Stanford Business magazine

Cars and Trucks for Energy Resilience Could Start with Retrofitting Old Models Today

Cars and trucks powered by domestic electricity rather than imported oil is an exciting but daunting vision. The first step could be retrofitting 1 million vehicles to run on electricity as well as gas, say Stanford Business School Professor Robert A. Burgelman and Lecturer Andrew S. Grove, former chairman of Intel. They describe this as the "minimum winning game," a significant step toward a long-term objective.

To start the ball rolling, the two asked MBA students to research how the country could reach that goal. As part of a seminar in the fall of 2008, teams developed strategic action plans for four areas: batteries; manufacturing retrofits; retrofit marketing, sales, and delivery; and public policy and legislative action. The plans are contained in a Business School research report titled "The Drive Toward the Electric Mile — A Proposal for a Minimum Winning Game."

Energy Resilience, Not Independence
In their first chapter, Grove and Burgelman explain why energy resilience, rather than energy independence, should be the goal. U.S. presidents since Dwight Eisenhower have recognized that the nation's dependence on foreign oil poses a strategic threat. Retrofitting 1 million vehicles could be the first step toward a solution, but it's a complicated undertaking.

Electric Vehicles Are Key to Resilience
The United States does not need to become totally independent of foreign oil. Rather, the goal should be development of diverse energy sources that can absorb a disruption in the oil supply -- especially in transportation. Burgelman and Grove call for dramatically increasing the use of plug-in electric vehicles that go 40 miles between charges and use gas when driven longer distances by retrofitting 1 million vehicles in three years.

Several Strategies Required
In Chapter 3, they outline the threat of U.S. dependence on foreign oil. How can the United States continue to grow economically even if unstable oil sources such as Venezuela, Nigeria, and Iraq disrupt the supply? It will most likely require several strategies, such as reducing the number of miles traveled, retrofitting vehicles to use electricity as well as gas, and producing alternative sources of fuel such as ethanol.

Three Retrofitting Technologies
Seminar students evaluated three technologies based on factors that included cost, fuel savings, warranty impact, and installation time. They recommended using a full retrofit with a smaller engine, and focusing on 11 common vehicles to minimize design challenges.

The students also profiled REV Technologies, an electric car retrofit business in Vancouver.

Marketing and Delivery Plan
Student researchers concluded that half the retrofits should come from affluent, environmentally conscious consumers and the other half from fleets. After comparing four distribution models — auto dealers, on-site retrofits, factories, and independent garages — the students concluded that the best distribution model would use independent, possibly franchised, garages that already have service facilities, trained employees, and loyal customers.

Six Battery Technologies Compared
Storing energy is a big challenge for electric vehicles. The student researchers compared six types of batteries before concluding that lithium ion batteries show the most promise. However, there are still significant obstacles, such as safety concerns, lithium supplies, cost (currently $12,000 per battery), and battery manufacturing capacity.

Retrofit Policy Recommendations
Shifting from gas-only to electric vehicles will require strong government support. The student researchers recommended that the government use short-term strategies to take the first step toward energy resilience while simultaneously exploring longer term programs to stimulate demand. Short-term policies include paying the full cost of retrofitting the first 1 million vehicles, providing tax incentives, and covering warranties.

A sidebar report on World War II draws parallels between government actions during the war and today's energy resilience goal.

Conclusion Urges Quick Action
Taking these first steps toward energy resilience would "demonstrate both our determination and our ability as a nation to begin the process of regaining control of our destiny," Burgelman and Grove write in the report's conclusion. However, they note that the student researchers also found reasons for reservations about the retrofitting strategy — and that the worldwide economic situation has changed considerably in recent months. Still, the problem of U.S. dependence on foreign oil remains — and the authors urge quick action.