Andy Grove, former CEO of Intel, has an interesting article in The American magazine this month entitled “Our Electric Future”. Grove argues that energy independence is a flawed and infeasible objective, particularly in a network of integrated global exchange. He suggests instead that the objective should be energy resilience:
What was wrong with energy independence? As the decades progressed, the United States became more and more integrated into a global economy, where goods, information, and oil move unimpeded across national boundaries. Countries around the world produce energy if they can, and buy on the world market what they need beyond their own production. Oil flows toward the highest bidder, just like all other goods. Consequently, talking about “independence” in terms of one product in an otherwise seamless global economy is a contradiction. As national policy, we must protect the U.S. economy from interruptions in the supply of such a critical commodity–whether those interruptions are related to natural or political causes. I believe that the appropriate aim is to strengthen our ability to adjust to such changes–to strengthen our energy resilience.
I think resilience is a really, really good word and good concept to use when thinking big picture about energy supplies and consumption. Resilience goes hand in hand with adaptability, and it also is reflected in important market ideas like substitutability. In fact, resilience is one of the best features of market processes; the information transmission function of prices means that individual buyers and sellers can adapt to changes in supply and demand conditions in a decentralized way.
His suggestion for how to increase the resilience of the U.S. energy economy? Shift use from petroleum to electricity. Although he makes the false claim that electricity can only be transported over land (has he never heard of underwater transmission lines?), the point is valid:
Equally important is the fact that electricity can be produced using multiple sources of energy. Petroleum, yes–but also coal, which is abundant in the United States, wind, hydroelectric, nuclear, and solar. Electricity is a multi-sourced form of energy. If one source suffers a shortage, we can produce electricity from another.
Because electricity is the stickiest form of energy, and because it is multi-sourced, it will give us the greatest degree of energy resilience. Our nation will be best served if we dedicate ourselves to increasing the amount of our energy that we use in the form of electricity.
This portfolio view is consistent with the ideas of resilience and substitutability that I mentioned above.
Grove closes by noting that transitioning from petroleum to electricity will be toughest in transportation, and that we can get a lot of value out of incremental technological changes, like dual-fuel vehicles and hybrids, while the battery R&D continues that will enable us to get long-distance fully electric cars.
An interesting and thought-provoking read.