A Step Forward for Electric Cars

Stephen DeAngelis

October 31, 2007

The New York Times published an article by John Markoff discussing a new venture to establish a network of “service stations” for electric cars [“Reimagining the Automobile Industry by Selling the Electricity.” 29 October 2007]. The implication is that some very serious investors see a bright future for “all-electric” cars.

“Shai Agassi, a Silicon Valley technologist who was in competition to become chief executive of SAP, one of the world’s largest software companies, has re-emerged with a grand plan to reinvent the world’s automobile industry around battery-powered all-electric cars. Others are developing green cars, like the Tesla and Chevrolet Volt. However, Mr. Agassi is not planning to make cars, but instead wants to deploy an infrastructure of battery-charging stations in the United States, Europe and the developing world. The new system will sell electric fuel on a subscription basis and will subsidize vehicle costs through leases and credits. ‘We’re basically saying this is just like the cellular phone model,’ he said. ‘If you think of Tesla as the iPhone, we’re AT&T.’ … He plans to announce in New York City that he has raised $200 million from private venture partners.”

Agassi is betting that governments will begin to look seriously at reducing carbon emissions and that consumers will jump on the “green” movement. Those are pretty big bets; but with oil nearing $100 a barrel and gasoline prices in the U.S. expected to hit $3/gallon later this year he may be right.

“In an interview Thursday, Mr. Agassi said tests of prototype vehicles would start in early 2008 and the company would begin commercial sales and service in two years. He said he was working to obtain commitments from both governments and carmakers. … He said his approach was a radical departure from other electric-car ventures that relied on advances in battery technology, which have come slowly.”

Agassi has a good track record, which is why venture capitalists seem willing to risk their money on his latest venture. The biggest challenge, I believe, will be convincing consumers, especially in the U.S., that all-electric cars will fill their transportation needs. The problem with past all-electric cars is that they have had limited driving ranges and then took considerable time to recharge before they were again available for service. For any long-distance trip, this arrangement was simply unacceptable. Although those drawbacks haven’t really changed, Agassi believes he can overcome them.

“He plans to extend the existing electric-power grids with a wide network of intelligent recharging stations in urban areas and supplementing it with a smaller number of automated battery-replacement stations. … The new venture, which Mr. Agassi has named, for now, Better Place, would be viable even with existing lithium-ion battery technology, he said. The economics will be more compelling in Europe, where gasoline is roughly twice as expensive as in the United States, he said. Assuming a life span of 1,500 battery recharges, he said that the energy cost of all-electric cars would be about 7 cents a mile. That would be less than a third of the cost of driving a gasoline-powered car today. ‘It’s much easier to transport electrons than octane molecules,’ he said. ‘We’ve already got a grid that goes around the entire world; all we have to do is extend it.’ Mr. Agassi envisions tens of thousands of recharging spots that will adjust for both cost and use patterns. For example, a group of parking-lot chargers at a workplace might recharge a visitor’s car before a regular employee’s car parked for the entire day. The system will also supplement recharging stations that require about one minute of recharge time for every minute of driving, with a smaller number of car-wash-style stations for swapping batteries. This would make it possible for a driver to go to a station rather than wait to recharge a battery, he said.”

The battery charging option doesn’t sound very attractive. Driving a couple of hours and then waiting a couple of hours for a recharge simply doesn’t seem efficient. For those that take only short trips, the system might work. But most of those people are likely to be commuters who will recharge their cars at home. The article doesn’t indicate how long a battery change would take, but I venture it will take longer than filling a tank with gasoline. Agassi is right that the all-electric car has the advantage of already having electrical grids in place to service them. Proponents of hydrogen technology still face the daunting challenge of constructing a hydrogen distribution network should that technology mature enough to be put into broad use.

If Agassi’s venture takes off and the use of all-electric cars becomes widespread, it will stress an already strained power generation sector. Analysts already predict that generation capacity will not keep pace with demand. Economic sectors are so interconnected that a blip in one area is generally reflected in other areas as well. This will certainly be true if Agassi’s vision becomes a money-making reality.