As I wandered the Plug-in 2008 Conference this week in downtown San Jose, California, I had an un-original but startling thought: Is Silicon Valley the new Detroit?

For a trade show and conference that is essentially about cars, this one looked nothing like any car show I’ve ever seen. In fact it looked like a typical computer trade show. The place was swarming with smart, well-dressed 20-somethings and gray hairs were few. Only a handful of cars were on display in the exhibit hall. And the sessions were decidedly technical, preferring performance curve charts and hard data over flashy videos.

These attendees weren’t interested in body styling or macho demonstrations of horsepower. They had an entirely different set of things on their minds, like peak oil, climate change, and the uncertain future of transportation.

From the presentations I saw, one thing was clear: These young technologists aren’t waiting for the Big Three to lead us into a new era of personal transportation. They’re unafraid to admit that we have some serious problems, and they know that we have very little time to accomplish an unprecedented technological revolution. They aren’t beholden to the gas-burning technologies of the past. And they’re accustomed to working at light-speed, compared to the glacial speed of innovation that characterizes the lumbering old automakers.

Step On It!

Andy Grove, former CEO of Intel, kicked off the conference with a bold challenge to convert 10 million existing gas guzzlers to plug-in hybrids within four years. By comparison, Toyota has only built one million Priuses to date. But for a computer company chairman like Grove, such a challenge is just the thing that gets his juices flowing.

He didn’t just issue the challenge, though. He’s got plenty of ideas on how to pull it off: A federal tax credit to offset half the cost of the conversion, paid for by licensing fees on all cars, boats, and planes. Give the electricity away for free for the first two years. Harness open source collaboration to speed development. And call on the venture capitalists of Silicon Valley to fund the innovations that are needed.

Transforming our rolling stock so that it can run on mostly electricity is, as another famous computer industry mogul likes to say, a “no-brainer.” Peak oil means we have a looming shortage of liquid fuels, but all renewable energy technologies make electricity, not liquid fuels.

With the latest battery technology, most PHEVs can run 40-60 miles on electricity alone. According to Anant Vyas of the Argonne National Laboratory, a 60 mile electric range is enough to offset 75% of vehicle miles traveled.

That could take a hell of a bite out of our consumption of petroleum.

James Winebrake, an expert with the Rochester Institute of Technology and Department of Energy alum, noted that the $500 billion [more like $700 billion now] that we spend on foreign oil is enough to buy every American driver a “neighborhood electric vehicle” over a four-year period.

He calculates that hybrid electric vehicles (HEVs) and plug-in hybrid electric vehicles (PHEVs) could replace 40% of our existing fleet by 2030. In the process American households would save $316 million dollars a year, even after accounting for the increased electrical demand, since electrically-powered miles costs a fraction of gas-powered miles. The economic benefits of the shift, he says, extend across the entire economy as more jobs are created and more discretionary income is freed up.

And that doesn’t even include the benefits to public health, transport outside the household sector, and general economic development and capital costs.

A Great Race to Save Society

Dr. Andy Frank, a professor of mechanical and aeronautical engineering at UC Davis who is credited as being the father of the plug-in hybrid, broke the numbers down in his keynote address.

We have 200 million cars on the road today, but we only make 15 million new cars each year. So at best, if the country’s entire auto manufacturing capacity were to build nothing but PHEVs, in 10 years we could only replace about 50% of the fleet. (Other speakers suggested the replacement rate might run as high as 7-8% per year, but did not cite details.) [This section has been corrected from the original version; please see note at the end of this article.]

Peak oil and rising prices, along with global warming, are such urgent and serious challenges that we simply have to move faster than that. “We are in a great race to save society,” he said, and offered his prescription on how to accelerate the transformation to a transportation fleet 90% powered by renewable energy:

• Replace and modify vehicles, because replacement alone is too slow. We might replace 1-5% of the fleet per year, but we could modify 10-15% (20-30 million) per year. (That makes Grove’s call to modify 10 million in four years seem slow!)
• Offer government subsidies to help drivers buy PHEVs, to overcome the initial higher cost of the vehicles and create the surge in demand that will drive innovation and more rapid production. He observed incisively that the subsidy would be justified by the future cost of diminishing oil, which nobody seems to take into account.
• Add plug-in outlets everywhere, to overcome the chicken-and-egg problem of having a PHEV but nowhere to plug it in. This is hardly a radical idea, he said, noting that outlets are already a ubiquitous feature of parking spaces in Canada, where drivers plug in during the winter to run heaters that keep their engine blocks from freezing. We already have parking meters with electric power supply in many places, he asserted, so adding plugs to them would be trivial and relatively cheap.

Frank has founded a company called Efficient Drivetrains, Inc. (EDI) to make an end-run around the big car companies and deploy PHEVs much more quickly. “GM and Ford are in the business of never buying or licensing anybody’s technology,” he said, and if they violate your patents, they’ll say “so sue me,” and you’ll lose. So instead of even trying to talk sense into their thick skulls, he’s focusing on the 400 other car companies in the world, supplying them with drivetrains and components, licenses to existing technology, and an open approach to collaboration.

His objective is bold and clear: “To see that the world moves toward electrification of the entire society in an integrated fashion to enable greater energy efficiency for higher improvement in productivity and lifestyle with a zero CO2 footprint.”

He’s not afraid of the Big Bad Three. And neither are we.

What’s Hot—and Not

The Plug-in 2008 Conference concluded yesterday, the same day that Ford announced yet another sweeping restructuring as it staggered under an $8.7 billion loss for the quarter. CEO Alan Mulally, who’s been struggling at the helm of the company for two years to turn its fortunes around, acted decisively. He issued new marching orders to retool three of its pickup and SUV factories to produce six models of the smaller, more efficient cars it currently makes in Europe. It’s a good move for Ford, but for the moment, they’re so Not hot.

But PHEVs? Nothin’ but hot.

Jeff Siegel has long been in hot pursuit of the companies with the best designs for lithium ion batteries, the power pack of choice for the new generation of PHEVs, and has recommended several of them for Green Chip Stocks subscribers. The rest of the components that will enable the PHEV revolution, like new high-efficiency electric motors, innovative transmissions, and software control systems, are also on his radar.

PHEV technology has been around for 15 years, and all-electric cars have existed for over 30 years. It’s mainly Detroit that has stood in the way of its progress, as many have learned from the documentary film Who Killed the Electric Car? But now, thanks to their own myopia, they’re on the ropes.

Silicon Valley is about to snatch their crown. With a fertile ground of fresh ideas, plenty of VC, and a $130-a-barrel wind at their backs, the question is not if you will ever drive a PHEV or EV, but when.

Based on the presentations I saw at the conference, I’m expecting to be able to buy PHEV technology for myself within the next two years. Perhaps it will be a conversion from EDI, a standard production line Mitsubishi, the Prius “2.0,” or a sleek all-electric Tesla.

But I don’t think it will be a Chevy Volt.

Until next time,

Chris

Correction – July 26