A Wind Power Boone-doggle

So what is Mr. Pickens planning to do with all the wind turbines he ordered? He’s hoping to foist them on ratepayers in [Ontario] Canada, because that country has mandates that require consumers to buy more expensive renewable electricity.

Boone-Pickens

By Robert Bryce, Wall Street Journal

After 30 months, countless TV appearances, and $80 million spent on an extravagant PR campaign, T. Boone Pickens has finally admitted the obvious: The wind energy business isn’t a very good one.

The Dallas-based entrepreneur, who has relentlessly promoted his “Pickens Plan” since July 4, 2008, announced earlier this month that he’s abandoning the wind business to focus on natural gas.

Two years ago, natural gas prices were spiking and Mr. Pickens figured they’d stay high. He placed a $2 billion order for wind turbines with General Electric. Shortly afterward, he began selling the Pickens Plan. The United States, he claimed, is “the Saudi Arabia of wind,” and wind energy is an essential part of the cure for the curse of imported oil.

Voters and politicians embraced the folksy billionaire’s plan. Last year, Senate Majority Leader Harry Reid said he had joined “the Pickens church,” and Al Gore said he wished that more business leaders would emulate Mr. Pickens and be willing to “throw themselves into the fight for the future of our country.”

Alas, market forces ruined the Pickens Plan. Mr. Pickens should have shorted wind. Instead, he went long and now he’s stuck holding a slew of turbines he can’t use because low natural gas prices have made wind energy uneconomic in the U.S., despite federal subsidies that amount to $6.44 for every 1 million British thermal units (BTUs) produced by wind turbines. As the former corporate raider explained a few days ago, growth in the wind energy industry “just isn’t gonna happen” if natural gas prices remain depressed.

In 2008, shortly after he launched his plan, Mr. Pickens said that for wind energy to be competitive, natural gas prices must be at least $9 per million BTUs. In March of this year, he was still hawking wind energy, but he’d lowered his price threshold, saying “The place where it works best is with natural gas at $7.”

That may be true. But on the spot market natural gas now sells for about $4 per million BTUs. In other words, the free-market price for natural gas is about two-thirds of the subsidy given to wind. Yet wind energy still isn’t competitive in the open market.

Despite wind’s lousy economics, the lame duck Congress recently passed a one-year extension of the investment tax credit for renewable energy projects. That might save a few “green” jobs.

But at the same time that Congress was voting to continue the wind subsidies, Texas Comptroller Susan Combs reported that property tax breaks for wind projects in the Lone Star State cost nearly $1.6 million per job. That green job ripoff is happening in Texas, America’s biggest natural gas producer.

Today’s low natural gas prices are a direct result of the drilling industry’s newfound ability to unlock methane from shale beds. These lower prices are great for consumers but terrible for the wind business. Through the first three quarters of 2010, only 1,600 megawatts of new wind capacity were installed in the U.S., a decline of 72% when compared to the same period in 2009, and the smallest number since 2006. Some wind industry analysts are predicting that new wind generation installations will fall again, by as much as 50%, in 2011.

There’s more bad news on the horizon for Mr. Pickens and others who have placed big bets on wind: Low natural gas prices may persist for years. Last month, the International Energy Agency’s chief economist, Fatih Birol, said that the world is oversupplied with gas and that “the gas glut will be with us 10 more years.” The market for natural-gas futures is predicting that gas prices will stay below $6 until 2017.

So what is Mr. Pickens planning to do with all the wind turbines he ordered? He’s hoping to foist them on ratepayers in Canada, because that country has mandates that require consumers to buy more expensive renewable electricity.

How do you say boonedoggle in French?

Mr. Bryce is a senior fellow at the Manhattan Institute. His latest book is “Power Hungry: The Myths of ‘Green’ Energy and the Real Fuels of the Future” (PublicAffairs, 2010).

9 thoughts on “A Wind Power Boone-doggle

  1. “Today’s low natural gas prices are a direct result of the drilling industry’s newfound ability to unlock methane from shale beds. These lower prices are great for consumers but terrible for the wind business.”

    Yeah, and BOTH of these energy technologies are HIDEOUSLY HARMFUL to the environment!!

    I much prefer COAL! At least it is DIRT CHEAP and comparatively EASY TO CLEAN UP!

    Why must we be governed by IDIOTS!!!!

    AARRGGHH!

    B.B.W.

  2. The U.K. wind turbine situation must be monitored as they now have more than 3,000 in use and Ontario has ~ 700 so that valid energy data comparisons can be made.

    The wind power situation in the U.K. will provide Ontarians with useful information that can be applied here. The U.K. is already showing us what future developments can be expectd here if we continue on the same course as the U.K. is now persuing.

  3. Anyone who wants to know what Shale Gas is all about should watch the documentary “GasLand”…..

    Between Wind Turbines and Shale Fracturing our environment is now doomed by the Industrialists and corrupt political leadership right across North America.

    Our Grandchildren will hold us responsible for this in the future, so if you believe in Kharma then get ready for some very dark reincarnations!

  4. Say what you will about Boone Pickens, at least the guy is honest about his motivation: in a CBC radio interview months ago, he said it is hopeless to imagine wind could ever approach 10% of the power supply, and the only reason he was in the biz at all was for the subsidies. He also made clear the connection between wind and gas.
    So, goodbye Texas, hello, Ontario.

  5. Pickens will risk losing money to get out of the shaky industrial wind market. Not unless he can sell the industrial wind junk to someone else. It is obvious a risk he considers better than going forward with his wind plans. More investors are taking Pickens lead and abandoning the wind ships, though he hopes not before he unloads his industrial junk.

  6. The green greed continues unabated. Simply appalling. How can these people steal billions and there are no prosecutions?

    “The Danish tax authority has been robbed blind by a carbon trading scandal that has rocked the market for carbon off sets: while the story saw some press a year ago, significantly higher losses have since been reported and the MSM has ignored the story. ”

    http://www.zerohedge.com/article/denmark-gives-away-7b-usd-or-2-gdp-carbon-credit-traders

  7. Toronto needs the wind-power — 550M off shore from McGuinty’s house…

    Tyler Hamilton Foams at Mouth Again — read all about it!

    *************************

    http://www.thestar.com/news/ontario/article/903344–offshore-wind-would-boost-ontario-economy-report

    “Ontario could create new industries, reinvigorate old ones, and generate thousands of new jobs over the next 15 years by building a vibrant offshore wind market around the Great Lakes, according to a report prepared by the Conference Board of Canada.

    The board estimated that the installation of a few hundred offshore wind turbines – or 2,000 megawatts of capacity—would add more than $4.8 billion to Ontario’s GDP and create at least 55,000 person-years of employment between 2013 and 2026.

    “The growth to 2,000 megawatts over 15 years is a conservative estimate of the market potential,” it said.

    Over time, it said, much more could be developed as the ability to connect to Ontario’s grid opens up and installation costs fall.”

    ************************

    And Snake Oil Cures Cancer — read CMO’s report!

  8. That post in the Star by “wee Tyler” is just another idiotic and misinformed rant in order for this “wee man” to get inside the “Greenies Clubhouse”!

    He is a sad and pathetic writer who shouldn’t even be read by anyone who considers themselves “human”.

    Kind of makes the Star what it really is: “Fishwrap!”

  9. I know some think that T. Boone Pickens is a straight shooter but there’s good reason to believe that he was really playing it fast and loose on this deal. There have been warnings for a couple years that he was really after the considerable water rights to the Oglala aquifer and the wind was just a ploy, made attractive or less risky by subsidies.
    If Ontario is going to buy these, they’d better drive a damn hard bargain to tell Pickens to stick his turbines, blades and all, where the sun don’t shine.

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