Wednesday, July 8, 2009

Pickens' Wind Farm Plan Shelved

This week, T. Boone Pickens let it be known that his plan to build an enormous wind farm across the Texas Panhandle has been cancelled. The wind farm would have sported 687 giant turbines that would generate up to 4,000 megawatts of electricity. Unfortunately, Mr. Pickens already ordered the 687 turbines from GE last year at a cost of about $2 billion. Now he needs to find projects to use them. As he noted in one interview, "my garage won't hold them."

This wind farm plan is not to be confused with the "Pickens Plan," Mr. Pickens' advocacy program to cause the U.S. switch to clean sources of energy while using natural gas as a bridge fuel. I believe that his work with the Pickens Plan is one piece of the puzzle to help push our country in the right direction, and his efforts to create new demand opportunities for natural gas, specifically transportation uses, are very good for the gas industry.

The wind farm plan was felled by a combination of a lack of transmission infrastructure to the area, a poor financing market and low natural gas prices. The low gas prices make wind energy expensive versus natural gas generation. It is particularly ironic that low gas prices helped scrap the project given his devotion to gas.

Unfortunately, Mr. Pickens will probably be too distracted over the next year by the need to unload the wind turbines to focus on his advocacy program and the creation of new demand sources for natural gas.

I think he will be able to partner with smaller wind farms across North America to offload most of his turbines. As the article linked above notes, the transmission infrastructure is being built in the Midwest, which means there will continue to be new projects in that area. I'm less hopeful for turbine manufacturers who now have to deal with a glut of turbines in the secondary market.

I'm sure there are many who will have a good laugh at Mr. Pickens' expense given his high profile, but I for one am sorry the project wasn't successful. Ultimately I think history will show that he drove his natgas-powered vehicle into a pothole rather than off a cliff. I wish him the best going forward.

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