By Jennifer Yousfi
Wind power should account for 20% of U.S. energy needs within a decade – compared with virtually nothing now – as the country’s energy needs are increasingly taken care of by sources of alternative energy, former Texas oilman-turned-wind-power-entrepreneur T. Boone Pickens told Congress last week.
Speaking before the Senate Homeland Security and Government Affairs Committee, the legendary investor warned that crude oil prices could rocket past the $300 a barrel level within the next 10 years as global reserves decline.
Pickens also was there to lobby for the construction of energy transmission lines from his Texas-based wind power Pampa Project, currently under construction, and an eventual $10 billion alternative energy project that has the potential to become the world’s largest wind farm.
At a time when the U.S. economy is facing its first nationwide energy squeeze since the gasoline shortages of 1974 and 1979, Pickens is politicking for wind power. Oil prices recently hit new records near $150 a barrel, before backing off slightly, although consumers continue to worry about summer gasoline prices and winter heating-oil costs.
It could end up being a global competitiveness issue, as well, since China is making wind power a priority; indeed, it’s already embarked on some key projects that promise a payoff well head of anything the United States could right now hope to replicate.
It is Pickens’ hope that wind power will account for 20% of U.S. energy consumption within 10 years, a substantial increase from 0.8% today. Currently, only about 3% of U.S. energy needs are met through alternative energy methods, such as wind, solar and hydroelectric.
Pickens would also like to see alternative energy tax credits extended as a means of encouraging further wind power investment. Right now, the tax credits expire every two years, forcing wind power turbine manufacturers, such as General Electric Co. (GE), to keep production levels low. Should the tax credits not be renewed, the inducement to make wind power investments would be greatly diminished, cutting down on turbine demand.
But with a growing global focus on reducing greenhouse gas emissions, international demand for wind power turbines could be set to take off, regardless of how the U.S. Congress acts.
Pickens’ Chinese Competition
Pickens’ Pampa Project could be the world’s largest wind power plant when construction is completed, but power projects currently under construction in Asia are also vying for that particular honor.
“China is witnessing the start of a golden age of wind power development, and the magnitude of growth has caught even policymakers off guard,” Junfeng Li, secretary general of the China Renewable Energy Industries Association, wrote in a paper last month, The Guardian reported. “It is widely believed that wind power will be able to compete with coal generation by as early as 2015. That will be the turning point in China, which by then will be the world's largest energy consumer.”
That’s no small claim, as China is currently the global leader in coal consumption, which also makes the Asian giant the world’s leading emitter of greenhouse gases. But the Beijing government seems to be taking its alternative energy policy a bit more seriously of late, forgoing its previous preference for “cheap” over “clean” energy sources.
“Our task is tough, and our time is limited. Party organizations and governments at all levels must give priority to emission reduction and bring the idea deep into people's hearts,” President Hu Jintao was quoted as saying by the state-run Xinhua news agency, after the meeting with several energy experts during a recent politburo study session on climate change.
If the Chinese government enacts policies to favor wind power investments, China could reach a wind power capacity of 122 GW by 2020, according to the environmental group Greenpeace. That would be enough power to meet 10% of China’s energy needs and be equivalent to five times the output of the Three Gorges Dam, the country’s massive hydroelectric plant.
“A few years ago wind energy was boutique, something to show off to foreigners to prove how green they are but now it is a very serious part of their energy policy,” Steve Sawyer, secretary general of the Global Wind Energy Council told The Guardian.
“They can make things happen so quickly in China compared to the west. When they make up their minds, it is incredible how fast things happen,” Sawyer said.
Wind Power Profit Plays
As an investor, if you’re looking to cash in on Pickens’ wind-power mandate or the newfound love for wind power in China, the manufacturers of wind turbines might be a good choice. With so many large projects in planning and construction phases, these companies are likely to see a steady stream of billion-dollar orders over the next several years.
Two of the largest include GE and Germany’s Siemens AG (ADR: SI). GE has already received a $2 billion order from Pickens and expects another $6 billion in orders from the 4,000 MW Pampa Project alone. Meanwhile, Siemens will supply the turbines for a 500 MW wind farm planned in the United Kingdom.
Other European manufacturers of wind power turbines include Denmark-based Vestas Wind Systems A/S (PINK:VWDRY) and Gamesa Corporacion Technologica SA (PINK: GCTAF) of Spain. Both companies produce turbines, as well as provide wind power-project planning and installation services.
Some of the hottest tickets are in emerging markets, but unfortunately for most U.S. investors, India-based Suzlon Energy Ltd. is listed on the Bombay exchange, while China’s Xinjiang Goldwind Science & Technology Co., Ltd. is listed on the Shenzhen stock exchange.
News and Related Story Links:
Wind power: A reality check
Energy in China: 'We call it the Three Gorges of the sky. The dam there taps water, we tap wind'