"Pickens drops wind from his energy plan, but industry remains ‘healthy’ and ‘sustainable’, says analyst"
After becoming a leading spokesman for the development of wind in the U.S., T. Boone Pickens says he’s officially abandoning the wind portion of his “Pickens Plan,” which originally proposed getting 20% of American electricity from wind (along with using natural gas as a transportation fuel).
According to a story in The Hill newspaper, Pickens claims he couldn’t make the economics of his plan work and is now focusing exclusively on pushing for natural gas:
Pickens has now canceled the bulk of a $1.5 billion wind turbine order that he placed with General Electric last year and says wind power will not be profitable until the cost of natural gas rises from $4 to $6 per million British thermal units. That, he estimates, will happen by 2016.
So, Pickens has turned his focus to lobbying Congress for the NAT GAS Act, a bipartisan bill introduced in April by Rep. John Sullivan (R-Okla.) to provide incentives for fleet vehicles to switch to natural gas. Pickens regularly fires up his private jet and makes the 1,000-mile journey between Dallas and Washington to push for the measure.
Cue the doubters who say this means wind can’t compete.
This news isn’t actually new; Pickens’ struggles with wind have been well documented. In 2009 he said he was putting development off a 4,000 MW wind farm on hold due to a lack of transmission and suppressed natural gas prices. Now it appears he is dropping the wind portion entirely, at least for the next few years.
Pickens’ decision to abandon wind is not actually an indicator of the broad health of the industry, says wind analyst Matt Kaplan with IHS Emerging Energy Research. It’s more a reflection of how specific markets around the U.S. are playing out.
“It doesn’t surprise me because of the market he chose to develop in. Building large scale wind projects in Texas simply doesn’t make sense at this time” due to a heavy reliance on natural gas and low demand for renewables (after a massive ramp-up) through the state-level target, says Kaplan.
Therefore, it’s been incredibly difficult for so-called merchant projects – farms selling wind power on the spot market that make up about 40% of the Texas wind market – to beat out the spot prices for natural gas. At the same time, developers looking for long-term agreements can’t seem to find those either, as Texas utilities have purchased enough wind to meet their required targets for now.
What we’re seeing, Kaplan says, is that development has shifted to California and Northeastern states with a lot more room in their renewable energy procurement targets. So even though natural gas prices are lower, utilities are more willing to sign power purchase agreements in these areas.
The state still leads the country in total MW developed, with over 10,000 MW. Wind development in Texas has dropped precipitously in the last two years. In 2008, the state saw 2,600 MW of projects built. In 2009, that figure fell slightly to 2,300 MW. Last year, only 730 MW were built in the state, and this year Emerging Energy Research predicts we’ll see only 300 MW installed.
Meanwhile, across the rest of the country, development will stay relatively flat. Kaplan thinks we’ll see between 5 GW and 5.5 GW of new installed capacity in 2011, which is around the same as 2010 (5,115 MW). That level of development, between 5 GW and 6 GW, will probably stay consistent over the next few years.
Moving from 10 GW new capacity in 2009 to 5.1 GW in 2010 and beyond seems like a defeat. But Kaplan thinks it’s probably a good thing for the sustainability of the industry.
“It’s a return to reality; 10 GW per year just wasn’t sustainable. We think it’s really a more healthy trajectory for the industry – this moderation is going to make wind more cost competitive over the long term by forcing companies to improve technology, build better projects and reduce costs,” says Kaplan
Indeed, when I attended the American Wind Energy Association’s Wind Power 2010 conference last year, the theme for many of the companies was “back to basics” – meaning a focus on quality projects, better technologies and steady cost reduction.
– Stephen Lacey