Oil is the greatest problem of all time

I’ve been hoping that some really smart people would tackle the dependence on oil problem. Silicon Valley and Microsoft helped put PCs in every office and home when it seemed impossible, so why not solar-powered electric cars. I’m fed up with the defeatist attitude so common in the US of … "it will be 50 years before we can get off oil."

Here’s a glimmer of hope, inspired by Shimon Peres, the former Israeli Prime Minister and now President, who said: "I believe Israel should go from oil to solar energy. Oil is the greatest problem of all time—the great polluter and promoter of terror. We should get rid of it." He was addressing his feelings to Shai Agassi, who wants to design a practical and affordable electric car.

Shai Agassi (he lives in Silicon Valley) is the kind of person who might make it happen. Below are some excerpts from a BusinessWeek article about his plans.

Source: The Electric Car Acid Test: Shai Agassi’s audacious effort to end the era of gas-powered autos by Steve Hamm, BusinessWeek, Jan 24, 2008.

On Jan. 21, Agassi, Olmert, Peres, and Ghosn unveiled the novel project, under which Agassi’s Silicon Valley company, Better Place, will sell electric cars and build a network of locations where drivers can charge and replace batteries. Olmert has done his part, too. Israel just boosted the sales tax on gasoline-powered cars to as much as 60% and pledged to buy up old gas cars to get them off the road.

Agassi contends that Israel is just the start. He hopes to expand his business into several other countries over the next few years, with China, France, and Britain among the potential markets. Ultimately, he believes that his company and others like it could shake two pillars of the global economy, the $1.5 trillion-a-year auto industry and the $1.5 trillion-a-year market for gasoline. "If what I’m saying is right, this would be the largest economic dislocation in the history of capitalism," says Agassi.

Yet soaring oil prices and the threat of global warming give Agassi an opening. Governments worldwide, like Israel, are getting more serious about reducing their dependence on oil and are more concerned about the effect of carbon emissions on climate change. And the auto industry is placing large bets on alternative power vehicles like never before.

Agassi does bring a new perspective to the alternative fuel world. The trouble with traditional electric cars is that they can go only 50 or 100 miles and then they need to stop for hours to recharge their batteries. Hybrids overcome the mileage limitations, but only by burning gasoline. One of Agassi’s unconventional ideas is to separate the battery from the car. That will allow drivers to pull into a battery-swapping station, a car-wash-like contraption, and wait for 10 minutes while their spent batteries are lowered from the car and fully charged replacements are hoisted into place. Better Place will build the service stations, as well as hundreds of thousands of charging locations, similar to parking meters.

Agassi’s other unusual idea is for Better Place to operate as something akin to a mobile-phone carrier. He plans to sell electric cars to consumers at a relatively low price and then charge them monthly operating fees. The total cost of owning an electric car, including the up-front price and ongoing operating expenses, is expected to be less than that of a conventional car.

What got Carlos Ghosn (chief executive of Renault and Nissan) excited was Israel’s willingness to slash import taxes for green vehicles and alter domestic sales taxes in ways that would make the economics of the plan work. "This is a unique situation," says Ghosn. "It’s the first mass marketplace for electric cars under conditions that make sense for all the parties." As a result of getting involved, the Nissan-Renault Alliance has made electric autos a top priority. Initially, the companies expect to produce electric cars for Israel and other countries by modifying existing models, but eventually they plan to introduce new models designed from the ground up to run on batteries developed by Nissan.

Immediately after the Davos meetings, Peres urged Agassi to take on Project Better Place as his own business. Agassi was in line for the CEO job at SAP, but Peres challenged him to change course: "In your young life, there’s nothing better you could do." A few days later Hasso Plattner, SAP’s chairman, called Agassi to say CEO Henning Kagermann had signed on for two more years. Since that would push back Agassi’s opportunity to move into the CEO spot, he saw it as a sign that he was free to leave and pursue other career paths. He quit on the spot, though two months went by before his departure was final.

He felt strongly about the need for a peaceful resolution to Middle East conflicts, and he figured that one way to reduce tensions was to reduce dramatically the world’s dependency on oil. He had chosen Project Better Place as the name for his project because of the challenge to the Young Global Leaders a year earlier to try to make the world a better place. He couldn’t think of anything more important he wanted to do.

By spring, Agassi was refining his business ideas. Those years at SAP gave him a unique perspective on overcoming the hurdles to widespread electric vehicle adoption. He saw that the vehicles needed an infrastructure comparable to NetWeaver to make them viable. On a 10-hour flight from Tel Aviv to New York, he laid out the core business model for Better Place.

During the summer, he concentrated on raising money. His big break came during a meeting with Israel Corp.’s Ofer last June. Agassi was in Israel to raise money from the country’s leading industrial families. One of Agassi’s allies, investor Michael Granoff of Maniv Investments, a New York company that concentrates on alternative energy investing, arranged a meeting on June 12 in Ofer’s office on the 23rd floor of the Millennium office tower—with a panoramic view of the coast. Agassi laid out the economic rationale for electric vehicles and explained his business plan. As he wrapped up, Ofer quipped to one of his colleagues: "I guess we’ll have to sell the refineries."

Agassi couldn’t guess where the conversation would go next. He had to rush to a meeting with Peres, but Ofer accompanied him down to the lobby. As they said their goodbyes, Ofer leaned forward and delivered some stunning news: "I’m going to invest in this, and I’m going to be your biggest investor. I’ll put in $100 million." A flabbergasted Agassi didn’t know how real the pledge was, but when the initial round of $200 million in funding for Better Place came together last October, Ofer kept his word. Agassi lined up a wide range of other investors, including investment bank Morgan Stanley (MS).

In December, Agassi saw his dream come one step closer to reality. With his backers in place and the company’s launch scheduled, he took a test drive in a Renault that his employees had converted to run on electricity. The modified Renault Mégane is capable of going from zero to 60 in eight seconds and has a top speed of 130.