Boone and/or his successors will remain in the background of all those future decisions.

    Always something to look forward to, isn’t there?

    Posted by: Will   November 14, 2008
    Vote for this comment - Recommend

  2. Will Well said…! No soft gloves and solid insights…!

    Posted by: Garry Golden   November 14, 2008
    Vote for this comment - Recommend

  3. Pickens never said that natural gas was the silver bullet. This energy problem is way too diverse to solve with one solution. He said on The Daily Show that natural gas should first supplement Trucks because diesel is becoming way too expensive. If there was another shift in the oil markets our transport of goods would be crippled and the USA would implode.

    Natural gas and Wind is only one facet of a solution which is going to take years to sort out. First, you have to have technology that works with renewables and they have to be JUST or close to efficient as hydrocarbons. This is a huge feat as 100% of our tech is adjusted towards the use of oil. Its almost a complete evolutionary transformation overnight. If you want to talk about lightning speed change, changing our infrastructure in 10 years is almost lunacy. In 10 years you will hear about massive changes very quickly with almost all our hopes pinned on massive scientific changes..

    To ease us in this process we will need wind and natural gas. Do you think they don’t want to make money in the process of this? This is what a good business man does, and if they weren’t able to make money on it they wouldn’t do it. I know I sure as hell wouldn’t.

    The second part of the solution is massive money being thrown at the science of solar, wind, nuclear, fission, geothermal and hydrogen. It’s going to take another trillion to solve this mess, unfortunately (we can afford it though).

    Posted by: Covus   November 15, 2008
    Vote for this comment - Recommend

  4. The fact that “Natural Gas is a globally integrated industry” does not mean that it can not be used for energy independence. Even using [cheaper] foreign natural gas is acceptable. As long as sufficient local resources are available to fall back on, if the external sources become unavailable. Independence just means not relying on external resources.

    Posted by: mMerlin   November 15, 2008
    Vote for this comment - Recommend

  5. RE: Covus mMerlin

    Well said.. agreed.. think I’m on your same page—‘part of more comprehensive solution’. I am only critical of Pickens tone- of promises of energy independence, et al. I think we do need to look at this as a multi-decade long effort. But not sure that this message is clear to general public.

    And re: ‘independence—I’m quite frankly not a fan or true believer. I am perfectly fine with global economic interdependence. I think it’s good for people and planet. Energy independence is not possible or desirable—IMHO Natural gas is clearly major resource of 21st century

    I look forward to cleantech being a globally integrated set of industries… So no desires from my end for independence.

    Posted by: Garry Golden   November 15, 2008
    Vote for this comment - Recommend

  6. Re: Garry Golden “no desires from my end for independence”

    Agreed. Interdependence could help stabilize the international scene. The problem is when some political entity (nation or collaborating group) becomes a monopoly for a critical resource needed by others, but is not in turn dependent on resources provided by that market.

    [Global] competition should improve the ‘product’, and reduce costs.

    Posted by: mMerlin   November 15, 2008
    Vote for this comment - Recommend

  7. As to your point about Big Grid needs to go smart before green… I never realized reliability was that big of a problem in the states. Compared to the rest of the world at least! I thought generally all we have to worry about is downed power lines due to thunderstorms. This of course does not account for hurricanes in the south or earthquakes in California, but that should not affect the northeast. Maybe Pickens should build those windfarms in New England instead?

    Posted by: AdamEdwards   November 16, 2008
    Vote for this comment - Recommend

  8. Interdependence could help stabilize the international scene.

    [What follows is directed at the concept being parroted, not any particular individual who might have done so.]

    In a word, twaddle.

    Anyone having the slightest acquaintance with basic strategic principle or economic theory will confirm that “stability” is the antithesis of “interconnectedness”. The greater the degree of market interdependence (whether in economic terms or social/societal), the more dynamic a market becomes. Dynamic markets allow for multitudes of options to be selected from by the vast hordes of proto-plutocrats that infest such places (that would be you and me, writ variously large). They are by nature chaotic and competitive, but tend to work toward maintaining the continued exchange of pretty much anything that doesn’t tend to inhibit the continuance of exchange.

    Obversely, the most stable market relationship possible is the total monopoly; you buy or you do not. Those are the only options offered, with no alternatives permitted lest instability should arise. The impermissable being the obvious (and pretty much immediate) result, of course. At its more extreme end of expression such market manipulations can take the form of open warfare and/or genocide. Even a casual glance at recorded human history should make painfully clear that such episodes are always followed by periods of remarkable placidity wherever the survivors have congregated afterwards.

    The apparent benefits and variable detriments of the entire spectrum of interactive possibility is (and undoubtedly will continue to be) endlessly debated among us in all of it’s many possible scenarios, but the aspect most applicable to the present energy discussion has to do with the mixture of domestic vs foreign resources that comprise any country’s total energy infrastructure (to include commercial and individual transactions for any type usage).

    Technology has as its fundamental purpose the transferring of energy potential from one state of being to another. The varying amounts of that potential available to us from any given source (wind, natural gas, diesel oil, uranium to name only four examples) or locale is a factor of the expense we will accept to effect realisation of that potential. Part of that realisation process is the technology used to transport the effect from one physical location to another. The entire process is generally broken down into catagories: discovery, accumulation, processing, transportation, distribution and regulation of all of the foregoing.

    My Fellow Texican has sought to profit from the regulatory mechanism we utilize within that energy potential transferance process rather than more directly from the transferance itself (perhaps “as well” would be a more fulsome description). His chosen methodology is to misrepresent the market mechanisms that achieve our present technologic state of enhanced existence (from its base-line of “cold, brutal and short” spent half in the dark), the faults of which are many, with another the faults of which are at best no fewer and only slightly different. While I applaud the societal arrangement that allows his attempt, I shudder that it hasn’t resulted in widespread shouts of derision and laughter (accompanied by elbow nudges and “Good one, Cyril” from the Pythons among us).

    As to the nature of our inter-relatedness, “Peace in our time” – surely the ultimate standard of stability – is not (and I would argue cannot be) a sustainable or commonly desirable result of any form of energy policy or technology, although the opposite is always a possibility among humans. The mechanism whereby we might most quickly and least damagingly achieve further advancement is through the most robust and dynamic marketplace of ideas and resources we are capable of achieving and maintaining. The larger the marketplace, the greater the opportunity available for possible mechanisms of participation and for ideas to be tendered for consideration (ie: offered for sale, investment, merger, trade, etc).

    There’s your sustainable energy policy (that would be us working our collective and individual asses off to keep the thing functioning at all …, errr, advancing toward the Singularity, that is).

    Posted by: Will   November 16, 2008
    Vote for this comment - Recommend

  9. Re: mMerlin—well said on give/take of interdependence, thanks!

    Re: Adam

    Interesting stat on costs of reliability of US grid “Today’s electricity system is 99.97 percent reliable, yet still allows for power outages and interruptions that cost Americans at least $150 billion each year — about $500 for every man, woman and child.”

    from recent post – The Future of the Smart Grid

    US DOE Report – page 9

    So it’s not bad at all. But knowing how systems work ‘bad’ usually doesn’t become apparent until the system is nearing performance collapse. So looks great on year 52, but year 53 starts rapid decline. And I’m feeling like our aging grid could be at a plateau point of performance. Another recent post from Edison Institute report est. $1 trillion for grid by 2030. So those wires are expensive to maintain. And not sure how much downtime comes from natural disasters (in Houston proper, post hurricane this year it was bad) but not sure about inland transmission lines) And I’m sure Pickens wants to stay close to Texas where the wind blows strong and he can avoid offshore wind projects likely to be found in northeast! (at least, I assume!) Thanks!!

    Re: Will

    Solid systems take- as usual! Best to Texas! Thanks…

    Posted by: Garry Golden   November 17, 2008
    Vote for this comment - Recommend

  10. Here are futurist Brian Wang’s thoughts on the Plan as captured by MemeBox at Convergence 08:

    Posted by: Alvis Brigis   November 17, 2008
    Vote for this comment - Recommend