Tuesday, July 08, 2008

T Boone Pickens Wind Plan

A regular reader wrote:

I recommend reading T. Boone Pickens's energy plan. We all know this guy has made alot of money with oil in the last 50 years and he openly admits he plans on making money in the wind farm business. He is putting some serious cash in this program at least from what I can tell.

I do not recall the numbers but T. Boone has won massive subsidies. Of course, if you can win enough subsidies, about any old energy system will do. T. Boone believes that he can replace 22% of US power production with wind power within 10 years. In the next 12 years, China plans to build about 130 nuclear power plants. The most recent announcement was for 100 Westinghouse Plants. By the year 2025, China will be producing much more than double the amount of nuclear power that is being produced in the USA today. This is more than double the amount of power to be produced by Pickens. It is anticipated that the construction time on the Westinghouse Plants will be reduced to 2 years each. One big difference is that the wind blows strong in the early morning but dies down during the heat of the day, when power needs are the greatest. Wind, like nuclear, is capital intensive. Add in the cost of massive storage batteries and the cost goes haywire. If one is going to spend that kind of money, one should at least get consistent results. Take away the subsidies and nuclear easily beats the price of wind. Furthermore, recent advances in nuclear have reduced the costs even more. Over the past 30 years, nuclear has gone from 1% efficiency to 4% efficiency, recent discoveries are expected to take us to 6%. It is easy to see this efficiency increase in the numbers. During a time when no new power plants have been built in the USA, the amount of nuclear power produced has steadily increased.

With financial stocks down for the "third dip", I think it would be a bad move to chase any high energy plays right now. At the least, there should be a correction as the rotation works its way through. Banks are holding mortgage backed notes that are trading for pennies on the dollar while the congress continues to work on a bail out plan. I do not support a bail out plan but I expect one to pass. Such a plan will give the banks a nice bump and there will be follow through. It will be interesting if there is some sort of grand compromise passed in congress, one in which drilling is permitted and banks are rescued. Such are the dreams of a congress that polls at 9% approval. Such are the kind of deals that can get passed just a few months before an election.