Bay Area seeks to become electric-car capital

The mayors of San Francisco, Oakland, and San Jose announced an ambitious public-private partnership last week to develop a $1 billion network of charging outlets for electric cars.

The money will be raised by Better Place, a Silicon Valley startup that develops infrastructure to support electric vehicles. The company plans to install about 250,000 charging ports and up to 200 battery-exchange stations in the Bay Area by 2012. The mayors say that they predict that this network will make the area a top-priority market for electric-vehicle manufacturers.

"Our aim is to make the Bay Area – and eventually California – the electric vehicle capital of the US," said San Francisco Mayor Gavin Newsom in a press release.

The plan was praised by House Speaker Nancy Pelosi and California Gov. Arnold Schwarzenegger, who touted its environmental and economic potential.

"This type of public-private partnership is exactly what I envisioned when we created the first ever low-carbon fuel standard and when the state enacted the zero-emissions vehicle program." said Governor Schwarzenegger in the press release. "This partnership is proof that by working together, we can achieve our goals of creating a healthier planet while boosting our economy at the same time."

Better Place, based in Palo Alto, Calif., has already begun developing electric-vehicle grids in Israel, Denmark, and Australia. The company, which is headed by software whiz and former SAP executive Shai Agassi, operates under a novel business model, distributing electric cars the way telecoms distribute cellphones.

Instead of purchasing a car outright, customers subscribe to a certain number of miles per month and get the electric car at a discounted rate, or even for free. Better Place operates the recharge grid and owns the batteries.

Most current electric-car batteries can go only about 40 miles before needing to be recharged. (That's more than the average round-trip daily commute.) For trips longer than that, Better Place is planning to build 100 to 200 completely automated battery-swapping centers in the Bay Area, where drivers can pull in and have their depleted batteries exchanged for fresh ones, all without ever leaving their cars.

In previous deals, Better Place has partnered with Renault-Nissan, which provides the electric cars. The automaker was absent at last Thursday's announcement, but an electric Nissan Rouge SUV was among the electric cars on display outside San Francisco's city hall.

The San Jose Mercury News reports that, since its founding in 2007, Better Place has raised $200 million in venture capital. Mr. Agassi says he has backing from Morgan Stanley, Goldman Sachs, and the Macquarie Capital Alliance Group. He does not plan on asking the cities for money.

In an interview with The Wall Street Journal, Agassi said that the $1 billion would be raised over three years or so, with about $200 million needed initially.

For their part, San Francisco, Oakland, and San Jose will expedite permits for building charging stations in homes, businesses, and public parking spaces. The cities will also offer incentives for businesses that install charging stations, as well as programs for bulk purchases of electric vehicles for state- and municipal-government fleets.

The plan would also encourage drivers to take advantage of a federal incentive, which offers tax credits of up to $7,500.

On the same day that the plan was announced, the Global Venture Lab at the University of California, Berkeley, released a report that found that, in two decades, adoption of electric cars by 39 percent of American drivers would lead to an annual $175 billion in gasoline savings for US consumers, while the battery industry would experience a $120 billion gain, all with only a "moderate" burden on the power system. Such widespread adoption of electric vehicles would significantly decrease the US trade deficit, the report found.

The San Francisco Chronicle's editorial board welcomed the announcement, saying that the Bay Area is well suited to electric vehicles. But it expressed reservations about the potential monopoly power of Better Place and about the hurdles presented by the current financial crisis:

With one firm controlling the charging stations, there needs to [be a] fair way to determine how much drivers will pay for the service. While the electric option may make sense long term, there are short-term concerns such as dropping gas prices and credit woes that could undercut investment.

Prominent green futurist Alex Steffen was also optimistic about the plan. Writing in his online ecomagazine, Worldchanging, Mr. Steffen called it "precisely this kind of an investment in the infrastructure that's needed to really get innovation and uptake rolling." He also tries to put the program's billion-dollar price tag in perspective:

[W]hen I read one billion for this project, I thought about the roughly one trillion or so we're expected to dump into economic stabilization and recovery programs, all told, and wondered if even half of that went into new bright green infrastructure, what we might accomplish.