Recharging Detroit (pg. 3)
Why are the batteries so expensive? Automobile batteries must withstand snow, sleet, rain, heat waves, potholes, and sadistic car laboratory tests that involve getting punched with nails, dropped from 30 feet, repeatedly overcharged, and then discharged to zero. Says Tony Posawatz, vehicle line director for the Chevy Volt: "Integrating [batteries] into a car? Oh, my God, it's gotta pass crash tests, has to be heated and cooled, and handle vibration, dirt, debris." They also must last 10 years and, for all-electric vehicles, get at least 100 miles per charge (to assuage a nascent psychological complex being called "range anxiety").
One way to drive the price down is for consumers to lease the battery from either the manufacturer - as Think plans to do in Europe - or a third party, such as a startup called Better Place. Founded by a former SAP executive named Shai Agassi, Better Place believes it makes no sense for customers to buy the battery - Agassi argues that that's like having to buy upfront all the gas the car will ever need - and instead proposes to own and maintain the battery and sell subscription plans just the way cellphone companies do. But instead of minutes, Agassi will sell you miles - unlimited, or a certain number per month.
Currently, Agassi's business plan makes the most sense in places where fuel prices are high. In France, with gas at $5 per gallon, it costs about 20 per mile to drive. An electric car, says Agassi, would cost just 8 per mile. That's an annual savings of about $1,500 for commuters who drive 12,000 miles a year. Drivers would pass along that $1,500 to Agassi's company in monthly payments to lease the battery and cover the electricity. Since they don't have to buy a $15,000 battery, customers would pay about the same price for an electric car as for a gas-powered one. In other words, Agassi argues, the lifetime cost of owning and operating an electric car should be about the same as that for a gas vehicle. Over time, as battery prices drop, owning an electric car should become more economical than driving a traditional one. Consumers will also benefit from those handsome government subsidies that go to buyers of green cars.
Better Place also hopes to calm consumers' concerns about where to charge their cars. The company plans to litter the landscape with charging spots on streets and in public garages - and deals with Starbucks and Wal-Mart may not be far away. If your battery is dying and you have no time to charge up, you could pull into a Better Place's "swapping station" that in less than four minutes will have a robotic arm swap your old battery for a fresh one. With $300 million raised and high-profile endorsements from Israel's former Prime Minister Shimon Peres and Ghosn of Renault-Nissan, Agassi has already started building his first battery-changing stations in Japan, Israel, and Denmark. San Francisco is slated for 2012.
Creating a charging infrastructure also dovetails with the goals of building a "smart grid" that would manage power supply and demand more efficiently. A small company called GridPoint has software that detects when a vehicle is connected to the grid and controls the timing and pace of the charging to prevent the whole system from browning out. It also allows utilities to offer discounts for charging during off-peak hours when demand is low. Consumers could also use their car battery as a storage device and sell electricity back to the utility when the car is not in use. President Obama's stimulus package, meanwhile, includes $11 billion to encourage smart-grid initiatives.
Some think it's not too late. "We can catch up, but it will take a lot of effort," says Joe Romm, a former Clinton administration energy official now with the Center for American Progress. "The Obama administration is packed with people who support the policies we need. But at the end of the day, somebody has to invest real money over a sustained period of time." In today's economy that's a real problem. On the other hand, it now appears that nearly every car on the planet will eventually be electrified. Investors could hardly ask for a bigger incentive.