Why T. Boone Pickens Could Be the Best Hope for Wind Energy

All of a sudden, everyone seems to be talking about wind energy. Sleek, gray wind turbines, rising hundreds of feet into the sky, rotate in steady, clockwise loops in television ads that pop up almost hourly. Both presidential candidates have heartily endorsed wind power. Even oil giants like Shell and Chevron are on board. Yet this spring, when the Department of Energy looked at wind power, it found huge hurdles, particularly the question of how to send electricity from the blustery Midwest to the big coastal cities.

T. Boone Pickens appears before a congressional panel.

The logistical and technological challenges remain, so why the new gust of interest? Four-dollar-a-gallon gas and concerns about oil, for starters. But the emergence of a Texas oilman and 1980s corporate raider as a national spokes-man for wind energy is transforming the playing field. T. Boone Pickens isn't offering any new technological solutions, but his endorsement is the most emphatic signal that wind energy has moved beyond the realm of the green lobby. It has gone mainstream, led by a titan of business with decades of oil experience. Returning to the national spotlight at the age of 80, Pickens is everywhere these days, traipsing across cable news shows and before congressional hearings. Moving beyond his reputation as a Republican partisan who funded the controversial swift boat ads attacking John Kerry in 2004, he has personally pitched his "Pickens Plan" to both Barack Obama and John McCain. And he is starring in his own TV ads, touting his plan to wean America off oil. Pickens wants 20 percent of U.S. electricity to come from wind power in 10 years, in the process helping to free up natural gas to become the country's main transportation fuel.

Game changer. Since his ads began airing, Pickens has won praise from politicians and the media alike for his "green conversion." But his fervor is not a sudden convert's zeal as much as a businessman's quest for a legacy. In the corporate world, Pickens has long been a game changer, and his embrace of wind is a good harbinger for alternative energy. America, he says, is ready for green energy. It just needs a leader.

Over the past 20 years, since he first became wealthy by mounting takeover bids on much larger companies, Pickens has routinely been asked if he is in it just for the money. He invariably says something like, "I'm worth enough money already." Maybe so, but easily overlooked is the simple fact that a growing number of companies believe that they can make money from wind. This wasn't always the case, of course. Wind turbine technology has advanced significantly in recent years, and the cost of generating electricity from wind has dropped by about 80 percent from the 1990s. U.S. wind production jumped 45 percent last year, and, in July, the country overtook Germany as the world's top wind producer.

Today, Pickens may be the most high-profile investor in wind, but he's far from the only one. A number of big investment banks, like Goldman Sachs, as well as top hedge funds, are hopping into the game. JPMorgan's energy unit, for example, has invested $4.4 billion into more than 40 U.S. wind farms.

Until Pickens emerged this summer, along with a $58 million ad campaign paid for out of his own pocket, the excitement was largely limited to trade publications and corporate boardrooms. Pickens took wind public, a move that comes at just the right time. Wind power, despite its recent advances, is still in a delicate position. It produces around 1 percent of the country's electricity. It's competing for attention with other nascent renewable energies. And it's still alarmingly dependent on government support. Over the past decade, every time federal tax credits for wind energy have lapsed—and it has happened three times—the wind industry has crashed. There's no guarantee that wind (or solar, or biofuels) will succeed on a large scale.

Certainly, Pickens stands to win big if wind power blossoms. Mesa Power, the wind firm he launched, is planning to build the world's largest wind farm near Pampa, Texas, for which it has already spent $2 billion to buy 667 wind turbines from General Electric. His hedge fund, BP Capital, is heavily invested in natural gas, and he stands to profit if natural gas becomes a transitional source of automobile fuel, as he envisions.

After all, the Pickens Plan is about more than just wind power. The Energy Department's best estimate suggests that wind is unlikely to generate more than a fifth of the nation's electricity by 2030. The switch to natural gas for transportation is essential to his plan, but it depends on the support of Detroit automakers as well as gas stations nationwide. More broadly, Pickens is pushing all kinds of homegrown energy, including solar power, biofuels, and additional offshore drilling.

If Pickens can help steer the country toward wind, it will be because of, in part, the tactics that helped him succeed in the 1980s. Back then, he was a self-styled outsider, a corporate buccaneer, railing against the big oil companies and the "good ol' boys" who ran them. They were complacent, in his view, and Pickens thought shareholders were getting a raw deal. He also saw the potential to make a profit for himself.

Quite a few critics (not to mention his targets) disapproved of his tactics, but he combined an analyst's savvy with a politician's ambition to shake up the corporate world. By the mid-1980s, Pickens had become an icon, appearing on the covers of national magazines. During one talk at Harvard Business School, recalls Irwin Jacobs, one of Pickens's longtime acquaintances and a fellow corporate raider, students were leaning over railings, jostling to catch sight of the oilman. "The younger generation looked at us like we were in a cowboy movie," Jacobs says. "You know, here are these gunslingers out there, shaking up the world."

Big Oil. Friends say Pickens is attempting an encore performance today. For renewable energy to go mainstream, the big oil and gas companies, as well as the large utilities, will need to be part of the transition. But "they are not good at finding stuff and being the lead on new discoveries," says Alan Edgar, an oil executive and Pickens's racquetball partner in the 1980s. Instead, they typically prefer to let others assume the risk.

Today, in fact, the majority of U.S. wind farms have been developed by specialized firms. Some utilities have taken the plunge, but it's the big oil companies that could provide the biggest boost. So far, their interest in wind has been mild. Some people close to Pickens speculate he is spending all this money simply to whet the appetite of Big Oil, in the hope of selling off the wind farm and making a tidy profit. Whether that's true or not, "he's going to force the big boys to play the game," says Jacobs.

The Pickens Plan faces serious challenges. Pickens's huge personal wealth—an estimated $3 billion—can help him with some (such as start-up costs). Perhaps the most daunting obstacle to making wind viable on a national, or even regional, scale is electricity transmission. Pickens wants to build his wind farm in west Texas, where the wind is strongest. But the potential customers live mainly in east Texas, in cities like Dallas and Houston. To move his electricity, Pickens will need to build 320 miles of transmission lines.

Thanks to a recent change in Texas law, Pickens has the necessary right of way to build them. The rest of the country won't have it so easy. The biggest boost would come from the federal government, which could designate national transmission corridors to move electricity across the country. It's a controversial issue, however, that will run into opposition on the state and local level.

Pickens's touch isn't always golden. In the 1980s and 1990s, his takeover bids often made him money, but in most cases he fell short of taking over a company. These failures, nevertheless, stemmed from the same quality that enabled his success—a ferocious competitiveness. "He would always hog the middle of the court," says Edgar of his racquetball matches with Pickens. "I had to hug the edges."

In his latest venture, the competitive spark is obvious. Pickens says he wants America to win "the energy war" against the Middle East and become energy independent. If that happens, it'll go down as his greatest takeover bid yet.