Tuesday, July 08, 2008

A Man, A Plan

T. Boone Pickens, well-known oilman and corporate raider, has a plan for reducing America's reliance in imported oil by more than one-third within a decade or so. When I opened the morning paper, I found a full-page ad heralding the Pickens Plan and directing my attention to http://www.pickensplan.org/ for the details. The idea behind the plan is simple and appealing: ramp up wind power to displace natural gas from power generation, and then use the natural gas to fuel vehicles, backing out gasoline and diesel fuel. The net result of this shift would reduce US expenditures on imported petroleum by perhaps $250 billion per year at current prices. Although the plan appears feasible, its implementation would face serious obstacles. More importantly, its key provisions appear to conflict with other solutions that offer bigger efficiency improvements and greenhouse gas reductions. Perhaps its largest benefit is in laying out a clear set of choices for discussion, in contrast to the wonkish complexity of most energy policy proposals.

The essentials of the Pickens Plan involve boosting US wind power to 20% of our electric generation mix, equal to the net generation currently derived from natural gas. This element of the plan draws on the DOE's recently released feasibility scenario for 20% wind, about which I blogged in May. That would free up the nearly 7 trillion cubic feet per year of natural gas supplied to the electricity sector for direct use in transportation. The energy content of that gas is equivalent to 4 million barrels per day of gasoline, 44% of our 2007 consumption. This would also save the 200,000 barrels per day of ethanol currently blended into that gasoline, for use elsewhere. Ignoring the impact of these drastic changes on refinery yields, the net result would displace at least 34% of our net 12 million barrel per day petroleum imports. Thus, as one would expect from someone with Mr. Pickens's background and resources, the math behind his plan works.

Of course, achieving all this would require more than just determination. If you accept that the necessary technical and logistical hurdles identified in the DOE's 20% wind scenario can be overcome promptly, including increasing the average on-line capacity factor of wind farms by 50% and installing enough new high-voltage transmission lines to move all this wind power from the central-US "wind corridor" to its ultimate markets, then the current wind power sector must grow by a factor of 18 within 10 years, and 44% of our vehicle fleet--over a hundred million cars and SUVs--must be built or converted to run on natural gas within the same interval, along with an enormous expansion of natural gas refueling infrastructure. In the process, existing natural gas-fired turbine generating capacity worth on the order of $400 billion would essentially be abandoned--generators that, by the way, account for much of the idle overnight capacity that would otherwise be available to recharge plug-in hybrids and electric cars. This gets to the crux of the hard choices inherent in the Pickens Plan.

Our national energy mix is better thought of as an "energy diet." In a diet, not all calories are alike, and the same is true for BTUs and kilowatt-hours. The power derived from natural gas provides much of the mid- and peak-load capacity in many US power markets. This is dispatchable, on-demand power that can shift rapidly to meet changes in the load. Without expensive energy storage, wind power is intermittent and unreliable--the opposite of dispatchability. Although some of this problem can be overcome by a sort of portfolio effect from widely-dispersed wind farms, the drastic shift suggested by Mr. Pickens would abandon the natural synergies between wind and gas-fired power, including the interesting option of compressed-air power storage.

The impact of the Pickens Plan on US greenhouse gas emissions must also be evaluated carefully. Mr. Pickens is certainly correct that natural gas vehicles emit fewer local pollutants and less CO2 than conventional cars, but for a change on this scale, we must consider the bigger picture. If wind power can grow to 20% of net generation and somehow overcome its intermittency problem, what is the best use of those green electrons? Is it in displacing one of our lower-emitting sources of electricity, in order to replace a fuel emitting 20 lb. of CO2 per gallon with one that emits 14 lb. of CO2 per energy-equivalent gallon? Or should we use that zero-emission electricity to back out coal-fired power producing 2 lb. of CO2 per kWh, contributing in aggregate over one-third of total US emissions? A similar argument can be made, based on the relative energy-conversion efficiencies of gas turbines vs. internal combustion engines.

Because of its scale, the Pickens Plan would affect other efforts to make the US vehicle fleet more efficient. Although the market is certainly large enough to accommodate both natural gas cars and plug-in hybrids, idling our natural gas turbine generating capacity and tying wind power to the demand that gas currently satisfies would make the adoption of electrified vehicles more challenging. It is also hard to imagine conducting two fleet turnovers on the scale required to have a meaningful impact, simultaneously. In other words, at least at first blush, adopting Mr. Pickens's approach might result in electric vehicles being pushed off for another decade or more.

Now, a cynic might suspect that the Pickens Plan has as much to do with promoting Mr. Pickens's investments in wind power as it does with addressing our national energy crisis. I prefer to give him the benefit of the doubt on this, and credit him with introducing an idea that merits further analysis and consideration. Discussing a proposal as concrete as this one might help frame our energy problems in a clearer context and prompt more action. Nor do I think the Pickens Plan must be considered as an all-or-nothing proposition. Natural gas could be an attractive vehicle fuel, if it didn't merely shift oil imports into LNG imports, or cannibalize a key part of our low-emission electricity portfolio. This prospect should increase our incentive to produce more gas in North America. At the same time, wind power should and will compete with gas power, but at the margin, not in its entirety, and all of this must take full account of the need to reduce US greenhouse gas emissions, a process that would be aided by putting a price tag on those emissions. On the whole, we should be grateful to Mr. Pickens for providing us with an interesting, non-partisan "straw man" proposal, to help us grapple with these complex issues.

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