Shai Agassi dreams of a gas-free future

Electric cars with zero emissions.

Powered by renewable energy.

All over the world.

That is Shai Agassi’s dream. The 40-year-old Israeli entrepreneur left a lucrative corporate software track last year to found Better Place, a transportation company based on sustainability and independence from oil.

In a lecture last week (Dec. 4), he brought his dream to a capacity audience at the Harvard Kennedy School’s John F. Kennedy Jr. Forum. Outside, in ironic counterpoint, rush hour traffic turned the chill night air hazy with exhaust.

To Agassi, all-electric cars that can sip power at parking meters and get new batteries at freeway “switching stations” is more than a dream. Australia, Denmark, and Israel have already committed to an Agassi-inspired plan that would market electric cars like cell phones. Instead of network access, you get the juice to run your car. Instead of paying for minutes, you pay for miles.

In Agassi’s subscription-based business model, profits would come not from cars but from user fees and electricity revenues.

His dream, just a year old, has already touched down in the United States. Last month, a coalition of Bay Area mayors, backed by California governor Arnold Schwarzenegger, committed to exploring Agassi’s idea and to installing a network of recharging stations by 2012.

This month, the state of Hawaii and a local electric company endorsed the Agassi model. The partnership wants a battery-charging network by 2012, along with roadside stations where old batteries can be swapped for new ones.

The model, said Agassi, can create new jobs, add a new market segment for power companies, propel automakers to retool for a gas-free future, and take a bite out of global warming. (Better Place claims that switching the global fleet of cars to all-electric would reduce greenhouse gases by 40 percent.)

“It all started with a single question” posed at the 2005 World Economic Forum, Agassi told his audience. “How are you going to make the world a better place by 2020?”

His idea of a scalable, sustainable infrastructure for electric cars — the move from pump to plug — requires three imperatives.

Before the first electric cars roll out of the factory, have infrastructure in place — what Agassi called “the largest extension cord in the world. Everywhere you park, you can charge your car.”

Secondly, “separate the car and the battery,” he said. “We buy the battery; the consumer buys the miles.”

And last, make the electric cars cheaper to buy and run than gasoline-powered cars. In the Israeli plan, electric cars are taxed at 10 percent, and gasoline cars at 73 percent. Denmark, falling in line two months after Israel, upped the stakes, imposing a tax of 180 percent on gasoline cars, and 0 percent on electric vehicles.

Beyond the Better Place business model is a wider vision for the world: Kill dependence on oil.

An oil-based energy system is ruinous to economies and the environment, said Agassi, in part because price does not reflect true costs. “We have not priced gasoline to reflect the [environmental] price of oil. We put the kids in the candy store, and tell them to eat broccoli.”

In Israel, where 100,000 electric cars will be on the road by 2010, the plan is to get off the oil habit in a decade.

What about power capacity in America? Citing a U.S. Department of Energy study, Agassi said 86 percent of American cars could run on electricity without adding a single power plant.

For cars, Better Place struck a deal with Renault-Nissan, and batteries would be fire-resistant lithium ion units designed in Massachusetts. But neither deal closes the market, said Agassi, an opponent of monopolies.

As for infrastructure, he said — that’s a matter for public policy and for capital from public-private partnerships.

Cars, batteries, recharging infrastructure: “Everything has to happen together,” said Agassi.

To kill global dependence on oil fast, he said, the world needs 100 million all-electric cars on the road by 2016 — a thousand-fold growth in the current market.

Even a more modest plan, for 10 million electric cars, would mean creating a $60 billion to $80 billion market — a move Agassi compared to “building three Googles in five years.”

But consider the alternative, he said. If world demand for gasoline-powered cars continues, by 2016 the global market will require 30 percent more oil a day. That’s the equivalent, said Agassi, “of two and a half Saudi Arabias.”

He said only two countries have the manufacturing capacity to turn out electric cars on a large scale in order to wean global transportation systems off oil. China could switch to making electric cars by decree, said Agassi, but the United States needs a crisis before it will take action.

Crisis can sometimes engender moral leadership and prompt hard decisions, he said, but stronger economies often result.

After the attack on Pearl Harbor on Dec. 7, 1941, moving from making U.S. cars to tanks was a “moral decision … to save the world,” said Agassi — but at the same time it prompted the longest-running boom in the American economy.

And 200 years ago, England decided to give up its economic dependence on human slaves, he said — but that set off a 100-year economic boom powered by steam.

By the end of his talk, Agassi had moved from a business plan and public policy and funding structures to the moral imperatives of ending dependence on oil. After all, he said, it’s a system that sends billions in cash to oil-rich nations whose values are often at odds with our own — and for a product that’s destroying the environment.

The one decision to make now is to boldly adopt an all-electric model for cars, said Agassi. Economists and U.S. car executives might say: Slow down, change to zero-emission vehicles over time, he said. But why not move faster, and move morally — then ride to prosperity on the coattails of doing the right thing?

“The crisis we have is the biggest opportunity in history,” said Agassi. “It’s a problem of will and morals, and until we can make one decision we will suffer the consequences.”

“The Future of Transportation: Ending Our Addiction to Oil,” a public address by Shai Agassi at the John F. Kennedy Jr. Forum Dec. 4, was sponsored by the Institute of Politics at the Harvard Kennedy School; the HKS Center for Public Leadership; the HKS Israel Caucus; and the HKS Environmental Action Committee. A video of the event will soon be posted at http://www.iop.harvard.edu/.