The Change Agent

By Ben Thompson, Senior Editor

If you’re taking on the world’s most powerful industries, you’d better have influential friends, financial muscle and a red-hot business model. Shai Agassi has all three. But can he get the world off oil before it’s too late?

Shai Agassi: No emissions, full stop

“Our global economy cannot produce as much oil as we need to continue to grow the economy, let alone support 300 million more cars, which is what we will add in the next 5-7 years. We are running out of time on both problems. We’re addressing one of the largest challenges of the 21st century.”
-Shai Agassi, CEO and Founder of Better Place

How do you run an entire country’s transportation network without oil? When Shai Agassi first posed the question in 2006 – along with his idea for a solution – people called him a dreamer. It’s a moniker the Better Place CEO and founder strongly rejects. Sure he thinks big, but there’s nothing fantastical about Agassi’s grand vision. On the contrary, his plans for the future of world transportation are down-to-earth, utilize currently available technology and, most importantly, have received significant backing from the people who matter most: politicians and investors. If anything, his is a pragmatic approach; not so much a re-invention of the wheel as a re-imagining of how to push it.

His goal? A world populated by cars with zero emissions. Not just better gas mileage, not just reduced emissions: no emissions, full stop. “There are 700 million cars in the world today that are producing 2.8 billion tons of carbon dioxide annually,” he explains, in between meetings on a whistle-stop tour of the US promoting the Better Place business model. “Our global economy cannot produce as much oil as we need to continue to grow the economy, let alone support 300 million more cars, which is what we will add in the next 5-7 years. We are running out of time on both problems. We’re addressing one of the largest challenges of the 21st century.”

Despite its mind-numbing scale, Agassi believes the goal is achievable. For one thing, Better Place already has the capability to build an all-electric car network using proven technology such as lithium ion batteries. And together with partners from around the world – including automakers, battery manufacturers, energy companies and governments – the company is making rapid progress. Israel has declared its commitment to be oil-free by 2020. Denmark has reaffirmed its global environmental leadership by committing to a renewable energy-powered electric car network. Australia signed up in October, refuting the suggestion that Agassi’s scheme won’t work on a large scale. And 25 more countries around the world are currently in talks with Better Place about how they can be next.

Your business model is unlike anything the automotive industry has ever seen before. When did you have your ‘eureka’ moment? Did the idea for Better Place come to you suddenly or did it evolve over a period of time?

The evolution of Better Place was definitely a process. During the World Economic Forum in 2006, I was asked how I would make the world a better place from an environmental perspective. After serious thought, I realized it came down to oil – we have to end the world’s addiction to oil. From there my idea evolved into a whitepaper and when I presented it as what I thought would be a government program to President Shimon Peres of Israel, he asked me why I wasn’t working on this full time. I haven’t looked back. Until the moment I met the President I was merely solving a puzzle – more out of mental curiosity than out of a real belief I could get anything done.

At first glance, the move from the software industry to the automotive sector is not an obvious one. What impact did your background at SAP have on the way you approached the issue of getting people off gasoline-powered vehicles and into electric cars? Do you think it has given you a unique perspective on how to address the challenge?

This is huge – and one of the most important things I learned during my time at SAP was how to scale and do it globally. We’re trying to end the world’s addiction to oil, so we’ve got to be thinking big. There’s also a huge technology element to what we’re doing, so again it is really not as big of a jump as you would think.

Your approach has been compared to that of the mobile phone industry, where the network operators own the hardware and infrastructure and lease it back to customers. Is this a valid comparison?
 
Yes, our model is very similar to that of the mobile phone industry. We’re the T-Mobile or Vodafone, putting the infrastructure and services in place. Just like the mobile rollout, you have to have the infrastructure in place before you can get the cars on the road. Remember the early days of the cell phone where people were huddled in specific areas where there was coverage?
 
Under our model, drivers subscribe to a monthly plan and pay for miles, not gallons, just as the consumer would pay for minutes and not the device itself. Essentially we are applying mobile phone economics to transportation to redefine the driving experience. We want to make electric cars more affordable than gasoline powered cars.
 
What success have you enjoyed to date – in terms of attracting funding, getting government buy-in, and starting to develop and rollout the infrastructure? What have been the most important steps for you to date?

We received $200 million in funding, the largest seed round funding on record, through partners such as Israel Corp., Morgan Stanley, VantagePoint Venture Partners and private investors who have expressed a concern over global climate change and a passion to protect the environment.
 
The last year has been an amazing journey and so much of it centers on the help of Shimon Peres who brought Better Place to Israel in January 2008. In addition to helping us announce Better Place Israel, the Israeli government proposed incentives to encourage consumers to switch from gas cars to electric vehicles.
 
The momentum has continued: we announced Better Place Denmark in March 2008 and most recently we signed agreements with Macquarie Group and AGL Energy in Australia to build infrastructure for electric vehicles in Australia. The goal is to raise AUS$1 billion in an effort to build a zero emission and zero price transportation infrastructure system to reduce their carbon footprint, the highest per capita in the world. Our expectation is that wide-scale electric vehicle adoption will take place in Australia by 2012.
 
I know you have signed an agreement with Nissan-Renault to build your initial electric vehicles, but do you envisage forming relationships with other carmakers?

Carlos Ghosn, the CEO of both Renault and Nissan, has been a tremendous supporter. We have signed agreements with Renault-Nissan in both Israel and Denmark and look forward to working with them on future deployments as well. In addition, we are in active discussions with many of the major automobile manufacturers around the world.

And what has been the reaction in Detroit to the Better Place model?

Just like the mobile phone model, we envision consumers having a wide choice of makes and models – including ones from Detroit, and other auto markets in the world. Better Place is currently in active conversations with 25 other countries around the world as well as most major automobile manufacturers.

Is there a place for alternative electric cars (plug-in hybrids, the Chevy Volt and others) as part of the bigger picture here? Is there a way for such vehicles to co-exist alongside the Better Place model?

At the end of the day we are not building Better Place for the sake of building a company, or even building a cool car, but with the purpose of ending the world’s addiction to oil. So, of course, every little bit helps and we welcome competition in the market, and believe competition breeds innovation. But in order to really end our addiction to oil, we believe zero emission vehicles present the strongest option.

Hybrids? You can buy one today, and they are definitely an improvement over a standard internal combustion engine. But they still need oil. Not as much, but they still need it. They won’t break our addiction to oil, they’ll simply make it last longer.
The analogy I use to try and explain it is this. There was this thing called the fax machine to send messages, in between the invention of the phone and email. I look at the hybrid as the fax machine. It serves a purpose, but does not solve the problem.

And what about hydrogen fuel cells? All they produce is water vapor…

The technology to mass-produce them is years away, and we must begin the transition of our infrastructure now, with today’s technology.

Critics have suggested that there is a danger that battery technology may evolve at a faster rate than is practical for a company that is likely to require a significant battery inventory. What would you say to this idea?

Battery technology has greatly improved over the course of time. Our philosophy is to deploy lithium-ion based batteries that are considered today to be the most advanced in the industry. By separating the battery from the car (which is our model) and making it a component of the infrastructure, we have the flexibility to keep up with the latest technology while maintaining our inventory. This approach allows us to create an ecosystem that uses battery technologies that are currently available, making electric vehicles an immediately viable alternative to fuel-powered cars.

The range extension is not inside the car, it’s in the infrastructure – just like it is today with gasoline. We don’t drive around with a second gas tank in order to extend the range of our cars; we use the gas station infrastructure to do that.

How flexible is the Better Place model to adapting to the pace of technology change? How are you ensuring against obsolescence?

One of the biggest challenges when designing an infrastructure like this is making it work for everyone. In order for the electrification of transportation to work on a global level, we need an open, standards-based infrastructure where all electric vehicles, no matter the make or model, will run on the same plug-in. When this is adopted, countries and automobile manufacturers around the world will join in the fight for oil independence.

It has only taken around a decade for mobile phones to become ubiquitous. What sort of timescale do you envision for a similar revolution in electric vehicles? How aggressive are you being in setting your goals?

Former vice president Al Gore presented an aggressive challenge to the United States government to be completely off of fossil fuel and using renewable energy by 2018. That’s an ambitious timeline for sure but we believe the electrification of the automobile is inevitable and that a difference can be made now. We know the Earth’s resources are diminishing and that we cannot sustain our current thirst for oil from a resource, economic or environmental standpoint. We know there are obstacles to adoption, but our model is making the transition easier for all drivers with the goal to end oil dependence.

To date you have signed agreements to deploy in Israel and Denmark, both relatively small in size and where the average commute is within the 80-mile range. However, you’ve also just signed a deal with Australia to trial the system there. What challenges does a country of this size present? Does it differ to that of a small country? And does this give you hope that you can eventually win over larger countries such as the US?
 
We’ve always said the model will work in large and small countries, even when we announced our agreements with Israel and Denmark. Now with Australia we hope to prove it works in big countries too. Our goal has remained the same and that is to end the world’s addiction to oil and you can’t do that by electrifying only small countries.
 
Our model scales up – Australia is the sixth largest country in the world and is actually the first in the world, per capita, in carbon emissions. Australia is rich with renewable energy technology and has spent a great deal refining its many wind farms, which we can draw from to power the recharge grid. We look for countries that have high population densities and commuter traffic. So for larger countries, for example, Better Place will begin in the dense urban areas and expand out from there.
 
Our model of charging spots and battery exchange stations gives us the flexibility to connect large metropolitan areas by placing exchange stations along the highways that connect these areas. So just like you would pull in for gas, you can pull in and in under three minutes swap out your depleted battery for a fresh one.

Finally, what’s next for Better Place? What are you currently working on, and what are your hopes for the next 12-18 months?

We are committed to helping Israel move off oil for transportation by 2020. We are equally committed to helping other nations such as Denmark and Australia end their addiction to oil, and my hope is that the Better Place model will be working and you will see mass deployment of electric cars in all of the major countries around the world just 10 years from now.

Within the next 18 months to two years, we fully expect the wide-scale deployment of electric vehicles in Israel and Denmark. It is the expectation that Australia will have wide-scale deployment by 2012.

Extra info…

How does it work?
What does an electric car infrastructure look like?

The batteries of a zero-emission vehicle need three things in place in for optimum functionality: charging spots, battery switching stations and software that automates the experience.

The charging spots will keep the batteries topped off with power so that they always have 100 miles of driving capacity. They are located where you work, live, shop and dine in parking lots so that an electric car will have the ability to recharge when the software instructs it to top off.

For trips longer than 100 miles, battery-switching stations will be available roadside. Stations are completely automated, and the driver’s subscription takes care of everything. The driver pulls in, and the depleted battery is quickly replaced with a fresh one, without anyone having to leave the vehicle. The process takes less time than it does to fill a tank of liquid fuel.

Because most electric vehicles will be charging during the evenings while at home, the batteries become distributed storage for clean electricity. In Israel, for example, excess power from the growing solar industry will be stored in the cars’ batteries. Similarly in Denmark, unstored energy from the country’s wind turbines will be utilized. Better Place can help each market identify and develop its own ‘virtual oil fields’ of renewable energy.

Due to the open standards-based approach that Better Place has adopted in the development of its batteries, there will be many manufacturers contributing to the pool of available batteries. This will maintain a steady supply and stable prices as more and more nations join us in our efforts to remake transportation as a sustainable service.