From Site Selection magazine, September 2008

The Bill
Comes Due
Investors spend record sums on power projects, but will it be enough?
T. Boone Pickens
Sometimes it takes a crisis to awaken us from our slumber.
But once aroused, the American people can accomplish miracles.

exas oil tycoon T. Boone Pickens is putting his money where his mouth is – in alternative energy.
      While he travels America spreading his gospel of renewable energy, his company, Mesa Power, builds a US$10-billion wind farm across 200,000 acres (81,000 hectares) of the Texas panhandle.

      When completed in 2012, the windmill complex will be the world's largest, but it's only one of hundreds of massive energy projects being built or planned around the globe.
      The question is, did investors like Pickens respond to the global energy crisis in time to meet the exploding demand for power that shows no signs of softening any time soon?
      For manufacturers and other consumers of industrial energy, that question cannot be answered quickly enough.
      As energy supplies tighten and oil and gas prices spike around the world, the planet enters an era of record spending on natural resource exploration and power production. According to a new report in The McKinsey Quarterly, record capital investments will be made in the next five years in several key energy and materials sectors.
      Chemical project investments will be 48 percent greater from 2008 to 2013 than they were from 2002 to 2007. Utilities including gas, electric and water will spend 31 percent more. Upstream petroleum and coal will spend 56 percent more. Downstream petroleum will spend 79 percent more; and metals and mining – including coal – will spend 64 percent more.
      Combined, the world's energy and materials industries will invest $10.477 trillion over the next five years, McKinsey estimates.
      The spending boom is already being felt in many parts of the world.
The two largest oil refinery projects being planned worldwide are in the U.S.: Hyperion Resources' $10-billion refinery in Elk Point, S.D., and Total's $2.2-billion refinery in Port Arthur, Texas. At least 13 major oil refinery expansions have been announced so far in 2008, and more are expected.
      Gas projects are also taking center stage around the globe, with another 13 major facility expansions being announced in this sector since January. The largest is Sempra Energy Mexico's $1-billion natural gas manufacturing plant in Ensenada in Baja California, Mexico.
      Piedmont Natural Gas Company's $300-million new liquefied natural gas plant in Robeson County, N.C., is the second largest gas deal announced this year.
      Many energy experts question whether this new spending surge, coupled with record investments into alternative power sectors like wind, solar and biofuels, will be enough to meet rising global demand.
      In China and India alone, demand for oil is projected to double from 2003 to 2020, to 15.4 million barrels a day. By 2020, experts say, Asia will consume as much oil as the U.S., which today stands as the world's largest oil consumer.

Pickens Plan Takes to the Air
      For Pickens, doing nothing is not an option. That's why he's urging anyone who'll listen to support any and all alternatives to traditional dependence on foreign oil. But mostly, he wants the White House and Congress to back his vision of large-scale wind-power development across the U.S.
      In a recent press conference in New York City, the oil baron outlined the details of what he calls "the Pickens Plan."
      "I like anything better than imported oil," said Pickens.
Stirling Energy Systems
If Stirling Energy Systems has its way, the world's largest solar energy plant will be built soon in Imperial Valley in Southern California. SES filed an application with the California Energy Commission earlier this summer to build a 900-megawatt solar dish field in 2009. San Diego Gas & Electric would purchase the power under a 20-year agreement.
"Ethanol will work. Biofuels will be a small part of the overall solution to the problem. Hydro-power works great, but we don't have enough of it. It will take nuclear too long to come into play, but I am for it and it will have to come into play."
      His biggest passion, however, is reserved for wind – lots of it. "If you go to Sweetwater, Texas, they have 2,000 megawatts of wind power there. It had been below 10,000 in population and is now above 12,000 – and it's all because of wind. The next big wind farm will be in Pampa, Texas. It will be the largest wind generation facility in the world – the equivalent of two nuclear power plants."
      Pickens adds that another advantage to wind is its central location throughout the country – a fact that makes it easier for power distribution to end users.
      "The wind corridor goes from Texas through Oklahoma, Kansas, Nebraska, South Dakota and North Dakota," he notes. "If you look at the power generation pie, 50 percent of power is generated by coal, 20 percent by nuclear, 22 percent by natural gas, and the rest by others. The 22 percent that we generate by natural gas can be replaced by wind, leaving the natural gas to power our automobiles."
      His primary goal? Reducing the $700 billion a year that America pays for foreign oil to $300 billion. To accomplish that, he favors a tax credit of $15 billion to fund creation of 200,000 megawatts of wind power.
      He also wants to see more Americans driving vehicles powered by natural gas. "There are 8 million vehicles in the world today that run on natural gas, and 142,000 of them are in the United States," he says. "You can buy a Honda GX natural gas car and fuel it at your home. It lets you drive in the HOV lane in California. The cost to fill it up is just $1.50 per gallon. There's a big difference in price between natural gas prices and gasoline."
      In case anyone thinks Pickens isn't serious, he points out that he's funding the marketing campaign for the Pickens Plan with $58 million of his own money.
Suniva announcement
Georgia Gov. Sonny Perdue, Georgia Economic Development Commissioner Ken Stewart, Suniva CEO John Baumstark and Gwinnett County Commission Chairman Charles Bannister celebrate Suniva's $75-million investment in a solar-cell plant in Norcross, Ga.

Sunlight Fuels Expansion Project
      Pickens is far from alone in pushing alternative energy production as a way to meet rising global demand for power. Throughout the world, makers of photovoltaic cells are seeing the gap narrowing between the cost of traditional fuels and the cost of solar power.
      One such company, Georgia-based Suniva Inc., secured a $500-million contract on Aug. 6 to supply high-efficiency solar cells to a large customer in Europe – Berlin-based Solon AG.
      The announcement came just two months after Suniva selected a 60,000-sq.-ft. (5,574-sq.-m.) building in Norcross in Gwinnett County for a $75-million solar-cell manufacturing plant.
      Started by a research scientist who developed his patented technology at the Georgia Institute of Technology,
We have one of the three highest income tax rates in the world, and we are the only country where the rate is not coming down. We want to stay in Georgia and the U.S., but we have to be like chess players and think three or four steps ahead.
Suniva scouted multiple locations before choosing its permanent site in Technology Park northeast of Atlanta.
      Suniva CFO Jim Modak tells Site Selection that two factors sealed his company's location decision: the presence of an existing facility (a former ICON building) that met the company's search criteria, and the rapid response and support of the local economic development office.
      "The Gwinnett Chamber of Commerce worked incredible hours on our project. Their speed is incredible," Modak says. "Whatever we needed, they found a way to provide the resources. Their team is boundary-less."
      Modak says his team especially likes the highly skilled work force in Gwinnett, a 790,000-resident county where 90 percent of the adult work force has a high school diploma and nearly 40 percent have a bachelor's degree.
      "We needed to have the right incentives for personal property taxes, real property taxes, and so forth," notes Modak. "And the employee base is very important. We are working with Georgia QuickStart on that component."
      Other factors that played a role in Suniva's site selection, says Modak, were proximity to a major international airport, continued access to critical resources at Georgia Tech, the infrastructure of Technology Park, and a favorable real estate deal.
      Modak adds that, for the U.S. to become more competitive globally in the solar industry, several things must happen. "We need more incentives for job hiring and capital investment, and we need to lower the federal income tax rate," he says. "We have one of the three highest income tax rates in the world, and we are the only country where the rate is not coming down. Malaysia just signed a 15-year tax holiday for all of our competition. We want to stay in Georgia and the U.S., but we have to be like chess players and think three or four steps ahead."
      As researchers continue to develop more efficient solar cells, Modak predicts "grid parity" – the time when the cost of solar power becomes competitive with traditional power – will be achieved between 2013 and 2015.
      In the meantime, Modak says, "we think the market is there for 10 to 20 years for our product technology."
Gov. Rounds: Refinery Pivotal to Energy Plan

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