The Renewable Electric Agenda

The President clearly has an electrification strategy as part of his agenda to transform our energy policy. At the last minute he snuck $8 billion dollars for high speed rail into the stimulus package. And while he showed tough love toward the carmakers by denying them bailout money, he (and I'm assuming that he is speaking through the newly installed GM chairman) exempted the plug-in hybrid Chevy Volt from the otherwise stringent requirements of other vehicles in the fleet:

Rick Wagoner's replacement as GM CEO, Fritz Henderson, might have recently said that all of GM's car models will need to "pay the rent" (unlike the previous business model, which was to make huge margins on ginormous SUVs and trucks, and to build unprofitable small cars as an afterthought), but there was some fine print on that claim. This new rule won't apply to the GM Volt plug-in hybrid car, and that's probably a good thing.

GM needs some long-term vision. It put all its eggs into big SUVs, and now changing direction will take much effort (as is pretty obvious from recent headlines). I can't imagine how much inertia had to be fought to even get the Volt project started after the demise of the EV1.

In other words, with such a heavy lift to actually get the Volt to market, we cannot abandon this first forward-thinking effort by American car manufacturers in decades. And there's no question in my mind that Obama's behind that. In fact, I wouldn't be surprised to see whatever reconstructed GM coming out of any potential bankruptcy process have the Volt as its flagship vehicle, perhaps even with some backing (and I'd like to see the same for Tesla).

A broad shift to electric, as opposed to flex fuels and ethanol, makes lots of sense, because renewables can be rapidly scaled up to accommodate major carbon reductions in ways that alternative fuels can never reach. A new study shows that offshore wind turbines could meet current electricity demand TODAY.

Reporting from Arlington, Va. -- Wind turbines off U.S. coastlines could potentially supply more than enough electricity to meet the nation's current demand, the Interior Department reported Thursday.

Simply harnessing the wind in relatively shallow waters -- the most accessible and technically feasible sites for offshore turbines -- could produce at least 20% of the power demand for most coastal states, Interior Secretary Ken Salazar said, unveiling a report by the Minerals Management Service that details the potential for oil, gas and renewable development on the outer continental shelf.

The biggest wind potential lies off the nation's Atlantic coast, which the Interior report estimates could produce 1,000 gigawatts of electricity -- enough to meet a quarter of the national demand.

We don't have to wonder about a world without coal - we have that ability now. The only resource that needs to be tapped is political will.

And America Loses The Innovation Race Again

The long-awaited very first mass market plug-in hybrid vehicle will come from... China.

BYD presented the vehicle, known as the F3DM, in a ceremony in the southern city of Shenzhen…. The vehicle can run up to 100 kilometers (62 miles) on its electric engine, and when it runs low on power shifts to a back up gasoline engine. Its battery can fully charge in nine hours from a regular electrical outlet, or much faster at BYD’s own charging stations, the company said in a statement.

The car will sell for 149,800 yuan ($22,000), about the same as many Chinese-made mid-sized cars, it said.

This is a company that Warren Buffett bought a 10% stake in recently. BYD (short for Build Your Dream) was a large battery maker that only moved into the auto market a few years ago. And now, they're on track to potentially beat the Chevy Volt to market - for half the price. I don't know if they'd sell stateside, but just selling them in China would have a dramatic effect on greenhouse gas emissions if they became popular, even if all of that electricity used plugging in the vehicles comes from coal.

Meanwhile, it's very clear why a Chinese company, or any company other than an American one, has the opportunity to do this - aside from the competitive marketplace for batteries, their industries aren't overburdened with legacy costs, a dynamic peculiar to our free-market for-profit health care system.

The Big Three are also not responsible for the broken U.S. health care system. If we paid the same amount for health care as Canada, G.M. would have accumulated an additional $22 billion in profits over the last decade.

That would be the savings if we assumed that General Motor's health care expenditures were reduced by roughly 48 percent to be in line with expenses in Canada. Of course, not all the savings in this counterfactual would have gone to profits. Some of it would have gone to workers in the form of higher wages or to consumers in the form of lower car prices.

On the other hand, G.M. is also picking up the tab for many spouses and dependent children. It would not have to pay these health care expenses in a Canadian type system. So the $22 billion figure is probably not a bad first approximation of the additional money that G.M. might have today if the United States had a more efficient health care system.

Even with these additional profits G.M. and the other domestic manufacturers would still face serious problems. They have made some bad choices in betting their future on SUVs and other low-mileage vehicles. They also have lagged foreign manufacturers in producing high quality, reliable cars.

But the real reason that Big Three are on their deathbeds right now is the economic crisis created by the Wall Street crew and their friends in Washington. It will be tragic if the people of the Michigan, Indiana, and Ohio are made to suffer through a depression because of the failed financial dealings of the Wall Street crew.

There is a failure of innovation, sure, but that's because of the constraints of doing business in an employer-based health care system. We have to do what we can right now to save the auto industry, but the biggest long-term goal would be to give them the breathing space to innovate.

Incidentally, there have been some excellent developments in this country with plug-in electric hybrid school buses.