This column first appeared in Business & Finance magazine in November 2007.

Richard Delevan

In Ireland we - or at least the 70% of us who use a private car to get to work - are worried that Brian Cowen will look to balance the budget on the back of drivers by raising taxes on petrol and diesel. Given that fuel prices have risen 15% and that even a strong euro can’t insulate us from $100 a barrel oil, this seems like enough to worry about.
But events in China last month should be a warning about how bad things could get. In Shandong province, a man was stabbed to death and in Henan another man died in a brawl. Both were killed at petrol stations. By other motorists. For trying to jump the queue. Because China refuses to let petrol prices rise with the world oil price, refiners no longer able to make a profit have either stopped producing or are hoarding, causing shortages, long petrol queues and arguably the first direct fatalities of the era of Peak Oil.
Fortunately we’re not (yet) in the scenario of the new “documentary”, “Crude Awakening: The Oil Crash” that opened in cinemas this month, and there’s some cause to believe that oil prices are now so high it might actually prompt some radical changes in the way we think about cars. Like maybe we should give them away for free and charge them for the fuel.
Crazy?
Not according to Shai Agassi, the Silicon Valley entrepreneur who was up for the top job at software giant SAP. In early November 2007 he announced he’d raised $200m for his startup, backed by venture capital from Israel and the US. But his company won’t be making electric cars. Instead he wants to create a network of battery-charging forecourts across the US in order to keep a new fleet of electric vehicles going. Instead he wants to give the cars away.
It’s like mobile phone operators giving away handsets in order to charge you airtime. And mobile phone operators are exactly the business model Agassi sees as the future of the transportation industry.
The economics are pretty stark. On his blog, “The Long Tailpipe” [actually stumbled across it when reading Chris Anderson's Long Tail blog] Agassi does some back-of-the-envelope calculations to make his point. He reckons there are 100m or so cars in Europe that are at least 8 years old. Each would cost you $5,000 to buy. Filling up with petrol for a year at 20 miles per gallon - which he says is roughly what the average performance of the European car fleet was 10 years ago - requires more than 600 gallons. Result? Even before the current price spikes, that meant it would take more than $5,000 to keep the car rolling for that year. (It gets even harder to take if you factor in longer commutes from further suburbanisation and petrol-guzzling traffic jams.)
So, Agassi argues, “the cost of the average used car in Europe is now cheaper than the cost of [petrol] to drive it for a year - talk about razor and blades businesses.”
Agassi’s new venture, “Project Better Place”, isn’t some warm and fuzzy attempt at fluffy PR from a traditional car company or oil company looking to tart up its image - despite the name. It’s an archetype of a new kind of technology startup - one designed specifically to capture the opportunities inherent in the Peak Oil/climate change crisis. Besides the Israeli venture capital fund, other backers include VantagePoint Venture partners, a US technology VC fund, plus a former head of the World Bank. And Morgan Stanley.
What makes Agassi’s business interesting is that, even though it’s a Silicon Valley startup, it sees its main target market, initially anyway, in Europe. In part because the price of petrol is so high - he estimates we’ll see €2 a litre in the next year - there will be more of an incentive to make the switch. Agassi says pilot programmes will be running - most likely taxi fleets in big cities - next year, with a build out from there. He doesn’t specify, but the pilots sites look far more likely to be in Europe than in North America.
It would be nice to think an Irish city might be considered for a pilot, but it seems unlikely. If Ireland’s electricity grid has trouble getting up to the basics of “smart metering”, what hope it could adapt to moving a chunk of our vehicle fleet to plug into the grid.
There are two other facts that suggest Ireland will be a lagging, not leading, adopter of electric vehicles. First, most of our cars - as any commuter sees from the license plates - are less than five years old. So we’re a while away from turning over the vehicle fleet. Then there’s the cars themselves. Most electrics are as safe in a crash as your average golf cart, without being as fun to drive. But still.
It is easier to transport electrons than octane molecules, and the ubiquity of the grid makes it a lot more likely that the electric car will be the end state of 21st century vehicles - with ethanol or hybrids being merely a (very expensive) waystaion on the way. Agassi’s case for the electric car gets more compelling every time the tank needs filling.

ends

After filing this story, I saw that the Irish Indpendent profiled the people behind GreenAer, a new venture importing the Indian-made (!) REVAi electric cars. Haven’t sat in one yet, but it looks pretty small.

Of course, this wasn’t the best week to talk about electric cars in Ireland. Not with this shower planning to turn off the country’s lights for Christmas. Wankers.