Shai Agassi
World Without Oil
Better Place Builds a Future
for Electric Vehicles
Innovations Case Narrative:
Better Place
So, how exactly would you run an entire country without oil?
Early in 2005, at the World Economic Forum for Young Global Leaders in
Davos, Suiza, someone asked me, “How would you make the world a better
place by 2020?” No one would have thought to call me an environmental crusader
back then, and I was primarily focused on my job as an executive at SAP. Sin embargo,
as I thought about my answer to the question, it became increasingly clear that
ending our addiction to oil, and therefore running an entire country without it,
would be the most significant progress we could make. That is why, eventually, I
founded Better Place.
One needn’t be an environmentalist to see the immense costs of oil depend-
ence. Primero, it is economically and physically unsustainable. Oil is a finite resource
whose price will only rise in the long run, compared to sustainable resources that
are not finite and normally become cheaper over time. Además, it has a high-
ly volatile price that, given the volumes and prices in question, can have massive
impacts on the global economy (see Text Box 1). Even countries that produce oil
seem to understand this: The United Arab Emirates invests all of its oil profits in
sectors that will be sustainable in the long run, including tourism, financial servic-
es, media, education, and even alternative energy. Beyond the economic concerns,
we find that our addiction to oil also has lead to the greatest transfer of wealth in
Shai Agassi is the founder and chief executive of Better Place. Agassi is a member of
the Forum of Young Global Leaders of the World Economic Forum, where he focuses
on climate change, transportation, and other key issues. He is also a member of the
Copenhagen Climate Council and the advisory board of the Corporate Eco Forum. Él
has been recognized by Time Magazine as one of the 2009 Time 100 and as a 2008
Hero of the Environment; by Fast Company as one of the “100 Most Creative People
in Business”; and by Scientific American as one of the 2009 Scientific American 10,
a group of people who have demonstrated outstanding commitment to assuring that
the benefits of new technologies and knowledge will accrue to humanity.
© 2009 Shai Agassi
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Shai Agassi
The Macroeconomic Impact of Oil
Switching from an oil-based transportation sector (y, by extension, an oil-
based economy) to an EV world would constitute the largest economic disloca-
tion in the history of capitalism. That makes it vital to note the potential macro-
economic impact this switch might have.
De hecho, a recent study at the University of California at Berkeley, published
this June, analyzed our company model quite specifically.1 The first step in deter-
mining our macroeconomic impact was to figure out roughly what sort of mar-
ket share EVs would have, at both a baseline level of gas prices and a high-price
scenario. Even at the baseline, they projected that EVs will have 44% of market
share by 2025, y 80% if the high-price scenario develops. They further pro-
jected that the total cost of owning an EV would decline from roughly equal to
an ICE at the current baseline-price scenario to less than half of that by 2030; el
difference was even more stark with the high-price model.
One of the most important macroeconomic impacts this shift presents
is in the balance of trade. Of the current U.S. trade deficit, 40% a 50% stems
from oil imports; por 2030, in our model, those imports will fall 18% a 38%
depending on the oil price scenario. This would have the same impact as elimi-
nating all imports from Saudi Arabia and Venezuela: each year we would re-
direct between $90 billion and $260 billion back into the domestic economy.
Also essential to the shift is the impact on employment. Being at the fore-
front of the EV switch could be a way for currently struggling U.S. automakers
to re-tool and regain their competitiveness. Además, jobs will be gained in the
sectors of battery production and charging infrastructure, while they are lost
from service stations and parts suppliers. Sin embargo, the study projected that this
will lead to a net creation of 10,000 jobs in the U.S. solo.
The study even explores how much the U.S. would save on healthcare costs
from a cleaner atmosphere and concluded that we would save $22 billion to $40
billion every year, apenas 1% a 2% de 2008 health care costs.
1. Celeste Chavis, Kazutaka Kanairo, Angel Lopez Samartino, Nakul Sathaye, Ikhlaq Sidhu, Phil
Kaminsky, and Burghardt Tenderich, “Strategies for Electric Vehicle Deployment in the San
Francisco Bay Area.” Center for Entrepreneurship & Tecnología (CET) Technical Brief No.
2009.7.v.1.1, Septiembre 18, 2009. http://cet.berkeley.edu/dl/EV%20Deployment%20Final.pdf.
history—mostly to countries that don’t share our democratic principles. Ending
our addiction to oil would also end this immense geopolitical cost.
The final and most important issue is the impact that an oil-reliant economy
has on the environment. CO2 emissions have already caused catastrophic changes
in climate that are well documented, y, tragically, those changes will continue
even after we rein in the current rate of carbon emissions. Arguments about
geopolitical and economic interests will be utterly irrelevant unless we significant-
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World Without Oil
ly curb the steady flow of carbon into the atmosphere, and soon. Fifty years from
now, in an oil-dependent economy, we will have one political issue: finding a way
to make the planet habitable. Mientras tanto, oil presents plenty of other environmen-
tal issues such as local air pollution (which causes immeasurable negative health
efectos, including death) and oil spills in the open ocean or other forms of contam-
ination that destroy environments and are extremely costly to clean up.
The transportation sector accounts for nearly half of oil use worldwide, hacer-
ing it the natural place to start considering how to end our oil addiction. My proj-
ect for Davos was to figure out a framework for ending our addiction to oil in our
transportation system; I hoped not
to rely on a government mandate
or on technology that would
require a scientific breakthrough to
be feasible.
Electric Vehicle (EV) technolo-
gy is here already, and completely
implementing EVs would lead to a
massive reduction in oil depend-
ence. The only barrier between EVs
and widespread adoption is a
coherent plan that would allow
them equal or better performance,
usability, and affordability when
compared to traditional internal
combustion engine (ICE) carros.
The Better Place business
model starts with a
fundamental rethinking of
the role the battery plays in
an electric vehicle and in the
business model of personal
transportation. From there,
all major problems with
electric vehicles are solved.
The Better Place solution
evolved from the understanding
that people have a social contract with their vehicles and that a mass transition will
occur only if the switch to EVs is a seamless one for the driver. Por lo tanto, the EV
must be similar to an ICE vehicle in terms of size, driving experience, driving
range, and price (see Text Box 2). The Better Place business model starts with a
fundamental rethinking of the role the battery plays in an EV and in the business
model of personal transportation. From there, all major problems with EVs are
solved. Car manufacturers have historically regarded the EV’s battery as a fixed
piece of the car. But what if they saw the battery as a separate component? Entonces
the consumer would not necessarily have to own it. At Better Place, we view the
battery as a consumable and as part of the infrastructure. We remove that cost
from the consumer. We sell miles—or mobility—much as people purchase min-
utes for their mobile phones.
This facilitates the most important innovation of our model: switchable bat-
teries that extend the vehicle’s range, and can be switched at Battery Switch
Stations (BSS) which will be installed along major highways. A driver can stop at
one of these carwash-like installations and have a battery swapped out for a fully-
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What kind of cars will they be?
To make a real difference, we need a solution that is scalable to the world.
Sin embargo, we cannot expect anyone to purchase an electric vehicle unless it can
compare to an ICE car in terms of price, convenience, and performance. Estos
basic demands essentially constitute a social contract as to what a car is and what
it should provide. If we fail to meet that social contract then the EV is not really
a car at all. We cannot be selling a glorified golf cart. Por lo tanto, I have always
demanded that EVs must be more convenient and more affordable than what
consumers currently get today with gas cars. So what exactly is that social con-
tract for a car? I think there are five distinct elements:
“It’s my car.” It needs to look like a real car, and be something you can actu-
ally be proud to call “my car.” We are seeing that this is actually quite easy to
achieve as Fisker, Tesla, and Renault-Nissan have all come up with EVs that look
just like ICE cars.
Equal or better performance. EVs have all their torque available instantly, entonces
the acceleration is linear and smoother than with an ICE. De hecho, for normal
driving, the acceleration is usually noticeably faster at lower speeds or in quick
bursts, like a 0-to-60 push.
Sufficient space for cargo and passengers. If a normal sedan does not have five
seats or room for a respectable amount of luggage, then it loses a lot of the free-
dom of transportation that cars are supposed to bring.
Affordability. Price is 85% of a consumer’s decision at a dealership.
Producing cars at scale and with our unique model should quickly solve the up-
front price problem. As for operational costs, ICEs are twice as expensive to run
per mile, and the EV cost is likely to decrease over the years while the ICE cost
only grows. Finalmente, the servicing is even cheaper.
Convenience. The average customer has to stop about 50 times a year for five
minutes to fill up with gas. The EV has to be quicker, and it can be. Charging
reduces the frequency of stops, and switches have been performed in as little as
60 artículos de segunda clase. If we are not more convenient than an ICE in terms of the number
or length of stops, we do not have a business.
charged one in less time than it takes to buy a tank of gas. This will give drivers
essentially unlimited range, just like any ICE car now enjoys with the current infra-
estructura.
In addition to these switch stations, ubiquitous charge spots will exist in each
major location where a typical consumer parks (at home, trabajar, shopping malls,
and downtown areas); these will allow people to continually charge their batteries
in a way that renders moot the everyday range issues. Por supuesto, a typical car is
parked for 22.5 or more hours out of a 24-hour day, so the charge spots themselves
will almost always be sufficient. Batteries have a range of roughly 100 miles, so peo-
ple will only need to use a BSS when they are driving over 100 miles in just one leg,
well beyond most normal commutes. The infrastructure costs of this plan are also
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smaller than one might imagine because the charge spots do not have all the
“smart” technology (which is mainly stored in the car). The switch stations rely on
a simple robot that moves in onedimension; they do not need the comprehensive
equipment and staffing of today’s ordinary gas station. Finalmente, the switch stations
will use renewable clean electricity (such as solar or wind), allowing each car to
have a carbon footprint of zero.
Before January 2005, I knew very little about the issues presented by an oil
economía. I started several software companies, the last of which we sold to SAP,
and was in line to become CEO there one day. Even after the Davos conference,
where I first proposed getting the world off oil, I never seriously thought it would
become my livelihood and indeed my life.
While doing research in the lead-up to that conference, I had to decide what
path to take towards my goal. The first step was to determine which sector to focus
en. I looked across the board, from home energy usage to power generation. Pero
transportation caught my eye: not only does it represent nearly half of world oil
usage, but it is also widely regarded as the most difficult to address, given the
entrenched need for infrastructure among other issues.
Various “solutions” to this problem have been getting play in the media over
the last few years, leading to a lot of discussion about which solution will work in
the end. I researched all the potential solutions myself, and the answer I came to
was electric transport.
A few years ago, Ethanol was the most talked about “solution” to the oil prob-
lem. En efecto, ethanol is renewable, and has the potential to replace oil. But it can-
not solve the trickier issues related to oil—and it is not entirely feasible. If every
square mile of land on earth was covered in Amazonian rainforest that could grow
sugarcane like that used to make ethanol in Brazil, the world would have enough
ethanol-generating material. But the world does not have that amount of arable
land, so ethanol is not feasible as a worldwide solution. Además, in ICEs, ethanol
delivers fewer miles per gallon (mpg) than gasoline, and it does emit CO2. Ethanol
is not nearly as energy efficient as electricity: it takes energy to create it, and ICEs
are naturally inefficient. Además, ethanol is corrosive and cannot be trans-
ported through pipes, making it impractical. Finally—and most crucially—it dis-
torts prices on corn, sugarcane, and related food goods, making it harder to feed
el mundo.
Similarmente, the “Hydrogen Economy” was championed by the previous admin-
istración, but it also faces problems. Primero, hydrogen has been the energy of the next
decade for the last four decades, and it is still decades away from being in any way
a reality. Segundo, hydrogen fuel requires more energy to produce than it produces
when burned; that’s a negative energy equation. Finalmente, fuel cell cars are prohibi-
tively expensive. The infrastructure issues are also massive, and would require a
complete overhaul. Dr. Stephen Chu, the United States Secretary of Energy and a
Nobel Prize winner in physics, recently rescinded all government funding for
hydrogen.
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Shai Agassi
Plug-in Hybrid Electric Vehicles (PHEVs) are now in fashion, epitomized by
the recent Chevy Volt. Although PHEVs are indeed much more environmentally
friendly than an ICE or a standard hybrid, the addition of the “range extender” in
the form of an internal combustion engine and gas tank causes enough problems
to doom it entirely. Primero, it does not remove us from the oil economy. Segundo, price
is a deal-breaker: with a range extender, the car would cost twice as much as a sim-
ilarly practical and capable car. Finalmente, it is debilitatingly heavy, making it harder
to achieve efficient energy use and performance equal to ICEs.
We have even heard some noise lately about natural gas (NG) as a potential
source of power for cars. Pero, like ethanol, it still emits carbon; and like oil, it is a
finite resource. It would require the same sort of overhaul of infrastructure that
hydrogen would, but would not ultimately solve any of the problems related to oil.
Por lo tanto, a lo mejor, it is a “bridge” solution, but not one worth investing in if we
have better technology already in place.
Electric cars, por otro lado, offer a full solution and the technology is
already available. EVs use resources far and away more efficiently than any other
sistema. The principal piece of infrastructure already exists: the electric grid. EVs
emit absolutely no carbon, and they can be produced affordably at scale with no
need for any technological advances. EVs are also cheaper to operate than ICEs,
and even come with lower maintenance costs because the engines have fewer mov-
ing parts.
So why are people not already buying EVs? The two main reasons start with
the battery: high upfront cost and a limited range.
At the moment, EVs cost significantly more up front than comparable ICEs,
mostly due to the battery cost. Although this cost will drop over time as battery
density improves (by roughly 50 percent every five years) and with scale, it will
remain the single most expensive component in the car for the foreseeable future.
No matter how much battery density improves, sin embargo, it will always limit
the range. Once the battery hits the end of its range, it must be recharged for hours
if we regard the battery as a fixed unit. This “range anxiety,” the driver’s fear of
reaching the end of the charge and not being able to go anywhere for hours, es
especially prevalent in markets like the United States that have many long-haul
routes and consumers accustomed to great mobility. Range anxiety is less of an
issue in emerging markets like China and India, where people will be more than
satisfied to have any range at all.
EV infrastructure is also far behind what is needed to encourage widespread
adoption. Imagine a parallel: that the cell phone revolution is peaking but we have
no cell towers to transmit calls. The car is not a complete product in itself; the actu-
al product is personal mobility. Por lo tanto, the complete product relies on the
infrastructure being in place before people start buying the cars themselves. Si nosotros
wait until 100,000 people buy EVs before we build an EV infrastructure, everyone
will wait until they can be the 100,001st buyer, and we will never get there.
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También, EVs will likely have a substantial impact on the electric grid. If electrici-
ty flowed automatically to any EV at the second the owner requested it, that would
create a load on the system throughout the day and often right at peak hours, como
the minute the driver gets home from work. That would mean that electric com-
panies would have to expand capacity to match every single new electric car, watt
for watt.
Finalmente, many of our climate goals could be defeated by the tailpipe-to-smoke-
stack effect. Eso es, if the extra energy produced to drive EVs is itself derived from
fossil fuels and thus causes carbon emissions, we are not significantly cutting a
car’s carbon footprint. Emissions would merely move from the tailpipe of the car
to the smokestack of the power plant that runs on coal, oil, or another fossil fuel.
For two years after the 2005 Davos conference, I spent whatever free time I had
learning about the energy sector and researched solutions to the issues described
arriba.
I started with the science, with what I actually had. Starting from that perspec-
tive led me to the conclusion that solutions other than electrons are neither short-
nor long-term solutions. Any time we turn energy into a molecule (such as oil) y
then turn that molecule back into energy, we lose energy along the way to heat and
other by-products that are useless to our end goal of propulsion. Electricity was
scientifically ideal.
After evaluating technologies for fast-charging batteries and dismissing it as a
possibility, I first had to find a way to eliminate the issue of range anxiety. Para mí,
the “Eureka!” moment came when I concluded that the fastest way to gain a full
charge would be to simply swap out the battery, much like swapping computer bat-
teries during a long flight. Aquí, the car industry had made a conceptual error:
regarding the battery as a fixed unit within the car, which could not be removed
easily or quickly. In addition to the impacts on range and price I mentioned above,
I saw another consequence of having a battery that was non-removable and con-
sumer owned: What happens when a battery becomes obsolete and better ones
have appeared on the market? Allowing easy transfer solved this smaller problem,
as well as the two broader ones of range and up-front price.
The concern with obsolescence became even more important once I consid-
ered the rate of battery development. As I said above, the energy density of batter-
ies typically improves by 50 percent every 5 años, or around 8 a 10 percent per
año. This means that consumers would always have obsolete technology with fixed
batteries in a product (a car) that they ordinarily own for much longer periods of
time than other consumer products with similar innovation curves.
Now it might be tempting to regard this improved density as a step toward
expanding the range for all EVs, when in reality it could be much more usefully
allocated toward a smaller, lighter, and cheaper battery. Most of us make few trips
longer than 100 miles one way; the typical driver does it five times a year.
Por lo tanto, a longer range is not nearly as desirable as a lower-cost option. Drivers
would have no reason to pay a premium for a 300-mile-range battery if they could
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Shai Agassi
The Oil Whiplash Effect
At its peak, in the first quarter of 2008, global oil demand stood at 87 millón
barrels per day (Mbbl/day).1 Current predictions for global oil demand for 2009
vary from 82.6 Mbbl/day to 84.9 Mbbl/day, according to the International
Energy Agency.2
The decreased demand is largely a result of the current economic crisis, con
people driving and flying less often than they did before. Over the course of
2008, drivers of motor vehicles decreased their miles driven by up to 3.6% com-
pared with their driving habits in 2007, and in the first four months of 2009 eso
figure dropped by an additional 1.1% compared with data from the same
months in 2008.3 Similarmente, the number of flights taking off or landing in the U.S.
en 2008 era 4.8% lower than in 2007, and the figures for the first quarter of 2009
were down more than 8.5%, compared with that quarter of 2008.4
Yet this decline in demand is predicted to be temporary, given the predicted
growth in global fleet size and the expected economic recovery. The UN predicts
that by 2010 alguno 939 million vehicles will be moving along roads around the
world, compared with only 751 million vehicles in 2002. It breaks down that
growth as a 15% increase in the fleets of nations in the Organization for
Economic Co-operation and Development (OECD), and a whopping increase of
más que 73% in the fleets of the non-OECD nations, such as China, India, y
Brasil. It predicts that the global fleet will reach 1.26 billion vehicles by 2020 y
1.66 billion by 2030.5 Considering that each 25 million vehicles require 700 mil-
lion barrels of oil a year, or approximately 2 Mbbl/day, we can expect oil demand
to grow dramatically, por 26 Mbbl/day, just to account for these new vehicles.
The trend toward increased demand in the very near future is troubling:
Increased demand will drive up the price of oil, just as we are moving out of the
current recession. Not only do prices affect the behavior of the end consumer;
more importantly, the price of oil is linked with national and global economic
growth and GDP. On the national level, meaningful oil price increases have pre-
ceded nine of the last ten recessions in the United States, including the current
uno. The one exception was the 1960 recession; ver figura 1.
These data demonstrate not only the link between the two but also the causal
relationship between them: the increase in oil price precedes the drop in GDP,
and thus supports the claim that these increases are one cause of the drop in
PIB, and not the other way around.
The figure also shows an asymmetry in the impact of changes in oil prices.
Increases in oil prices have a larger impact on GDP than do declines in oil
prices.6 Thus, the economy is hurt much more by price increases than it is helped
by price decreases. This asymmetry means that the economy is subject to the dis-
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advantages associated with increasing oil prices without getting nearly as many
benefits from any potential declines.
The harmful link between oil prices and GDP puts our economy at risk and
makes us more vulnerable to global economic trends. Because oil is a commod-
ity that can be traded across the world, its price is affected by the economic and
supply/demand trends of different countries. This means that with the anticipat-
ed fleet growth in India and China, demand for oil in the next decade is antici-
pated to rise substantially, and thus affect the national price of oil as well.
En efecto, many experts are predicting another price shock once the current
recession eases. A report this spring issued by McKinsey and Co., “Why Energy
Demand will Rebound,” indicates the potential for yet another price spike
entre 2010 y 2013.7 Eliminating our dependence on oil will break this cycle
and insulate the economy from this volatile market.
One key way to minimize the impact from increases in oil prices is to elim-
inate its use in the passenger vehicle sector by switching to electric vehicles.
Given that over 60% of the oil demand in the U.S. is used for transportation and
that the U.S. car fleet is growing dramatically, focusing efforts on that sector will
provide the greatest leverage to break the link between oil price increases and
recessions.
Electric vehicles are the only technology available today that could be mass
produced in a short time frame to promote the effort of decoupling our econo-
my from oil. Reducing our dependence on oil will help secure our economy,
while also improving our air quality, reducing our carbon footprint, and increas-
ing our national security.
1. International Energy Agency, Oil Market Report, Demand, Junio 11, 2009.
http://omrpublic.iea.org/.
2. Ibídem.
3. A NOSOTROS. Department of Transport, Federal Highway Administration, Individual Monthly Motor
2009.
A NOSOTROS.
y
Vehicle
www.fhwa.dot.gov/ohim/tvtw/08dectvt/page3.cfm
www.fhwa.dot.gov/ohim/tvtw/09aprtvt/page3.cfm.
Travel
Abril
2007,
el
para
en
4. See Research and Innovation Technology Administration, Bureau of Transportation Statistics,
Flight. www.transtats.bts.gov/Data_Elements.aspx?Data=2.
5. United Nations Yearbook; and International Monetary Fund staff calculations, as quoted in
Martin Sommer, World Economic Outlook, Chapter IV: Will the oil market continue to be tight?,
International Monetary Fund, Abril 1, 2005
6. Rebeca Jiménez-Rodríguez and Marcelo Sánchez. Oil price shocks and real GDP growth:
Empirical evidence for some OECD countries. Economía Aplicada 37 (2), 201-228. European
Central
2004.
Paper
Working
www.ecb.int/pub/scientific/wps/author/html/author456.en.html.
7. McKinsey & Co., Puede 2009, “Why Energy Demand will Rebound”
Bank,
Puede
362,
No.
www.mckinseyquarterly.com/Why_energy_demand_will_rebound_2361.
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Shai Agassi
Cifra 1. Real Oil Price (darker line, sustained price increases lighter line) y
Recessions (shaded in gray).
Fuente: Stephen Brown, of the Federal Reserve Bank of Dallas, en 2008 Conference of the U.S.
Energy Information Administration, «Globalización, Oil Prices and U.S. Economic Activity.»
switch it and have the same effective range.
Once I had completed my scientific research and innovation, I had to create a
business model to implement these findings in a way that could actually have an
impact on a worldwide scale. Since all the technology already existed, it was obvi-
ous what we needed: not a technological innovation but a business innovation that
would set up a meaningful market shift.
At first, as I considered what organization would deploy the infrastructure and
manage the network, I envisioned a governmental agency. The government tradi-
tionally controls matters of infrastructure and electricity, so an extension into EV
networks seemed logical. But offering a competitive market solution would be
much more effective in enticing customers and also had the potential to be pro-
foundly profitable. It would also facilitate competition within the industry that
might not be ideal from an individual firm’s perspective, but would certainly help
Better Place to eventually realize its goals.
Having decided that a private venture would be the best vehicle for conversion,
I then had to figure out how to create a network that would not be prohibitively
expensive to install yet would be comprehensive and thus fully functional for con-
sumers. The first step would be blanketing the target region with charge stations.
People tend to park in four key locations: their place of residence, their place of
trabajar, shopping districts and malls, and downtown areas. If we provided charge
spots at all these locations, most consumers would always have a place to plug in
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and therefore to maximize the benefit of using our network. To make this work,
that network would need to have approximately 2.5 charge spots per EV, so charge
spots will need to be ubiquitous at full deployment. Switch stations would be locat-
ed roughly 30 miles apart, mostly on highways between urban areas, to assist with
commutes and long trips
when needed.
Where does the margin exist in
our model, given the
infrastructure costs? Quite
simply, it comes from the fact
that electricity is far cheaper
than gasoline. Even the most
expensive electricity (como
solar, which is steadily becoming
cheaper) costs approximately 2
cents for a mile of EV usage in
Estados Unidos. Factoring in the cost of
the battery, it costs roughly as
much to operate an electric car
as to operate an ICE vehicle on
gasoline at $1.50 a gallon, with a barrel of oil costing about $25.
full of
But how could we roll out
millions of charge spots if
they were
prohibitively
expensive? De este modo, we designed
charge spots that are not
stuffed
computer
equipment and instead put
the computational and net-
work power into the cars
themselves and into a net-
work management hub. A
consumer would flash a card
at the charge spot, cual
would communicate with the
on-board computer system,
telling the charge spot to start
charging based on the con-
sumer’s usage plan. Este
would let us build cheaper
charge spots than in other
models that build network
software and credit-card-
en
reading mechanisms
every spot. También, as I said ear-
lier, the simplicity of the BSS
robot, with only one arm that
moves in just one dimension,
should keep costs down.
So where does the margin exist in our model, given the infrastructure costs?
Quite simply, it comes from the fact that electricity is far cheaper than gasoline.
Even the most expensive electricity (such as solar, which is steadily becoming
cheaper) costs approximately two cents for a mile of EV usage in the U.S. Factoring
in the cost of the battery, it costs roughly as much to operate an electric car as to
operate an ICE vehicle on gasoline at $1.50 a gallon, with a barrel of oil costing about $25. That does not include maintenance costs or depreciation, two elements
of operating costs that should also be favorable for EVs. Over the long term, oil
prices will likely never again fall below $50 a barrel, y $1.50 a gallon is unheard
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of in the U.S., let alone Europe, where the difference is even starker. Oil remains
encima $50 a barrel today, and that is in the midst of recessionary conditions. Once the economy recovers, oil demand (and therefore price) will recover with it (see Text Box 3). Consider some numbers. It costs roughly 16 cents a mile to operate an ICE car and 8 cents a mile to operate an EV. When battery prices fall and clean energy is cheaper when produced at scale, the operating cost of an EV should be four cents a mile by 2015 and two cents a mile in 2020. The next problem has to do with acquiring electricity. The problem of strain on the electrical grid is an important one, but can be avoided easily. Network man- agement software can schedule car charging intelligently; Por ejemplo, around the low-demand periods of the day such as late at night when most people are asleep. That will let drivers take advantage of cheaper electricity that will be more readily available, and therefore not significantly increase the total capacity needs of the electric grid. Por ejemplo, you might plug in your car at 5 p.m. when you get home, but it would not start charging until 10 p.m. or later, whenever the software determined that the network load was low and the cost cheaper. If you suddenly needed to run out on an errand, your car would likely still have enough energy to do what you need, but even if it didn’t, you could find a switch station. If this sort of network management existed, electric grids would only have to expand their capacity by roughly 6 por ciento, which is relatively easy to do compared to the expansion necessary for non-managed charging. Por supuesto, it is essential to our goals that all this expansion of energy come from clean sources, such as solar and wind. We cannot guarantee that every elec- tron in your car is clean, but we will guarantee that for every electron you use, someone will be generating a new one that is clean. Given that it would take about 10 years to switch a country from fossil fuels to clean sources, we are talking about expanding the grid with clean energy, by just one half of a percent per year. Given that both solar and wind are intermittent, the EV actually solves yet another problem. Electric grids have remarkably little storage capacity. Reserves are kept for unexpected demand spikes and usually cannot be recovered when they go unused. Sin embargo, if millions of EVs with large batteries were on the network, they would provide an excellent resource for energy storage. Por ejemplo, wind is often at its most productive at night, but demand at night is often low. Combining EV batteries with the network-management software, all the excess electricity gen- erated by wind power by night (or solar power by day) can be stored in EV batter- ies during non-peak usage times late at night and used as a buffer on the network. This solves a previously tricky problem in making renewable sources effective. More importantly, this is one more step in negating the tailpipe-to-smokestack effect. Solar and wind energy are often criticized as being prohibitively expensive, and indeed they are more expensive than certain other non-renewable energy sources. Sin embargo, in this context they should really be compared to the cost of gasoline, the comparable propulsion method for cars. To supply an entire nation’s car fleet with 136 innovaciones / caer 2009 Descargado de http://direct.mit.edu/itgg/article-pdf/4/4/125/705360/itgg.2009.4.4.125.pdf by guest on 08 Septiembre 2023 World Without Oil enough solar and wind energy for the next 50 years would require the same amount of money it costs to import and refine crude oil for just one year. Viewed in this context, solar and wind are in fact remarkably cheap. In the U.S. we spend $300 billion a year on oil imports. To give an example from Israel, we asked the
government if they would be willing to build a two gigawatt power plant in the
desert. They were put off by its size, so I framed the question differently: What if
we found oil in that exact same region? They said they had tried and knew there
was none. I said I knew there
era, and that I could prove it.
Just let me drill up, build a
and supply
power plant,
enough power for Israel’s
entire car fleet. Better yet, este
oil will not run out.
Only in the very last days of
2006 did I start thinking of
making a career out of my plan.
Shimon Peres, the President of
Israel, called me at home just as
I had gone to bed after the
Saban forum. He said, "Tú
have a good idea, Señor. Agassi,
now what are you going to do
about it? If you believe in it but
do not do it yourself, why would
anyone else jump on it?"
By late 2006, I had figured
out the technological kinks in
the business, but I saw my
plan as no more than an inno-
vative idea that someone else,
be it a government or an
entrepreneur, would eventual-
ly take up and make their
own. In December of
eso
año, Haim Saban kindly
invited me to present my idea
at his annual
forum of
American and Israeli leaders.
After I gave my presentation,
former President Bill Clinton
had a provocative critique: el
idea was good, but what about the Average Joe consumer who buys a well-used car,
drives it into the ground, and buys another? That sort of person, a large segment
of the market, is not likely to go for a car at the “new” price, and therefore is not
likely to switch at all.
After the Saban forum, we further developed our model on the parallel to cell-
phones. The auto market as a whole actually has some striking parallels to the
mobile phone market, where the network and the handset are independently use-
less but together necessary and ubiquitous. The product that operates on the net-
work is (relatively) expensive in either case, and both systems charge for usage.
Mobile phone networks are owned and operated by private companies, y ellos
have a starkly different business model than auto companies currently do despite
those similarities. Primero, they charge based on usage of their network. Segundo, ellos
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sign customers to long-term contracts, in exchange for which they will subsidize
their handsets.
como $10,000 It is telling that someone so closely involved with oil would not only allow for a switch but would boldly support it financially, and that will become a theme. About a year later BusinessWeek quoted Ofer as saying, “If I did not do it, someone would. What is the point of fighting something that is inevitable?” This cell phone-based model of business allows for some extremely interesting innovations in the EV business model. Por supuesto, it allows service providers to own batteries and thus allows for the all-important battery switching; at the same time, it lowers the price of the car by something to $15,000. It also allows the cus-
tomer to pay on a usage basis,
much as we all do now for gaso-
line, but with a network that is
ideally cheaper, more ubiqui-
tous, and easier to use. Drivers
would have no reason to buy
usado, inefficient ICE cars when
they could get brand new ones
that are cheaper to buy and
cheaper to operate. This model
also allows for value-added serv-
ices, such as network-manage-
ment software and emerging
management planning for driv-
ers that can point each con-
sumer in the direction of the
nearest available BSS or charge
spot, as needed. It could even
send the customer an instant message saying that the car is fully charged or that
the charging was unexpectedly interrupted.
But only in the very last days of 2006 did I start thinking of making a career
out of my plan. Shimon Peres, the President of Israel, called me at home just as I
had just gone to bed after the Saban forum. He said, “You have a good idea, Señor.
Agassi, now what are you going to do about it? If you believe in it but do not do it
yourself, why would anyone else jump on it?"
He was all too persuasive, and convinced me to leave my job at SAP to go off
into the uncharted territory of my new idea. He also set me up with Ehud Olmert,
then Israel’s Prime Minister, who said the Israeli government would support my
project if I lined up enough funding and a major automaker to back my plan.
Realizing that funding would be difficult to come by without at least a tenta-
tive agreement from an original equipment manufacturer (OEM), Peres helped set
up meetings with them a month later at the Davos 2007 conference. Only two of
the five we invited showed up. But that was enough.
My meeting with Carlos Ghosn, the CEO of Renault and Nissan, changed the
course of Better Place. Finding him surprisingly supportive of my plan, I asked if
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World Without Oil
he was interested in hybrids. He said, “Hybrids are like mermaids. When you want
a fish you get a woman and when you want a woman you get a fish.” He hit the nail
on the head: if you want gas car performance from a hybrid, you get a watered-
down version, and if you want a clean environment you are still giving off substan-
tial emissions. Además, only one million of the 500 million cars sold in the last
10 years are hybrids: a market share of just 0.2 por ciento. Even worse, hybrids are
solo sobre 20 percent more efficient than comparable cars, and therefore have
almost no meaningful carbon impact on the world scale.
Ghosn immediately responded to my ideas and business model, and seemed to
really appreciate its implications. His company had been doing research on
advanced batteries and was technologically well prepared for the challenge. Él
promised that down the road his company could make fully functional EVs, com-
patible with our solution, at scale (Text Box 2 describes the sort of car we are talk-
ing about).
With Renault-Nissan on board, my next task was to line up funding for what
remained a fairly audacious venture. Michael Granoff, the President of Maniv
Energy Capital, pointed me in the direction of Idan Ofer, the President of Israel
Corp. Ofer’s company is one of the largest owners of oil refineries in Israel, y
therefore stands to be affected the most by the switch to EVs. After we had met for
several hours, he stepped into the elevator with me, and said he would support my
venture with $100 millón. I was floored, and not sure I believed him, but Ofer was deadly serious. De hecho, he would end up contributing a total of $130 million to the
proyecto. It is telling that someone so closely involved with oil would not only allow
for a switch but would boldly support it financially, and that will become a theme.
About a year later, BusinessWeek quoted Ofer as saying, “If I did not do it, someone
would. What is the point of fighting something that is inevitable?"
From there, Granoff helped me get funding from his own Maniv Energy
Capital, and we acquired substantial funding from VantagePoint Ventures and
Morgan Stanley, totaling roughly $70 millón. Ahora, con $200 million in capital,
and a major OEM as a partner, we launched Better Place in October 2007. We lined
up partners for the various pieces of the supply chain, most importantly battery
producción (with Automotive Energy Supply Corp. and A123 Systems), and began
working on target markets.
Given the support we enjoyed from President Peres and Prime Minister
Olmert, Israel was a natural place to start. In addition to the policy support, cómo-
alguna vez, Israel is an ideal place for our solution for several reasons. It is a transporta-
tion island (if your car leaves Israel it has probably been stolen). The longest route
one could possibly drive is 250 miles. Más importante, the geopolitical costs of oil
dependence are extremely clear to every consumer in the country. Israel even has
a fairly aggressive gasoline tax. On top of that, Israel has a favorable tax scheme,
which was recently revised; it ensures an approximate 80 percent difference
between the tax rates of ICE cars and EVs, and will maintain a substantial differ-
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Shai Agassi
ence of at least 30 percent in the long term. We announced Better Place Israel in
Enero 2008.
Barely two months later we announced our next market: Dinamarca. De nuevo, el
region presented a uniquely perfect fit for our business. Denmark has a relatively
small and contained landmass, wind is a principal source of energy, gasoline is
extremely expensive, and the difference in tax rates between an ICE vehicle and an
EV is staggering: 105 por ciento a 180 percent depending on the price of the vehicle.
Denmark’s reliance on wind is a perfect example of EVs solving the problem of
intermittent energy sources. De hecho, Danes pay Germany to take some of the elec-
tricity they generate at night (the peak time for wind) because they have no
method of storage and demand is not strong late at night. With millions of EV bat-
teries and intelligent network management, the cars will be charged at night, pro-
viding a much more efficient usage of the energy generated around those hours.
We managed to secure €103 million in funding as a seed fund for the Danish com-
compañía, and quickly set up an office on the ground.
Since then, we have announced Better Place operations in Australia (beginning
in Canberra), the San Francisco Bay Area, and Hawaii. As Renault and Nissan
approach mass-market volumes in 2012, our next step is to get the infrastructure
into the ground as fast as we can to help speed up the transition. Government pro-
grams to encourage EV adoption are essential, either from the supply side, el
demand side, or via regulation such as those making it easier to acquire permits for
charge spots. With a little government help and with OEMs taking notice of
Nissan-Renault’s commitment, EV growth can only be limited by the rate at which
we reach agreements with new regions and put the infrastructure into the ground.
Countries around the world are rapidly starting to pass EV legislation, and are
looking to show leadership in the field. Porcelana, especially, with its $9,000-per-vehi-
cle EV credit, is showing the western world the sort of decisive action needed to
transition quickly and effectively. Now it is up to the United States and others to
show leadership by taking action on their own and encouraging OEMs to help and
foster the trend.
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