T. Boone is Getting on the Gravy Train
By Michael R. Fox Ph.D., 7/23/2008 12:20:01 AM

“This nation is exquisitely tied to science and technology with a citizenry which knows little about science and technology”—Carl Sagan

Oil man T. Boone Pickens recently announced his own large program to help get America off its oil addictions. His message in his own Texas twang starts off appealing, while he properly and accurately reports on the $700 billion annually we now spend on imported oil, now at 70% of our total oil consumption. That is a huge sum and economically crippling to be sending off shore.

Correcting this foreign dependence is essential for the nation’s energy security and balance of trade issues. A nation importing oil is not a new problem, having, for example, been solved nearly 40 years ago when the French replaced oil-fired electricity with nuclear energy. Our large dependence on foreign energy is dangerous to our nation’s economy and future. Just as dangerous are some of the proposed energy solutions offered to help this situation.

Regrettably, near the middle of his advertisement T. Boone wandered off into an alternative energy universe, proposing that wind and solar energy replace the current 22% of our electricity produced by natural gas. Neither source is a true alternative, and are merely erratic, unreliable, supplementary energy sources.

Leaders from both sides of the aisle throw out wind energy as a cure-all reliable source of future electrical energy. It most assuredly is not.

One of several major problems with the wind mill option is that it is a major beneficiary of huge Federal tax credits and accelerated depreciation allowances, as well as many local state, city, and county benefits. These are the primary reasons why some of these big players are interested in wind energy. It is not about the energy.

An excellent cost analysis of the Pickens proposal has been prepared by Glenn Schleede at http://tinyurl.com/6nyk5j .

The following are estimates, necessitated by the lack of more precise tax and revenue data. Schleede assumes that Mr. Pickens spends and/or borrows $10 billion for the nation’s largest wind farm, having 2700 windmills with 4000 installed Mw(e) capacity proposed windmills. Mr. Pickens plans to earn 25% on a $10 billion investment, which sound risky, but in fact it is almost guaranteed, thanks to a whole host of federal and local subsidies.

These include the accelerated depreciation allowances which permit the entire investment to be depreciated to zero in 6 years, 70% in the first 3 years. Assuming a 35% tax bracket, this would permit the avoidance of $3.5 billion in federal taxes.

In addition there is the Production Tax Credit (PTC) of 2 cents/kw-hr. By itself the PTC would permit the avoidance of taxes over 10 years, another $2.45 billion, assuming an optimistic 35% capacity factor.

The worst operational features of wind energy production are that they are unreliable, intermittent, and non-dispatchable. That is, the produced wind energy cannot be scheduled for use or for sale or transfer to other utilities on a given schedule. This makes the electrical energy from windmills less valuable than the energy from other far more dependable sources.

Further, windmills operate with a capacity factor of 30%. Life cycle performance numbers are not available. That is, 70% of the time they produce no energy. Coal, hydro, and nuclear are typically much higher. The average nuclear capacity in the US for example, is about 90%, and much of the remaining offline time is for scheduled outages.

Furthermore, that 30% of the time the wind energy is produced at varying times of the day, in varying amounts, and so becomes a very undependable, non-dispatchable source of energy.

Tax payers and rate payers are on the hook for much more subsidies for wind mills, too. Since the windmills operate at best only 30% of the time, other more dependable sources of electricity must be constructed and held as a backup in case the wind dies down, which it often does. Often the backup energy is held in “spinning reserve”. When the backup energy system is operating, it is consuming energy, consuming fuel, releasing the usual gases. Remarkably, the wind mill lobby has been successful in shifting the costs of operating these backup systems to the consumers and taxpayers, and do not pay for it themselves.

For example, the State of Texas also has some very generous tax benefits. They get favorable treatment under Texas’s “franchise taxes”. According to Schleede the entire cost of the wind project may be deducted from the company’s taxable capital.

As with many other states Texas also has Renewable Portfolio Standards (RPS) as well as Renewable Energy Credits (RECs). These require electric utilities to have a fraction of its electricity (often 20%) be produced from “renewable” sources. This virtually assures under penalty of state law that T. Boone will have customers to buy substantial fractions of the energy he produces. Wouldn’t it be nice if all small businessmen had customers who, under the full force of state law, were required by law to purchase your goods and services. And they call it “free markets”. Windmill owners have such forced customers locked in by state law.

Another subsidy involves the remoteness of many wind farms and the subsequent need for additional transmission lines. Texas political leaders have mandated that additional transmission capacity will be built and that the costs be borne by electric customers in their monthly bills. This requirement amounts to another huge subsidy for the wind farm owners.

Texas has a wind mill arrangement similar to many other states that makes it hugely profitable for the owners, plus very costly to the customers, for an energy system which is notoriously and inherently unreliable. Because wind turbines are so unreliable, they cannot substitute for the reliable generating capacity required to meet growing electrical demand or to replace old generating units.

A nation which has an economy dependent upon the whims of low grade energy has an economy headed for collapse. Why would anyone want that?

Schleede properly concludes that the long list of huge subsidies of huge sums going to the wind mill owners who are only producing small amounts of unreliable energy, are very good reasons for eliminating the subsidies.

found here

The Pickens Plan