If Andy Grove had his way, electric utilities would offer consumers free electricity for two years to help popularize plug-in hybrids, and governments would pay half of the cost of converting gasoline-engine cars into plug-ins.

Grove, former CEO and chairman of Intel (NSDQ: INTC), the world’s largest chipmaker, spoke Tuesday at the first-ever Plug-In conference in San Jose, Calif., where he outlined his plan for enticing consumers to drive plug-in hybrids.

Not enough effort is going into promoting electricity as a replacement for fossil fuels, Grove said. He called for the public to “transform our energy industry” and showed slides with phrases such as “There will be blood” and “Clear and present danger” to emphasize the urgency and difficulty of accomplishing the goal.

“We are at a strategic inflection point in our country and for the $7 trillion energy industry worldwide,” Grove said. “We are, so far, doing the very worse that we can do, which is worse than ignoring that there is a problem.”

Promoting plug-in hybrids has become a passion for Grove, who is one of a stream of industry and political heavyweights who have used their fame and power to draw attention to the energy debate this year. Last week, former Vice President Al Gore urged Americans to produce all of the country’s electricity from renewable and emission-free sources in 10 years (see Al Gore Sets Energy Goal).

In a recent issue of The American, published by the American Enterprise Institute, Grove talked about the beauty of electric power – it can be produced locally and from many sources, and it can be transported quickly across long distances.

In an interview with the Associated Press in June, he urged local and federal governments – as well as private industry – to do more to promote plug-in hybrids. Unlike traditional gasoline-electric hybrids such as the Toyota Prius, plug-in hybrids – which also are equipped with both an internal combustion engine and an electric motor – can recharge their batteries at standard electrical outlets and get more than 100 miles per gallon by using less fuel and more electricity.

Some automakers are likewise considering plug-in hybrids as the next stage of an electric-car evolution.

But challenges such as a lack of better and cheaper car batteries, as well as a paucity of charging stations, have kept electric cars from being feasible for road trips – and viable for mainstream buyers, according to some analysts. But range is less of an issue with plug-in hybrids, because drivers could always fill up on fuel for longer trips, yet many could potentially use the vehicles as electric cars for shorter daily commutes.

Several major carmakers, including General Motors, Toyota and Volkswagen, plan to introduce plug-in hybrids in 2010.

At the conference on Tuesday, Grove reiterated the plan he proposed last month to make plug-in hybrids mainstream.

A key element of his proposal is to figure out ways to help consumers convert existing trucks, SUVs and vans into plug-in hybrids.

A123Systems’ Hymotion, for example, is taking this approach. The company in April began accepting orders for a kit to turn Toyota Prius cars into plug-ins, and in June announced that six dealers had signed up to perform the conversions (see Can Hymotion Convert the Auto Industry? and Toyota Dealers Sold on Hymotion Plug-In Hybrids).

Grove also said utilities should provide free electricity for two years for powering converted plug-in hybrids. He called for a tax credit to pay for 50 percent of the expenses of retrofitting cars, a cost that he said could be offset by an increase in licensing fees for all vehicles, boats and airplanes.

Here are some of his other proposals:

Create a special federal court system to efficiency resolve intellectual property disputes and promote public interest.

Standardize battery and other technologies.

Invest more venture capital in technologies that promote plug-in hybrids.

Assemble a consortium of automakers, utilities, technology companies and public research institutions to better lobby the government for change.

Once assembled, Grove called for the consortium to create a plan to have 10 million plug-in hybrids on the road in four years and to present the plan to the next president in January.