Gone with the wind. Robert Bryce writes in today’s WSJ:
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.