Twenty-one years ago, President George H. W. Bush admitted that he lacked “the vision thing,” but when it comes to energy and transportation policy, nearly all of our leaders since him have been equally impaired.

Despite having lived through the oil shock of the early 1970s, only to see our oil imports since then rise steadily to two-thirds of our consumption today…

Despite increasingly urgent warnings from agencies such as the IEA, who warned one month ago that if oil demand recovers in 2010, global spare oil production capacity would fall to zero by 2013, sending oil prices skyrocketing…

Despite ample evidence and clear mathematics that the world could be down to 75% of today’s energy budget in 20 years, down to less than 50% in 40 years, and down to less than 10% in 80 years…

The US still has no plan whatsoever to deal with the impending energy crisis, a crisis that threatens to drastically shrink our economy and change our way of life forever. Nobody is driving this bus; we’re all passengers.

After nearly 40 years of evidence that finite energy supplies inexorably reach a point of diminishing returns, I can only ask: Why do we still not have a plan? Any plan?

The Pickens Plan

One plan that we do have on the table is the Pickens Plan, T. Boone Pickens’ proposal for making a dent in foreign oil consumption. It imagines a corridor of large wind turbines stretching through the windy heartland from Texas to North Dakota, which would replace the 22% of our current electricity supply that is generated from natural gas. Then we would use the natural gas to run commercial and fleet vehicles, offsetting 38% of our demand for foreign oil.

Pickens critics were quick to sling mud on the plan, alleging that he is only trying to line his own pockets with taxpayer money, despite the obvious fact that at the age of 80, he’s unlikely to see the fruition of his plan, let alone realize the fortune that it might bring to its investors. Pickens himself has said as much, indicating that his real motivation is to leave a legacy that will put the country on a more sustainable path. (Pickens is a strong proponent of peak oil and probably understands the oil business as well as anyone else alive.)

I have voiced a number of important questions about the Pickens Plan, including how and when the natural gas fired power plants will be decommissioned, the cost and the time-to-market for natural gas powered vehicles, how the project will be financed, and whether our domestic natural gas resources are up to the job. (See “Will Arctic Oil, Natural Gas, MIT, Paris and Pickens Save the Day?” for more on that.)

Although those questions remain unanswered, we at Energy and Capital and Green Chip Stocks have written a fair bit on the Pickens Plan, not because it’s perfect, but because it’s a plan. Something is better than nothing. At the very least, to the extent that the wind and natural gas parts of it work out, it would make a dent in our oil imports.

The Better Place Plan

I can only think of one other serious plan that excites me, which seems truly pragmatic and sensible: Better Place, a company with a plan to replace oil-burning cars with all-electric cars.

Better Place starts with a simple objective: How do you run an entire country without oil? (Which immediately makes me wonder: Why are none of our elected leaders asking themselves that question?)

At a Brookings Institute presentation last summer, CEO Shai Agassi ticked off the key elements that will allow his plan to succeed.

The first element is policy. Last year, Israel set a goal to get off oil entirely within a decade. By a simple mechanism that would gradually raise taxes on gasoline-based cars over the decade, consumers would be driven toward zero-oil cars. With Israel’s leadership, later joined by Denmark, Australia, California, and Hawaii, there is a bona fide market for the vehicles.

The second element was a commitment by automakers Renault and Nissan to build all-electric cars in partnership with Better Place that would go 100 miles on a single charge. For the majority of users, such a range is more than adequate for a daily commute and errands, and the cars would be recharged from the grid at public parking spaces and at home. For longer distance travel, Better Place envisions that one would be able to drive up to a device like a car wash, and have the battery pack replaced in about the same amount of time that it takes to fill up with gasoline today.

(There may be an even better option. New research from MIT published in the March 12 issue of the journal Nature found that by coating lithium iron phosphate particles with a thin film of lithium pyrophosphate, they could allow a lithium ion battery to be charged and discharged hundreds of times faster than normal, potentially eliminating the need for battery-swapping stations.)

A third element to the Better Place plan is to deploy a charging infrastructure. A half a million charging parking spots will be established initially, which can recharge the car automatically, billing via a built-in ID chip. The company has already obtained $200 in private seed capital to built the charging stations in Denmark and Israel.

The fourth element is the business model itself. Agassi compares it to that of the cell phone business: Instead of charging consumers for the car, it will essentially lend the cars to consumer for free when they sign up for a four-year plan. Consumers will pay only for miles driven and for access to charging stations, which will cost them no more than they already pay for gasoline Agassi claims, and will be sheltered from the risk of owning an expensive, cutting-edge battery pack.

A final benefit of the Better Place strategy is that enlarging the overall fleet of electric vehicles has a multiplier effect. By enabling vehicle-to-grid (V2G) technologies that can use plugged-in electric vehicles as temporary storage, V2G holds great promise as a way to help solve the storage problem of intermittent renewable energy sources like wind and solar, which further enables their growth. At the same time, it creates demand for renewable electric power.

Cars created under the Better Place program are slated for mass production by 2011. By comparison, Chevy will bring just 10,000 units of its new electric Volt to market in 2010, which will do only 40 miles on a charge, at a cost of $40,000. Remember, the Better Place cars will be essentially free to own.

Agassi estimates that under the Better Place plan, at a cost of $500 per car, or about $100 billion, the US could get its 200 million cars off oil entirely. At $45 a barrel and 20 million barrels per day of consumption, that’s equivalent to what the US now spends on oil in only four months!

The German Plan

It’s not a serious plan to get off oil, but I should mention a curious program Germany has begun which will give a $3,250 rebate to anyone who will scrap an automobile at least nine years old, provide proof that it has been destroyed, and buy a new or slightly used car. It’s mainly a stimulus package for the automobile industry, but if it replaces a potential 1.2 million old cars (out of a fleet of over 40 million) with more efficient ones, it would certainly reduce their import needs.

Again: at least it’s a plan.

Congress’ Plan

Against the brilliant Better Place plan and the pragmatic Pickens Plan, Congress’ plan, as embodied in the $800 billion stimulus package signed into law last month, looks downright shabby.

The $100 billion that Agassi would need to achieve his vision is about one-eighth the price of the stimulus package. Although the latter includes $150 billion in public works projects for transportation, energy and technology, it would only put one million electric vehicles on the road—that’s 0.5% of our current fleet—in six years, and there is little else in it that would actually reduce our use of transportation fuel any time soon. It’s a start, but it’s really far too little, too late. In six years, we’ll be about three years past the global oil peak and clawing for solutions.

For another comparison, $100 billion is a mere 4% of the $2.5 trillion that we’re spending to shore up the fundamentally insolvent banking system. That includes $175 billion to extend the life of the terminally ill AIG, some of which is going to bail out its default-swap counterparties, including Goldman Sachs.

Even the portion of the stimulus package dedicated to rail—the most obvious, tried-and-true transportation technology we possess—is a mere $12 billion or so. The repair backlog for Amtrak’s northeast corridor alone is $10 billion. Just $1.1 billion will be spent on improving Amtrak and intercity passenger rail, and another $1 billion is designated for new commuter and light rail.

At this point, the hopes I once had for a rail renaissance in the 2009 funding spree have all but faded.

(For his part, President George W. Bush proposed eliminating the budget for Amtrak entirely in 2006. Apparently he inherited his father’s lack of “the vision thing.”)

Meanwhile about $30 billion of the stimulus package is targeted for road-building, a painfully stupid investment on a dead end street. In the wake of the most destructive spike and crash of commodity prices in recent history, Congress still doesn’t understand that oil prices will spike again, and that our days of importing 13 million barrels per day of oil are numbered.

Now, I’m not saying that the Better Place vision can be achieved exactly as advertised, because it’s a bit too early to say. But at least it’s a plan—a plan that absolutely can be implemented with today’s technology, that’s scalable, and that comes at a very attractive price.

America desperately needs serious energy leaders who will not flinch at telling the truth about the future of energy, and who are willing to figure out how in the world we’re going to navigate it. Clearly, presidents and Congressmen are not those people. We can only hope that the visions of business leaders like Pickens and Agassi will succeed despite them.

Until next time,

Chris