For nostalgia purposes, I recommend reading President Jimmy Carter's 1977 speech on energy policy. It's spot-on, and Carter's subsequent energy policies managed--among other things--to decrease U.S. oil imports by 50 percent between 1977 and 1982.
One of several ways he did this was by removing oil from the country's electricity production. Since petroleum products such as gasoline and diesel work so well as transportation fuels, Carter believed that oil should be exclusively for them.
Pickens reasons that if the United States gets natural gas out of the electricity production business, it can replace about 25 percent of imported oil with domestic natural gas."
His point--and mine--is that not all fuels are created equal. Oil can be used to run cars and airplanes as well as power plants, while coal, nuclear energy, and renewable sources such as wind and solar are pretty much limited to making electricity. Therefore, oil's inherent versatility makes it a much more valuable energy source than less versatile sources.
Yet, in 1977, petroleum accounted for about 20 percent of the primary energy used for U.S. electricity production. In that year alone, about 620 million barrels of oil were burned for the simple task of boiling water to run a steam turbine. Since that relatively simple task could be performed by myriad other sources, burning valuable transportation fuel to make electricity was a colossal waste--something Carter understood.
Over the next five years, a combination of government action and market forces caused the quantity of oil burned for electricity production to decrease by a staggering 61 percent. That decrease freed up about 1.1 million barrels of oil per day, which meant significantly less oil had to be imported. Today, petroleum accounts for less than 2 percent of U.S. electricity production.
That brings us to Texas oil billionaire T. Boone Pickens, who lately appears to be channeling Jimmy Carter. Pickens is taking Carter's premise one step further by making the argument that natural gas also should no longer be used in electricity generation.
Natural gas is second only to oil in terms of versatility. Natural gas--which is primarily methane--is used to make all forms of petrochemicals, including fertilizers and plastics; in addition, it's used to generate electricity, heat homes and buildings, and drive cars and buses. For example, compressed natural gas is a good transportation fuel that is currently used in city buses all over the country. The problem is that more and more natural gas is being used as fuel for electricity production--a comparably easy task. Indeed, between 1991 and 2007, the quantity of natural gas burned to generate electricity doubled; in 2007 alone, the United States burned the equivalent of 3.3 million barrels of oil per day of natural gas to generate electricity.
That's a colossal waste. Natural gas is too valuable a fuel to burn for electricity production, and Pickens knows it.
Using logic similar to Carter's thinking, Pickens reasons that if we get natural gas out of the electricity production business, we can replace about 25 percent of imported oil with domestic natural gas. This might just work because about 20 percent of imported oil is used to haul goods in 18-wheelers. Those trucks, which often have 650-horsepower engines, will not be made to run on batteries for decades--if ever. But they can be powered by relatively efficient compressed natural gas engines.
The "Pickens Plan" is fundamentally based on the principle that not all energy sources are created equal. As I've argued previously, the physical limits of energy density favor hydrocarbons such as oil and natural gas over virtually all alternatives for energy storage mediums. These physical realities should guide our energy policy--as they did for President Carter.
The biggest obstacle that I see for the Pickens Plan is that tens of billions of dollars already have been invested in natural gas electricity infrastructure over the last 15 years. Obviously, the companies and individuals who made those investments will not be thrilled about natural gas being removed from electricity production.
Nonetheless, I believe the benefit of a 25-percent decrease in oil imports will be far greater than the costs of writing down or transforming recently constructed natural gas power plants. And make no mistake about it, Pickens wants to mothball such plants. A radical idea? Maybe. But--like Jimmy Carter before him--he's right.