EnergyBiz - January/February 2008 - (Page 12) » FInanCIaL FRont Lassoing Panhandle Wind oilmAn plAns huge complex By gARy m. steRn T. boone picK ens is nobody ’s Fool . picK ens, who has a net worth of $2.5 billion and is ranked as the 131st wealthiest person in the United States by Forbes, is not prone to invest in pipe dreams. Then why is Pickens, who runs BP Capital Management, a private equity firm, and Mesa Power, building a 4,000-megawatt wind energy facility in Pampa, Texas, in the Panhandle section about 70 miles from Amarillo, which could cost as much as $10 billon? In 2006, wind power facilities totaling 2,500 megawatts were built nationally, making them the second largest source of new generating capacity in the United States, according to Randall Swisher, executive director of the American Wind Energy Association. Pickens’ wind-power facility would be 60 percent larger than all the wind power projects introduced in the United States in 2006. Wind power, however, hasn’t been considered an instant moneymaker or hasn’t generated enough payback to warrant its major capital expenditures. Does Pickens, who is often one step ahead of the curve, know something that the rest of us don’t? Is Pickens’ 4,000-megawatt new facility a sign that wind power has come of age? In its planning stages, Mesa Power hired leading consultants to investigate the cost effectiveness of wind power, conduct reviews of existing facilities and wind farms, and become acquainted with state-of-the-art generating equipment and transmission. After completing the research, Mesa Power concluded, “It was feasible, viable and profitable,” said Mike Boswell, a vice president at BP Capital Management based in Dallas. Currently, wind power provides about 2 percent of the power consumed in Texas, but Boswell expects that by 2020 it will furnish about 20 percent of Texas’ energy needs. And Pickens will command a large slice of that market. Wind power “has become a much more important segment as the price of petroleum and NewsFlash natural gas has increased,” China Greenhouse Boswell said. Gas Trade The genesis of the project The Chinese springs from a previous government wants to water project in which Mesa step up its involvement Power agreed to deliver in trading greenhouse 200,000 acre-feet of water gas emissions credits, according to the a year to the northeastern Associated Press. portion of Texas, explained The government has Boswell. That same acreage set up a special fund will be used as the site for that will provide loans construction of the turbines. and technical help to cut emissions and promote If the wind project trading of emissions reaches its full size, it will credits. The fund will be have 1,500 wind turbines, used to increase public each generating from 1.5 awareness of climate change issues. to 3 megawatts of power. T. Boone Pickens sOurcE: ap phOTO/FiLE Construction is scheduled to begin in 2009. The initial turbines will begin generating power in 2011, while construction takes about eight years to complete. The project will have four phases and cost about $1.7 million to $1.85 million per megawatt for generating equipment and another $500 million to $800 million for transmission lines. If economic factors change, its scale could be reduced, Boswell said. Once completed, Mesa Power expects to “enter into power purchase agreements with a single entity at a fixed price for a number of years and in off-take agreements, which are more of spot marker concepts. We anticipate getting more money for the power than what it takes to put in the facility,” Boswell said. The primary audience for wind power will be consumers throughout Texas, though commercial businesses will also be targeted. Boswell acknowledged that the current cost of wind power is more expensive than electricgenerated or nuclear power by about 10 percent and is more comparable to natural gas prices. Pickens is betting that as demand intensifies to reduce carbon dioxide emissions, the need for clean, environmentally sound energy will increase. Wind power will therefore play a more important role in meeting our 12 E n E rgyB i z January/February 2008 http://www.energycentral.com
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