Wednesday, November 19, 2008

The Pickens’ Plan

I am sure that most of you have read or at least heard about the Pickens’ plan. Oil tycoon T Boone Pickens has a plan in which the United States uses wind energy to generate electricity which will replace natural gas derived electricity which will allow all that natural gas to be used to fuel vehicles, thereby displacing oil.

Sounds good, but will it work? The short answer is no, there are a lot of holes in the fundamentals (not just the details) of the plan that have not been addressed.

The long(ish) answer is that there are many reasons why both the Pickens’ plan is impractical.

There are two types of electrical generating sources in the US: baseload and peak.

Baseload plants, just like the name would imply, provide for the base electrical demand on the grid. These are big units like nuclear and coal plants. They are baseloading units because they have the lowest $/kW operating costs (fuel prices) and the highest reliabilities and capacity factors.

Peaker capacity is almost entirely comprised of stationary natural gas powered turbines and supplemental natural gas firing into boilers. This is because natural gas is expensive but cheap to build.

As a commodity, electricity is special in that it cannot be easily stored in large quantities and it has to be generated as needed: to much of it and you crash your grid, too little of it and you crash your grid. Determining how much electricity needs to be put up on the grid at any given moment is a very complex process. Any shortcomings in your baseload capability has to be made up for with your peaker capacity. Natural gas turbines make for good peaker sources because if you need X number of MW of additional electricity, you know with a high level of certainty that you can generate what you need, and gas fired sources can come on line within minutes, which is nice if you lose a baseload generating source for some reason (happens all the time).

How much generating capability a utility builds and keeps on line is determined by how much electricity they need divided by the capacity factor of the source they are installing. A coal fired plant has an average maximum capacity factor of about 85%, so in order to meet 100MW of electricity demand with coal you would have to build a plant that had a nameplate capacity of 117MW (100/.85).

So what does this have to do with the Pickens’ plan and why it won’t work?

The crux of Picken’s plan is that we replace natural gas derived electricity and replace it with wind powered electricity. Wind power is variable, just like the wind, so you cannot rely on it to provide exactly as much power at the precise time you need it to. To compensate for this you either have to use a backup power supply to compensate for all those times that the wind isn’t blowing right, like natural gas. Since wind only has a capacity factor of around 33% you have to install 3 times as much. In reality a combination of both would be needed, but the Pickens’ plan does not take any of this into account. He prices the replacement of natural gas with wind on a watt per watt replacement cost.

In addition to the cost of the implementing the plan to provide a reasonable degree of reliability to avoid rolling blackouts, controlling a system that would be prone to such wild and dramatic swings in load would be a significant engineering challenge (lots more money).

There is also the question of whether or not this even provides us all that much energy security.

The US uses about 39.8QBTU’s of oil, imports 58% of that and uses 70% for transportation meaning we import 16.2QBTU’s of oil for transportation alone. Out of that 16.2QBTU, we use about 55% for cars or 8.91QBTU, the res is for commercial trucks, planes, trains and boats. The US uses about 23.5QBTU’s of natural gas, imports 20% of that and uses 30%, or 7.1QBTU’s for power production. This means that we will still have to nearly 2.0 QBTU’s of natural gas to make up for this differential. Doesn’t sound like a lot, true, but our production of natural gas in the US has been nearly flat for the past decade. So instead of importing oil from volatile areas of the world whose inhabitants and governments despise us, we now have to import natural gas from volatile areas of the word whose inhabitants and governments despise us.

In short, the Pickens’ plan will cost more that is estimated, by an order of magnitude once everything is factored in and will not significantly reduce our reliance on foreign energy.

Unfortunately when the press and pundits weigh in on this, they do a terrible job of addressing any of these issues. An example of the 4th estate’s failure to clarify these issues is Obamabot Anthony Cefali’s ill-informed and gushing piece about Obama’s willingness to implement the Pickens’ plan:

Why is Pickens’ Plan important? Simply because it’s main goal is to divert all of our oil and natural gas to the transportation sector. Factories will no longer use natural gas because they will be powered either on site or through an electric grid powered by wind and solar. The plan stresses efficiency and centrality. It could also potentially save the US $300 billion in oil expenditures. Citing Obama’s plan to end dependency on foreign oil in the next ten years, Pickens expects that the first step will be implementing major parts of his plan.

The major parts of the plan involve the US specially equipping larger vehicles (buses, trucks, etc.) to run on natural gas. This would take a huge load off of our dependence on oil, in turn causing prices to drop because factories and businesses will have no need for it. Demand for oil would come solely from consumers, as would carbon dioxide emissions (the nitrogen oxide emissions will come from the natural gas burning buses).

The author’s lack of even the most fundamental understanding of how the nations electrical grid works (he is a biology and English lit major at UW Madison) is only compounded by the certainty he has that this plan, under the ever watchful eyes of the Dear Leader naturally, will work. Industry uses natural gas primarily for process heating applications, and electricity makes a poor and very expensive substitute for this (trust me, I recently priced out a 10MMBTU electrical heater and it was about $850,000 dollars, the 10MMBTU natural gas heater was $50,000.)

Pickens plan might work if we were willing to spend the money for it and the money for the additional transmission and distribution infrastructure needed, and the additional money to make 20% of our grid reliant on a variable output source, and additional money to develop offshore gas production and transportation infrastructure for Alaskan natural gas (good luck with the last 2).

I am all for reducing our dependency on foreign oil, that why we need to reduce what we use, drill here at home, develop the trillion plus barrels we have in shale deposits and build lots more nuclear plants not blindly buy into a woefully underpriced plan.


  1. Great post, I can tell you know a lot about the industry. Keep in touch, I might need a job some day as this Navy thing is coming to an end soon ;).

  2. Thanks.

    I always say that you cant swing a dead cat in a power plant without hitting a USN veteran.