U.S. MUST MOVE TO THE EV LIKE IT DID TO PC, DVD: INTEL BOSS

Once the world’s oil supplier, U.S. dominance is now compromised. Here's how Andy Grove, former Chairman/CEO, Intel Corporation/author, Only the Paranoid Survive, and Robert Burgelman, professor, Stanford Graduate School of Business, put it: “Our standing in the world of oil has fallen a long way in a short time.”

Digital world mavens Grove/Burgelman compare the Organization of Petroleum Exporting Countries (OPEC) dominance of the oil world to Google’s dominance in the realm of search engines: “Google’s share of the U.S search market is more than half. This allows the firm to wield tremendous influence over the very nature of the American advertising market. Google may even have the power to transform and redefine how advertising is carried out. OPEC has a similarly dominant share of the worldwide oil market, and it may have a correspondingly large influence…”

To escape OPEC’s power over the U.S. economy, through its control of oil, Grove/Burgelman advocate a critical, brilliant shift: “We can do that by increasing our reliance on electricity.”

Explaining that electricity is “sticky” (it does not transport like oil) and has multiple sources (coal, gas, nuclear, wind, hydro, solar), they lay out a plan not for energy independence but for energy "resilience." Shifting the U.S. transportation sector from oil to electricity would shift the nation’s reliance to a variety of domestic sources, none of which would require import and all of which could be replaced by others in the event of shortages.

The plan:

(1) Do not wait for the auto industry to get the perfect battery or for the battery industry to be financed by the auto industry. Like the adaptation of desktop computer technology, follow “cognoscenti and hobbyists” to electric vehicles (EVs).

(2) Do not wait for the market to provide solutions. Federal fleets should lead the way by shifting to “dual-fuel” plug-in hybrid electric vehicles (PHEVs) that mimic the transition from VHS to DVD or from wired to wi-fi laptops by providing both options until the changeover is complete.

(3) Do not wait for the gradual shift of 250 million U.S. vehicles now on the road to electric power. Pay for the dramatic reduction of oil consumption by older vehicles through incentives for retrofit conversions. Retrofitting the 80 million U.S. pickups, SUVs and vans with mileages in the 13 to 16 mpg range to PHEVs would cut U.S. oil imports 50% to 60%.

Shifting the U.S. to EVs and PHEVs would likely cut greenhouse gas emissions 50%.

But there is a greater urgency in the tone of the Grove/Burgelman proposal, an urgency only explained in their closing paragraphs: “…oil has been a major factor in many wars. And it could be again. Today’s relationship between China and the United States, says Henry Kissinger, ‘is very similar to that of Germany, a rising country at the turn of the 20th century, and Britain, an established one.’ … Listen to Lieutenant General William Caldwell, who heads the Army’s schools and training centers: ‘We are in a period of time in the world today where there is a shortage of resources.’ … over the next 10 to 15 years, Army Chief of Staff General George W. Casey Jr. says we will face ‘an era of persisting conflict.’”

Gets the blood rushing, doesn’t it?

Graphic by John Hersey, from The American. (click to enlarge)

Our Electric Future; Energy independence is the wrong goal. Here is a plan Americans can stick to.
Andy Grove and Robert Burgelman, July/August 2008 (The American)

WHO
Andy Grove, former Chairman/CEO, Intel Corporation/author, Only the Paranoid Survive; Robert Burgelman, professor, Stanford Graduate School of Business

WHAT
Grove and Burgelman describe the “critical juncture” at which they believe the U.S. has reached in its energy situation and how they believe the U.S. must respond by transitioning from an oil-based transport sector to an electricity-driven transport sector.

Graphics by John Hersey, from The American. (click to enlarge)

WHEN
- After World War II, the U.S. was the world leader in energy (meaning oil) production.
- U.S. oil production peaked in 1970 and the 1970s revealed a change in energy leadership to Organization of Petroleum Exporting Countries (OPEC).
- In the 1990s, Asian economies rose, putting pressure on U.S. energy supplies.
- 1970 to 1980: Net energy imports doubled.
- 1980 to 1990: Net energy imports doubled.
- A slow, natural transition of the 250 million U.S. vehicles now on the road to EVs and PHEVs would likely take 10 years or more.

WHERE
- The U.S. – with enormous supplies in Texas and California – was once the Saudi Arabia of oil. Then Saudi Arabia became the Saudi Arabia of oil. For a while North Sea and Alaskan supplies kept Europe and the U.S. in the game but eventually neither could challenge the Saudi dominance. Brazil and Russia are now emerging as potential competitors to the Saudis as Middle Eastern reserves begin to peak.
- The politics of oil is seen where there is dependence on oil: Russia cut gas supplies to the Ukraine in response to democratic elections, China looked away from atrocities in Darfur to obtain its oil, Venezuela’s Hugo Chavez has been using his country’s oil wealth to create alliances.

WHY
- The authors argue that energy availability controls a nation’s economy and its growth.
- Oil is a commodity that would likely increase competition among nations because it can flow to the highest bidder. Electricity does not.
- Energy resilience requires independence from oil in the transport sector.
- New technology normally emerges from the “hobbyists and cognoscenti” but the auto industry has resisted that transition, demanding battery technology that mimics the travel capacity of the internal combustion engine.
- The battery industry has been unable to improve battery capability because of the lack of economies-of-scale investment from the auto sector.
- “Dual-fuel” vehicles (PHEVs) would mimic the transition from VHS to DVD or from wired to wi-fi laptops by providing both options until the changeover is complete.
- The transition will require a difficult coordination of efforts from the auto industry, the battery industry and the power generation/transmission industry. It will require new leadership or old leaders capable of thinking in new ways.

Graphics by John Hersey, from The American. (click to enlarge)

QUOTES
- Grove/Burgelman: “…energy is the lifeblood of all economies. Like drinking water or oxygen, we simply cannot be without it. So a supplier of energy can have significant control over customers—even nations.”
- President Nixon, kicking off Project Independence, State of the Union address: “At the end of this decade, in the year 1980, the United States will not be dependent on any other country for the energy we need to provide our jobs, to heat our homes, and to keep our transportation moving.”
- Condoleezza Rice, U.S. Secretary of State: “The politics of energy is warping diplomacy in certain parts of the world…”
- Grove/Burgelman: “We have an urgent need for a strategy that can deflect our march toward this “persisting conflict” by strengthening our energy resilience. A policy that favors sticky energy with multiple sources and that aggressively moves vehicles first toward dual-fuel mode and ultimately to running on just electricity provides the answer.”