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Getting charged up over service stations

Shai Agassi has a plan to create a network of service recharge stations for electric cars--and $200 million to make it happen.

Swap and go.

That's the business plan behind Project Better Place, an electric-car infrastructure effort headed up by former SAP executive . The organization wants to set up service stations where electric-car drivers can pull up, replace their batteries, and then drive another 150 miles or so before needing a recharge.

The plan ameliorates two big problems for electric cars: the long charge time and the limited range. Drivers wouldn't have to buy their batteries either, according to Agassi. They would lease them for a fee that would come to about what they would ordinarily spend on gas. That solves a third problem: the high cost of batteries.

But the service station model also depends on the cooperation of car and battery makers, component standardization, the willing help of governments and utilities, and a desire among consumers to buy electric cars. Some of these goals will be easier than others. The world will see how it works when the first stations open up in 2008.

In the meantime, Agassi this week announced $200 million in private venture capital from several backers, including Edgar Bronfman Jr. Agassi spoke with CNET News.com about his new career, cutting down on greenhouse gases, and rolling up his sleeves to look under the hood.

Q: In your own words, what are you trying to achieve?
Agassi: Well, we're trying to achieve a world that does not depend on oil, does not pollute cities, and does not change the climate on the planet. I think we have a situation today where we've run out of oil and we're running a very uncontrolled experiment on the only planet we've figured out how to live on.

We're trying to achieve a world that does not depend on oil, does not pollute cities and does not change the climate on the planet.

We think that if you do it correctly, this is probably the biggest economic opportunity of the century. We're looking at about $6 trillion to $10 trillion a year spent around that problem, and our investors are very excited about getting into this opportunity at the beginning of what would probably be the next generation of personal transport.

People have tried electric cars before and the results haven't been great. When you look back at those earlier electric cars, even some of the ones coming out now, what have the chief problems been?
Agassi: I think the attempt to try and solve the entire problem by only working within the car itself is the fundamental problem. That was the fundamental element that was breaking the business of these corporations. If you think of putting a battery that only lasts for 200 charge cycles and goes for 70 miles on the charge--which is where the EV1 failed--that's not economically sustainable. If you have a battery that costs $10,000 and lasts for 14,000 miles, your cost of the battery is now 70 cents per mile.

You're trying to get a market where it's 5 cents a mile on gasoline. Why would anybody want a battery that costs 75 cents per mile? Luckily in the last 10 years, two things have happened. One, the price of oil went up from $10 a barrel to $93 a barrel today. Two, the technology in batteries allows us now to go on the same battery for 200,000 miles, not 20,000 miles. So the same $10,000 now actually takes you at 5 cents a mile, which before it took you 75 cents a mile. So, suddenly we've got an interesting situation: this technology that was more expensive before is actually the saner, cheaper, and cleaner solution.

You're also getting around the charge time issue too. Right now, electric cars take a few hours to charge. You're proposing building service stations where you go in, the spent battery gets dropped out, and a new battery gets popped in. You're charged right away with a new battery. It's similar to what they have in some municipal bus services.
Agassi: That's absolutely right. You've seen it in mini buses, but we suggested dual model. In the normal mode, you will charge your car when you stop it and park it, and go do whatever you do and you do it. I mean you come home at night, you park your car. You don't care what it does at night, right?

Then what's your infrastructure plan?
Agassi: We're looking at a number of transportation islands around the world as the first places to test. We're coming in and putting infrastructure, which is this combination of the charging spots in parking lots and buildings as well as these battery switch points where you're able to, as you said, drop a battery and put a full one back in. In our model you never own the battery, you never buy the battery, you never pay for the battery. It's just part of the infrastructure and you basically pay for it just like you do with gasoline.

What we offer you is something that other people cannot, which is I can give you a fixed price contract for your energy for driving for the next any number of years. I bet you that if we went down on the streets in San Francisco and you asked 10 people on the street, "Do you think the price of gasoline will go up or down in the next five years?" I know what they would say.

Oh, You could go anywhere and they say the same thing: up.
Agassi: That's the point. That's the price you're going to pay for a month, that's it.

Do you have islands lined up where you will go first?
Agassi: We've talked to about 15 countries so far, and we're getting great reception. We haven't announced the countries. Some of these are virtual islands, some of these are physical islands, I mean if you think about it, Hawaii is perfect...You've got places like Denmark, Israel, Hong Kong. I mean, there are a variety of different places around the world...If you look at these places, they are virtual transportation islands. Most of them are already set up in a way that will let you come in and plug into the grid. We don't need to start in Texas; we can start in Manhattan.

What prices are you looking at for the car and the battery?
Agassi: It depends on the location, the length of lease. We're looking at cars that would cost you less to acquire than their fuel counterparts and looking at charging you less per month than what you would pay for with fuel. Obviously it depends on the location. If you're in the U.K. where it's $8 a gallon, then you need a shorter contract and if you're in San Francisco, unless (Mayor) Gavin Newsom puts a different price on gasoline, you need a longer contract to secure that car. But at the end of the day, again, we're looking at trying to reduce the cost, making it a saner opportunity and cheaper opportunity for the consumers.

Are you going to have established automakers or some of the electric start-ups cooperate on these filling stations?
Agassi: We are talking with both. I think variety is important for the consumer and we think that the opportunity for the carmakers to get into the market early on is fantastic. You see what happened when Toyota decided to go with the Prius. The first-move advantage sustains itself for a very long time. We believe the first movers on electric cars are going to enjoy a very, very nice profitable market with a product that is better for their consumers. It doesn't kill people.

This is not a science project. We're not looking to invent something new. We're looking to integrate what is already there in the market.

Whose battery are you going to use?
Agassi: We've talked to a lot of component makers. Batteries are obviously a critical component. We're not sharing until we've heard and confirmed prices and confirmed everything with those suppliers, but I've got to tell you the batteries are already in the market. We can work with what's there today. This is not a science project. We're not looking to invent something new. We're looking to integrate what is already there in the market.

How do you prevent some of the large manufacturers from taking over your ideal. As you said, it's not a science project. A lot of it involves capital infrastructure and logistical issues, and they've got money to burn.
Agassi: This is a $6 trillion to $10 trillion opportunity. If we share it everybody is happier because we, all of us, will make good profit. My investors will make good money and we have somebody to hand it to because our kids will have a planet.

Right, but they could also say, "Thanks. Great suggestion. But we're going to do these ourselves." How do you keep them out? Agassi: I think, again, you're looking at 200 countries around the world that will need to do something like this. There is no $10 trillion market that is controlled by one company and if you get standardization, you get people to compete, who are going to share in this market. I think it will be fantastic for everybody. We're not looking to exclude people. We're looking to include as many people as possible and if we can set standards, that will only accelerate the transition.

Do you have a prototype yet?
Agassi: We're working on a number of fronts with a number of carmakers. And we're hoping to launch this in early 2008 with tens of cars in our first test market and then grow this to a few hundreds and thousands in 2009. Finalize the test and then when we get to, all tests are good and the system is checking and no quirks are left in the system, we'll open the floodgate and supply the demand.

If you think of the cell phone analogy, we are AT&T; we're not Nokia. If Tesla is the new iPhone, they also need AT&T to make sure that the drivers can continue to drive.

Back in '97 and '98 there were a couple of people who did try the electric filling stations in California. There have also been other attempts to get people to cut down on gas. Is there anything for you to learn from these experiences?
Agassi: I think the problem is we have to remember there is a contract between the consumer and his car. The contract is pretty straightforward. It's my car, I don't want to share it. So, all the guys who tried these car share models--there are some trying it right now--they are a niche. But you don't find the mainstream consumer. We like to have five seats even if we're driving on our own.

If I give a souped-up golf cart, it's not going to work. We'd like to have the speed and acceleration. We'd like to drive in something that we're proud of driving. If you find yourself in a Hummer in the middle of a left-wing neighborhood, that Hummer is not going to survive for a long time. You're not going to be popular in the neighborhood. At the end of the day, we're willing to only stop to refill energy about 50 times a year for about five minutes because that's the contract we've got today.

Now, if you're willing to improve on that contract--so if you can figure out a way by which I stopped 20 times during the year and it's the same 5 minutes, or if it's 50 times, but I stop for one minute--that's also OK. But you can't ask me to stop every day for an hour or two and wait. That doesn't work.

By the way I've talked to a couple of companies that want to build rapid charging systems, but there is a lot of controversy. A lot of people are afraid about safety and challenges in charging.
Agassi: We're looking at what we believe is a more pragmatic solution and we believe that instead of trying to charge everything in three minutes, it's easier to exchange a battery in three minutes.