On July 22, 2008, T. Boone Pickens appeared before the Senate to present the Pickens Plan – to replace the 22% of electricity produced by natural gas with wind power and use this natural gas to fuel cars. According to the Boston Globe, Senator Joseph Leiberman called Pickens plan "bold ... [he] hoped Pickens’ testimony would infect people in a position in Washington to do something about it." Pickens announced his plan several weeks ago and said that in the following weeks he would reveal more of his plan. But why did he postpone the details?
Now he tells us that he wants the government to mandate that all government vehicles run on natural gas! Where will all the natural gas fueling-stations come from. It just so happens that Pickens owns all the existing natural gas fueling-stations. I guess I just answered by own question.
I think Pickens proves the argument that I advanced in my recent piece, The Price of Oil is the Message, that government should use taxes and regulations to encourage renewable energy, but it should not endorse specific projects. I wrote, "Trying to second-guess scientist, engineers and entrepreneurs can only encourage partisan bickering, constituent pork and lobbying by established industries."
Let’s give Pickens and all entrepreneurs the same regulations and tax schedules and let them compete to produce renewable energy sources. They can have feed-in-tariffs – guaranteed prices for renewable electric power, accelerated depreciation – fast tax write-offs for renewable energy capital equipment, cap-in-trade – penalties and credits for carbon dioxide release, and a carbon tax. But they must sell the market on their specific plans, not Congress.
Pickens Plan has serious problems. The public will only buy dedicated natural gas cars if there are natural gas fueling-stations. Unless the government mandates natural gas vehicles, building such a network would be risky business.
Natural gas cars will have problems competing with electric cars. Most of the electronic and motor technology of electric cars is well developed. Rechargeable battery technology is advancing rapidly. Current lithium ion batteries give a 40-mile range (78% greater than the average commute).
The lithium ion battery technology was driven by laptop and handheld technology. It is now driven by electric car technology. The lithium ion battery has advanced significantly in the last few years, but it’s about to be eclipsed by a nano technology version that could greatly extend range and reduce charging time.
Pickens Plan’s worst problem is that it compromises the ability of the power grid to manage peak loads. Power grids must accommodate varying loads. Some load changes are fast and others are slow. A power mix must include "base-load" sources – that produce constant power near capacity, "load following" sources – that can ramp-up or down to accommodate slow varying grid demand, and "peaking" sources – that can respond quickly to load transits. Currently, natural gas is the primary peaking source. Removing natural gas leave hydroelectric as the only source that can accommodate peaking demand.
While hydroelectric can accommodate all load variations, it operates most economically near capacity – base-load and provides about 11% of US electricity. To operate it as a peaking source, it would have to operate at a fraction of capacity to allow stand-by capacity for peaks. Pickens plan would thus remove a large part of a renewable energy source from the grid!
Hydroelectric is particularly suited to complement wind generation. Wind often produces surges when they are not needed. "Pumped storage," – pumping water to a storage pool – allows this energy to be stored and used when needed by the hydroelectric generator. Such storage can be particularly effective if it is released as the generator is operating near capacity, since hydroelectric energy cost is primarily based on capital expenditure.
Pickens needs to put all of his cards on the table face-up. He needs to develop a business plan to persuade other venture capitalists to invest in his endeavor. Offering incomplete proposals as political propaganda to lobby the government to subsidize his ventures over others is exactly what’s wrong with the present system.