How You Can Invest in the Pickens Plan 37 comments
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A friend recently asked me how to invest in the Pickens Plan. I named a stock (see below).
He then surprised me by saying "You are the fifth person I've asked, and no one else knew how. Several said it could not be done."
You can invest in T. Boone Pickens's plan. Here's how:
The Plan
T. Boone's plan is both simple and audacious.
- We will build wind farms all over the Great Plains.
- Build the necessary transmission to get that electricity to cities, displacing natural gas used in electricity generation for the use in automobiles.
- This will give us an alternative, clean transportation fuel, to replace oil, which has peaked.
- It will also cause an economic revival for rural America.
There are investments available for you to profit from all of these steps (so long as they are more successful than is currently expected by the market). Most of the links below are to articles about how the company fits into the clean energy picture.
1. Wind Farm Investments
To profit from the massive build out of wind farms, look no further than wind turbine manufacturers, and other wind related stocks.
- Among individual wind stocks, Zoltek (ZOLT) is currently looking relatively cheap because of a negative analyst report. If you believe T. Boone will pull it off, now is a probably a good buying opportunity.
- T. Boone is buying his turbines from a longtime favorite of this blog, General Electric (GE).
- If you want to play wind without picking particular manufacturers or suppliers, try one of the new wind ETFs, First Trust Global Wind Energy (FAN) or PowerShares Global Wind Energy (PWND).
- Makers of power conversion devices to turn the the "wild AC" produced by wind turbines into more domesticated power should also benefit.
2. Transmission Investments
We've been pushing transmission investments at this blog for a long time. It's nice to have an oilman hop on our bandwagon. Here are some of our top picks.
- Long distance transmission from the Great Plains to coastal cities could be most efficiently accomplished with new high voltage DC [HVDC] lines. Leaders in HVDC are the ABB Group (ABB) and Siemens (SI).
- A more speculative play, Composite Technology Corporation (CPTC.OB), has technology not only for a superior transmission cable, but also for an innovative wind turbine.
- Other interesting ways to play transmission are ITC Group (ITC) a Midwestern transmission-only utility, and two I highlighted in February, National Grid (NGG) and Quanta Services (PWR).
3. Natural Gas
- The most direct investment in the Plan is natural gas fueling stations. Clean Energy Fuels (CLNE), operates fueling stations for natural gas fleets, as well as providing fueling stations to the public. T. Boone owns about 37% of the company personally, serves on the board, and founded the predecessor company in 1997. His wife owns another 7%. Although he just recently hit the media with it, T. Boone has been thinking about peak oil for a long time. (This is the stock I told my friend about.)
4. Rural Resurgence
- Massive wind investment should be good for real estate values in rural towns in windy areas, mainly the great plains. You don't have to buy the land that the wind farm is on to benefit; the economic revival should help land values in towns nearby, too. The workers have to live, eat, shop, and sleep somewhere, and county tax rolls will benefit, leading to improved public services.
- Another way to play the same trend would be to invest in a Midwestern REIT, such as Investors Real Estate Trust (IRET). While this should profit by an improving Midwestern economy, I'd prefer a REIT with a rural focus, but have been unable to find one.
Quibbles
- Insulation. Pickens dismisses insulating homes as "too slow." I'd guess his real problem is that he has no way to profit from insulation on a large scale, so he's not going to waste his money and time promoting it. But you can profit from insulating homes, which not only will save natural gas used in heating, but is usually an excellent investment for the homeowner. About 21% of US natural gas goes to residential uses, nearly as much as is used in electricity generation. To invest in insulating homes, Owens Corning (OC) is a good bet. Another home efficiency improvement is a ground source heat pump. Waterfurnace Renewable Energy (WFFIF.PK) sells extremely efficient ground source heat pumps, which can displace gas used for heating with a smaller amount of electricity from wind.
- Intermittancy. Pickens oversimplifies when he says we can simply slot in 22% of electricity from wind power and displace electricity from gas. At the current low penetrations, wind will mostly displace natural gas, but without other sources of dispatchable power, such as Concentrating Solar Power [CSP], and/or much improved smart grid infrastructure, wind will begin to displace baseload generation such as coal (or the wind generation will be curtailed). Displacing coal is a good thing, not a bad thing, but Pickens is most likely not talking about it because it would muddy his message. The improved transmission called for in the plan will help, but in no case can wind simply displace natural gas one for one on our electric grid. It's like trying to fit a square peg in a round hole. You either have to trim down the peg (wind curtailment) or make the hole square using demand response and other smart grid technologies.
- Water. Some environmentalists have been protesting the whole plan as a shell game to win permission for a water pipeline, to bring water pumped from an ancient aquifer to thirsty Texas cities. While pumping water from an ancient aquifer is not a good idea, opponents are too simplistic. First, no account is given to the water which would otherwise be used in electricity generation without the wind farm. Second, the water will likely be pumped with wind power when electricity prices on the grid are low. This will even out the net output of the wind farm, and displace less clean electricity which would otherwise be used to pump or purify water elsewhere. Finally, if the giant wind and transmission project is really just a quid pro quo to get us to accept the pipeline, he's essentially offering us a $10 billion plus wind power quid so that we'll ignore the $1.5 billion water pipeline (and the powers of immanent domain which are necessary to put the necessary transmission in place) quo. It sounds like a good deal to me.
DISCLOSURE: Tom Konrad and/or his clients own ZOLT, GE, ABB, SI, CPTC.OB, ITC, NGG, PWR, CLNE, OC, WFIFF.PK.
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This article has 37 comments:
Most of the nat gas power generators in the US today are operating at a loss due to their own demand for the fuel.
If the Pickens plan were to initialize, the best way to invest in it would be nat gas producers like CHK, DVN, UPL, ect...
Trinity Industries, TRN
You need two lakes, one above another.
When the wind is blowing, you use the turbines as pumps and shift the water up hill to a higher lake and when the wind stops the pumps become generators and the water flows down hill again.
The Swiss have been secretly doing this with cheap nuke power from France which they quietly use at night, when the France electricity demand is low, they pump Swiss lake water uphill. and let it run turbines during the day. smooths out the electricity flow.... Maybe this is what Boone is planning.
I don't believe many more coal-fired plants will be built because environmentalists have been successful in challenging them on economic grounds:
Global Warming will cause restrictions on future carbon emissions so coal plant operators may not be able to recover their capital costs over the long operating life of these plants. If built the shareholders will loose money because the public utility commissions that regulate these plants will not allow the cost to be passed to the consumers and without that guarantee the utility companies will not build the plants.
Natural Gas fired electric production costs have now become the base cost for electric production in this country.
(Clean coal has too much carbon emissions and sequestering coal plant emissions has not be shown to work yet and may never work at an acceptable cost for large scale plants.)
Is it legit?
While, I agree with the sentiments of "mertenfam" and "user 199792", I must respond to one comment by "Breadnight".
Pickens is very clear about the initial thrust of natural gas usage and vehicle conversion. If you read the full plan, he takes the Port of Long Beach model for converting heavy equipment and eventually the highway trucking system as the most reasonable, short-term (10 year) solution to converting electricity generation from natural gas and shifting that supply to the heavy equipment users. Unless there is a rush by auto manufacturers or passenger engine re-tooling and scads of refueling stations (neither very likely within this frame), there should be a modest uptick in nat gas demand, but the shift in power generation usage to wind would more than likely offset extremes in the gas market.
Why some wind mills are operating and others aren't: Broken. Down for maintenance. Not commissioned, yet.
boston.bizjournals.com...
stockcharts.com/charts...
In addition, Beacon Power is exploring energy storage as a way to integrate wind power in California where transmission capacity is limited. Further details are in the link:
www.reuters.com/articl...
> jack
Thanks for the note about wind energy storage. As Pickens himself acknowledges, it is the key to making wind farms work.
Howver, LNG heavy vehicles have been omitted from this discussion. They are why Boone is building wind farms in the first place. Some companies involved are Kenworth, Cummins, and Westport Innovations.
A lot to think about for a long-term investor for sure, short term probably money to made in a volatile market.
one "pro" that should be considered but rarely is, is the cost of defending a difficult to find and increasingly expensive substance called crude oil", or perhaps more appropriately, "cruel oil".
If everyone factors in the requisite defense and war costs of God awful escapades like Iraq (estimated to be in the 3-5 trillion dollar range overall) coupled with economic servitude to the likes of OPEC nations
the "pros" should take on additional weight.
How many wars, lives lost and national treasure squandered will it take to make us wake up to the fact that reliance on foreigners for a central element in our economy (transportation of goods, services and ourselves) is a dead end indeed?
If our national net economic loss is 700 billion dollars as Pickens suggests, adding in Professor Joseph Stiglitz' 3-5 trillion dollars makes the cost absolutely prohibitive and a minor thing like the human cost increases that figure beyond an imaginable level.
With the discovery of the recent massive reserves of natural gas there is no sane reason to do whatever is necessary to break up our dependence on the most un-American fuel of all, crude oil.
one "pro" that should be considered but rarely is, is the cost of defending a difficult to find and increasingly expensive substance called crude oil", or perhaps more appropriately, "cruel oil".
If everyone factors in the requisite defense and war costs of God awful escapades like Iraq (estimated to be in the 3-5 trillion dollar range overall) coupled with economic servitude to the likes of OPEC nations
the "pros" should take on additional weight.
How many wars, lives lost and national treasure squandered will it take to make us wake up to the fact that reliance on foreigners for a central element in our economy (transportation of goods, services and ourselves) is a dead end indeed?
If our national net economic loss is 700 billion dollars as Pickens suggests, adding in Professor Joseph Stiglitz' 3-5 trillion dollars makes the cost absolutely prohibitive and a minor thing like the human cost increases that figure beyond an imaginable level.
With the discovery of the recent massive reserves of natural gas there is no sane reason to do whatever is necessary to break up our dependence on the most un-American fuel of all, crude oil.
There was nothing scurilous about the Swift Boat program to demolish a politician that needed to be demolished since he laid claim to heroics that apparently most of his own sailors chose to dispute. All Pickens did was spend a little of his own money to support the effort and let it happen. "Scurilous" indeed, the attack was out in the open, nothing secret, names named, books written and NOBODY SUED FOR SLANDER OR ANYTHING ELSE. That ought to tell you something about Senator Kerry.
Even in the best case scenario, it's a drop in the bucket. It is simply impossible to generate enough wind power that it could meaningfully reduce US usage of natural gas for electricity generation and to divert that to powering motor vehicles.
Anyone who spends ten minutes with the numbers can see this. Most electricity in the US is generated from coal, and most natural gas is not used to create electricity. Even if you could reduce electricity generation from natural gas by 10% (a totally unrealistic assumption, by the way), you would only reduce demand for natural gas by about 3%. The math does not compute.
Ultimately, the Pickens Scam would make the US even **more** dependent upon imported energy, because the US lower 48 is depleting what is left.
Over time, the US is destined to import more of its gas from foreign sources, which means more money for the countries that have it, such as Russia and Iran. In other words, the usual suspects.
The Pickens Scam ultimately appeals to the greed and stupidity of the American voter, who doesn't want to accept the reality that the quickest route to using less imported energy is to consume less energy.
That means downgrading your lifestyle and figuring out how to use less energy, even if it means walking, using public transit or just staying home. Americans apparently lost their rationing gene sometime around 1945, and they are bound and determined to never, ever get it back.
(None of this is a criticism of the article, by the way. I'm watching GE, too, but I doubt that Pickens can buy enough windmills to do much for their fundamentals.)
Pennystocks2, you're right. No one in their right mind would want to live within sight of a windfarm. I've seen them up close and personal for an extended period of time, and they are akin to chinese water torture. Fortunately, there are places on the Great Plains, where no one lives and no one would want to.
Pickens is selling a pipe dream that the US is going to become energy independent. The US has a snowball's chance in Hades of achieving energy independence.
Energy independence cannot possibly be achieved in the United States without major lifestyle changes and reductions in commerce that Americans will simply not make, under any circumstances.
The Pickens Scam is simply a corporate welfare scheme that will produce no bang for the buck for anyone, except for Pickens and his cronies. It's a pork barrel project that appeals to our base instincts and to those who can't do a bit of research or use a spreadsheet.
On Aug 26 03:09 PM jtsymbo wrote:
> You're right on target Pch101. Once again, we need to go nuclear
> for electrical power, and pursue plug in hybrids for our cars. This
> will help us get us through the transition period until possibly
> hydrogen becomes feasible.
Yes, I know about the "butterfly effect" and did know long before "Jurassic Partk).
On Aug 22 01:14 PM mouse85 wrote:
> All of these articles on wind power, yet I have never seen a mention
> or consideration of the "butterfly effect". (Any Jurassic Park fans
> out there?) Use of worldwide wind power could be more harmful to
> our enviornment than carbon emissions from coal.
And certainly energy independence is possible, just not for 30 years or more. It would take a plan and some advances in technology. If you think those are not likely to happen, then you haven't studied history and noticed what people do when pressed. Now, for the first time this country is starting to see some real pressure on our wallets in regards to energy purchases. If this keeps up, we'll find the workable replacements.
I am anything but a Pickens supporter. Like I said, I've seen the wind farms up close and personal - they suck. But there is a place for some of the different energy technologies.Competiti... between them and among them will help eventually produce the energy independence we need. I don't expect it to happens anytime soon and any plan shouldn't be based on a short term goal either.
Plus, we can pump water to places that need it using intermittent, excess electricity from wind and solar. We see now that major non-desert US cities need water like Dallas and Atlanta. That just emphasizes how much desert cities need water.
The rest of the world is even more thirsty for water than us. I foresee desalination and water pumping as being major infrastructure projects around the world, with alternate energy being a major source of power for these systems.