Energy: Why the U.S. Isn’t a Better Place

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Ask Shai Agassi how his electric transportation startup Better Place is doing, and the Israeli-American entrepreneur will offer up an endless supply of good stories. The company’s trial in Tokyo—running several electric taxis in the Japanese capital, which can recharge and switch their batteries at a Better Place station—was recently extended for an additional three months, giving the company more time to evaluate their new service in one of the most crowded car markets in the world. Agassi has signed test agreements in China, Australia and Denmark,  and his on track for a full commercial deployment in his home market of Israel by October 2011. And today Better Place announced a partnership with GE to accelerate the deployment of a new electric vehicle infrastructure, including the use of the GE’s new Wattstation electric chargers. And if that’s not enough, Agassi and his company has a fan in Bar Refaeli—Sports Illustrated swimsuit cover model and Leonardo DiCaprio girlfriend—who penned this tribute to the company. All Nissan’s electric Leaf has is a kind of creepy commercial with a polar bear.

Agassi has a unique take on the electric car transition. Rather than manufacturing electric vehicles—as companies like Nissan and GM have done, along with startups like Tesla—Agassi wants to create infrastructure for electric transportation. He envisions replacing gas stations with battery charge and swap stations—built by Better Place—that would make owning an electric car viable. The battery swap stations would help alleviate the problem of short range of most electric cars—rather than waiting for a recharge, Better Place would swap in a new battery in minutes, and you would be good to go. And instead of buying a battery with an electric car—which is the reason why early generation electrics cost so much, because a good lithium-ion battery can cost up to $10,000—customers will be essentially leasing the batteries from Better Place. The model is similar to a cell phone subscription plan because you end up paying for the miles as you go, rather than being forced to pay all at once—which is essentially what you do if you have to buy the battery and the car. (Imagine how much your iPhone would cost if you were forced to pay for all the minutes you’d be using over its lifetime up front, rather than month-by-month.)

Agassi’s plan has its critics, who question whether battery-swapping will be too cumbersome, and whether it’s financially viable to put in the infrastructure in place before there are enough cars and customers. Still, Agassi is innovative, and he does have smart backers—that’s why we put him on the Time 100 list in 2009. But whether he succeeds or fails, you’re not likely to see Better Place moving to scale in the U.S. any time soon. As he told me in a meeting today, there’s simply no way for electric cars—especially Better Place’s plan—to make headway in the U.S. unless there was a willingness to tax gasoline. “At $3 a gallon, this isn’t going to work,” Agassi told me. “That’s the reality. There’s no way of getting around it.”

In Europe, in Israel, in Japan, in China, that’s not a problem—the high price of gas will make a transition to electric cars much easier. (As will smaller, more compact cities, where the shorter range of an early electric might not be as much of a limitation as it would be in the U.S., and where it will be simpler to develop a new fueling infrastructure.) Gas in Europe can go for $7 a gallon—due chiefly to taxes—because there’s a political willingness to accept those higher prices. That doesn’t exist in the U.S.—especially now—but Agassi believes the U.S. will steadily fall behind the global electric car race unless it is willing to price itself off its addiction to oil. “You’re going to end up buying electric cars made in China, powered by batteries made in Japan,” he says. “We’re not falling behind—we’ve already fallen behind.”

Not everyone believes that electric cars will be financially viable now or in the near future—if you want a vibrant debate on the virtues and vices of government support for electrics, check out this back-and-forth on Slate. And even if electrics do succeed, that doesn’t mean Better Place will—it could end up becoming the Betamax of low-carbon transport. But there’s a larger truth to what Agassi is saying that goes beyond his own commercial interests. Other countries—including China—have the political will to prepare for an age when oil won’t be easy, and to gear up their economies for the next big manufacturing possibility. We seem to lack that will in the U.S., where we’ve lost the ability to prepare for any future that doesn’t involve plentiful oil. “We had oil pouring into the Gulf for 90 days this summer, and still nothing changed,” Agassi says. If we don’t change ourselves, change will be forced on us—and it won’t be pleasant.

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