OPINION
The US' Perilous Path to Energy Enslavement

Earlier this month, I had the opportunity to watch Andy Grove talk about saving the U.S., and I was once again taken with what made him a truly great CEO. It isn't that he is articulate or simply on message -- it's that he conveys a combination of intelligence and passion rarely found in any current leaders. It is also fascinating to see he can still make ex-Intel executives sweat at an Intel (Nasdaq: INTC) alumni reunion, even though many of them now run their own companies.

Hidden in the messaging at the Intel Developer Forum (IDF) last week was a goal to dramatically lower U.S. electricity bills and, in conjunction with Andy and the ex-Intel employees, save the country from becoming an energy slave to China by 2020. At the core of this is the view that the current Obama administration may be focused on the right things but in the wrong order.

For instance, if we don't fix the energy problem -- in short, our addiction to oil -- first, then other things -- like healthcare reform and the war on terror -- will fail. I'll share my observations on this issue of timing and then close with my product of the week: The Archos 9, which launched at IDF, sets the bar for a new iPad from Apple (Nasdaq: AAPL).

Scaring Me to Death one Presentation at a Time

I actually saw Andy Grove present his concerns twice: first, in a long form as part of a half day session on green technology; and second, in front of a panel I was moderating on green job opportunities. Both times he very effectively scared the crap out of me.

Here is the problem in short form. China's need for oil is increasing at a near-vertical rate, and it should pass the U.S. in consumption is just a few years. Production isn't increasing much at all, which means there will be massive oil shortages.

The most credible projections I've seen place the shortage crisis at around 2013-15 (there is clear disagreement on the cause but the effect is consistent) and suggest that oil will veer upward of US$150 a barrel at that time. That would suggest gas prices exceeding $7 a gallon -- and going vertical after that.

Gas for cars aside, this development would also take electricity costs vertical, because a good chunk of the U.S. is powered by oil-fired generators, according to the utility executives who were in the room -- and virtually all of the peak power comes from these relatively dirty generators. China mostly uses coal-fired generators.

Now, the quickest answer to this electricity-generation problem, at least according to most of the executives in the room, is solar power. It is clean and tends to peak in energy production about the same time usage does. The utilities did point out that "about" was a big word, and the U.S. still needs better energy storage technology than it currently has.

The problem is that since the recession, U.S. investments in developing and building this technology are beginning to lag China dramatically, and China, which recognizes its own need, is moving at an unprecedented pace to develop its own solar infrastructure -- in some cases outspending the U.S. by over 300 percent. Most likely, this is because Chinese citizens who are upset with their officials generally don't vote them out. Instead, they tend to put them in prison, or worse, so this appears to make them a bit more motivated to anticipate problems. Hmmm ...

The belief is that since the U.S. government can't plan ahead to save its life, there will be another economic-collapse moment in a few short years -- this time, driven by spiking energy costs. Obama is doing as much about this, evidently, as the past administration did with the last economic collapse. If the words "We are so screwed" pop into your head, I'm right there with you.

The U.S. won't be able to roll out the solar stuff quickly enough to prevent the collapse, because the related ecological impact report requirements will make the fix take years, if not decades. Under this scenario, a Mad Max future suddenly becomes not only possible, but likely. The group has thought through this problem and recommended a massive solar farm around Hoover Dam where there is both an electricity distribution network and massive amounts of public land.

The expert on China argued that being inept wasn't just unique to U.S. politicians and that China might not be in much better shape at the beginning of the event than the U.S., but it doesn't have environmental impact report requirements and will have built up enough solar capacity to address its need in months. It will take all of it -- and by then, it will be the only major producer.

China also will have bought up all the available oil -- something it is doing at the moment with low cost loans to oil-producing countries -- leaving the U.S. without most of the foreign oil, and without access to what will then be the largest supply of solar panels.

That scenario -- which was credibly delivered and confirmed by a room full of executives working for a variety of companies -- is what the U.S. will experience in the future, I now believe, unless something is done quickly.

Intel's Part

Intel's part in fixing this, which seems to be way too much of a secret for me, is that it is working on significantly advancing smart grid technology. The utilities wanted programs that would allow them to turn off consumers' appliances when there was insufficient capacity, and Intel's counterproposal was to develop incentive programs and let consumers make the choices.

Under the utilities' program, those of us who work at home could likely find ourselves with personal generators so we would have power during the day. Under Intel's program, we would at least have the opportunity to keep working though at a higher premium.

By using a smart grid, the U.S. can substantially reduce the need for oil ahead of the crisis, lowering energy bills for consumers -- and putting off for a while the need to start learning "Yes Boss" in Chinese. This -- coupled with increasing capabilities in servers and PCs to drop down to extremely low power states when performance is not needed -- could delay an involuntary energy enema but not prevent it.

Setting Priorities

When you step back -- and oh, how I wish the Obama administration would step back and stop trying to repeat the actions of the Carter and Bush teams -- it becomes apparent that oil is a higher priority than either healthcare reform or waging the ongoing wars in Iraq and Afghanistan. This is because oil is the U.S.' largest addiction. It pays for the weapons U.S. enemies are using -- including the frightening Iranian nuclear program -- and it is at the source of much of of the pollution that contributes to ill health.

Maybe this is an incredibly deep thought, but if the folks fighting you can't buy weapons, then wars tend to go a lot better. And if you address the stuff that is causing expensive illnesses like cancer, then healthcare gets a lot more affordable. If you make healthcare more affordable and massively reduce oil-related spending, then you should be able to have good healthcare. But if you don't have any money, and you're doing things that make you sick a lot, while funding people who want to kill you -- well, then maybe you don't need healthcare. Maybe you need a keeper.

Wrapping Up: Is Smart Government an Oxymoron?

I simply don't get, given what just happened with the economy, why the current administration doesn't try to anticipate and mitigate what clearly appears to be the next disaster. Folks like Andy Grove are even having trouble getting the administration to return emails, and it brings to mind the poor guy who was jumping up and down about Bernie Madoff, but this is so much worse. It may be hard to believe at the moment, but Obama appears to be on track to becoming a bigger bozo than Bush -- and I would have thought that impossible. It's great to want to overachieve, but my preference would be for a different direction.

Product of the Week: The Archos 9 iPad Killer

I'm having fun with the "iPad killer" part, but Apple typically works really hard to prevent another company from setting the bar for one of its future products. Apple designers had to work their butts off with the iPhone so it could outshine the LG Prada, but the Archos 9 sets an even higher bar.

Costing about US$499 for the 60-GB version when it launches late next month, this little beauty comes from a company that has actually had a better media player than Apple for some time. It just can't spell "marketing," so few know of it. I typically refer to their products as "the best media players no one has ever heard of."

The Archos 9 'Netbook of the Future'

(click image to enlarge)

This potential iPad killer uses the Intel Atom processor and will launch with Windows 7 starter edition, giving it full browser capability, including Flash -- not Flash Light. It also has the ability to run most any Windows application -- granted, no high-end games -- and it showcases a touch interface. Unfortunately, it doesn't have multitouch yet, because its screen doesn't support it . This is where not being Apple hurts a bit, as it doesn't have the clout.

Accessories will eventually include a Bluetooth wireless keyboard and an extended battery. It will use virtually all generic PC accessories, and it makes the MacBook Air look kind of chubby and expensive. This will be the first test of whether the market even wants an iPad-like device, and it will set the bar -- much like the LG Prada did for the iPhone -- that Apple will need to surpass.

I am not taking the position that Apple can't clear this bar, but the Archos 9 sets it high. Beating Apple to market doesn't happen often, and for a little company to do that makes the Archos 9 a natural for my product of the week.