If electric cars are the answer, what’s the question?

An eVgo charging station

An eVgo charging station

Like many environmentalists, I’d love to see lots of people driving electric cars. If  broadly adopted, electric cars will go some way towards limiting air pollution, reducing greenhouse gas emissions and undermining the power of oil oligarchs in the Arab world and elsewhere. Electric cars produce what economists call “positive externalities,” that is, consequences that benefit people other than their owners.

But what problem to do they solve for electric-car owners? That question has been on my mind since my recent visit to Israel, when I drove a Better Place car and experienced, first-hand, one of the obvious drawbacks of electric vehicles: They don’t go very far without refueling. [See my January blogpost, Better Place is alive but not well.] This is a problem not just for Better Place, but for other sellers of pure electric cars, like the Nissan Leaf and the Tesla Model S.

Today, I took a closer look at Better Place in a story for the YaleEnvironment360 website. Here’s how it begins:

If you want to sell electric cars, Israel looks like a great place to start. It’s a small country, with most people clustered around Tel Aviv and Jerusalem. Gasoline costs more than $7.50 a gallon, and oil revenues help support Israel’s Arab foes. So it’s easy to understand why Shai Agassi, an entrepreneur who was born in Israel and made a fortune in Silicon Valley, chose to launch his Better Place electric-car company in Israel, while preparing plans to expand in Europe, Australia, Japan, China, and the U.S.

What’s harder to understand is why things have gone so badly. Better Place, which staked out its position in the electric car market with an innovative battery-swapping technology, has sold only about 750 cars in Israel, while piling up losses of more than $500 million. Agassi was forced out of Better Place in October, his successor as CEO quit in January, and the company has put its global rollout on hold. Better Place needs to raise more money this year, and that won’t be easy, insiders say.

Start-ups often stumble, of course, but Better Place’s woes raise questions that matter to anyone who cares about electric cars and their future in a low-carbon economy. Has Better Place sputtered because of its own mistakes, or are the company’s difficulties a sign of the broader challenges facing electric cars?

As part of my reporting (much of which didn’t make its way into the story) I spoke to executives at General Motors, Nissan, the charging network eVgo and others, to see how electric cars are faring here in the U.S. Last year, Americans bought 52,000 all-electric cars or plug-in hybrids–vehicles, that is, designed to run primarily on electricity, like the Leaf,  the Chevy Volt and the Tesla. That’s about 0.35% of U.S. car sales, which topped 14.5 million in 2012. By comparison, the best-selling passenger car, the Toyota Camry, sold 405,000 units, without, incidentally, the benefit of the billions of dollars in government loans, grants and tax credits that have flowed to the electric car industry. EVs have attracted lots of attention but they have been slow to penetrate the mainstream. [click to continue...]

Better Place is alive, but not well

A Better Place battery switching station

A Better Place battery switching station

I’m driving a Better Place Renault Fluence all-electric car from Tel Aviv to a kibbutz in the northern Negev, about a 60-mile trip. I can’t decide whether to keep my eyes on the road, on the GPS system to make sure I don’t miss my exit or on the data flowing out of my 22 kWh  battery, telling me how much electricity I’m using at any given moment, how much remains and how much, in theory, I’ll have left when I reach my destination. A wrong turn or two, and I could run out of juice–and without an internal combustion engine in the car, a nearby gas station will be no help at all.

Suddenly, I understand “range anxiety.” Breathe slowly and deeply, I tell myself, trying to recall a meditation DVD I’d listened to a few days before.

Eventually, I relaxed and, by the time I’d made it to the kibbutz and back to Tel Aviv, I’d thoroughly enjoyed the trip. The Renault all-electric car ran smoothly, and silently, and it was fun to drive.. The ingenious, fully-automated battery-switching technology that the company has designed to make long-distance driving easier worked (almost) flawlessly. Better Place’s customer service, which I called upon on couple of times, was first-rate.

Having said that, Better Place appears to be running out of gas, er, electricity, well, actually, money and time. That’s a shame. This is a very cool company that set out to change the world. [click to continue...]

In Israel, clean tech is not the new new thing

David Ben-Gurion, a clean tech pioneer

David Ben-Gurion, clean tech pioneer

Sounding more like a clean tech venture capitalist than a head of state, David Ben Gurion, the first prime minister of Israel, once said that Israel requires “the study of desalination, massive utilization of solar energy, preventing waste of useful rainwater and maximization of power from wind turbines.”

Ben Gurion, who was born in 1886, said this in 1955. This was a man ahead of his time.

Since then, an Israeli company called Netafim pioneered the idea of drip irrigation in agriculture to save water, another called Luz built the first solar thermal power plants, still another called IDE Technologies became a global leader in desalination and Chromagen developed solar thermal water heaters that can be found on most rooftops in Israel, and elsewhere.

Today, Israel, which has been dubbed Startup Nation, remains a seedbed of clean tech innovation–last year it ranked second in the world (behind Denmark) in a report called Coming Clean: The Cleantech Global Innovation Index 2012 [PDF, download] by CleanTech Group and WWF.  I visited Israel last week, and had a chance to talk with a founder of Israel Cleantech Ventures, the chairman of a company called Miya Water and executives at electric-car company Better Place. I’ll report this week on my findings.

First, some context. As Ben-Gurion saw more than half a century ago, Israel is short on natural resources–water, land, oil–and thus needs to use what it has efficiently. This is the biggest, but not the only, explanation for the growth of Israeli clean tech. Most everyone serves in the military, exposing them to advanced technology. Ariella Grinberg, a young associate with Israel Cleantech Ventures, told me she did her service in the Israeli equivalent of the US’s super-secret NSA (National Security Agency), overseeing a multimillion dollar budget and sophisticated software, when she was just 19. The country also benefits from its world-class colleges and universities, among the Israel Institute of Technology, aka the Technion, the nation’s oldest university. (Here’s a fun example of what their students can do.) A strong entrepreneurial spirit pervades the culture, which may also have its roots in universal military service. “People come out of the army, they’re tired of taking orders, they want to be their own boss,” one executive told me. Finally, targeted government support for basic research has helped underwrite the sector. [click to continue...]

Electric cars: all systems go

Despite the disappointments of Copenhagen, despite the inaction on climate-change regulation in Congress, despite the global recession, the momentum behind electric cars keeps building.

Yesterday, Better Place, the Silicon Valley-based electric car startup, raised $350 million in financing—the biggest clean tech investment ever, the company said, and a validation of a business model that has been scoffed at by the auto industry. The investment round, led by HSBC, values Better Place, which has yet to put a car on the road, at $1.25 billion.

“Electric vehicles are, at this point, inevitable,” said Jason Wolf, vice president of Better Place. “We’ve broken through, and there’s no turning back.”

Big automakers, meanwhile, are pushing forward with their electric offerings, as executives from Nissan and Ford affirmed yesterday during a “Green Car Summit” held at the U.S. Capitol.

Nissan Leaf

Nissan Leaf

Nissan has been taking its all-electric Leaf, which will be introduced next fall, on a 24-city U.S. tour.  “The market is ready,” said Scott Becker, senior vice president of Nissan North America. “We’ve had an incredible reaction from consumers.” He said more than 38,000 people have signed up to get more information about the car.

“This is going to be a vehicle designed and made for the mass market,” Becker said. The car will have a range of about 100 miles before needing a new charge, good enough to meet the needs of 90% of U.S. drivers.

Lots of forces will bring an array of new electric cars to market in 2010 and 2011–technological improvements in batteries, concerns about climate change (despite legislative foot-dragging), worries about the U.S.’s dependence on imported oil and, most of all, the increasingly attractive economics around electric cars, which we’ll get to in a moment.

Having said that,  significant disagreements remain even among electric-car advocates about how fast the new technology will be adopted, and what form it will take. Will gas-electric hybrids like the Toyota Prius or Ford Fusion dominate, or will the market shift to plug-in hybrids like the Chevy Volt or all-electrics like the Leaf? Will electric cars be a niche business, a mainstream product or–maybe, just maybe–will they come to dominate? Or are they being overhyped? Certainly, there’s no shortage of skepticism out there, particularly from auto-industry incumbents.

“Yes, you will have the intellectual guys who drive electric vehicles,” scoffed Stefan Jacoby, CEO of Volkswagen Group of America, who spoke at the “green car” event. But, he argued, mass-market consumers won’t pay a premium for electric cars and they don’t want to deal with the hassle of charging their car batteries.

When Jason Wolf of Better Place opined that 50% of new car sales could be electric by 2020, Jacoby shot back: “That’s totally impossible. We need to be realistic.”

Still, Better Place has made more progress in the last couple of years–during a global economic meltdown–than most people would have expected. It’s got the support of the governments of Israel and Denmark for widespread rollouts, which require

Renault Fluence ZE

Renault Fluence ZE

building charging stations as well as battery-switching operations throughout those two countries. (The Better Place model envisions battery switches for long trips.) It’s got a commitment from Renault build 100,000 electric cars, a new model known as the Fluence ZE (for zero emissions, a car that I wrote about here.) And yesterday’s round of Series B funding brings in new investors including HSBC, Morgan Stanley Investment Management, and Lazard Asset Management. Charles Stonehill, Better Place’s CFO, wrote on the company’s blog:

Our investors represent some of the largest financial institutions in the world, employing exceptionally thorough due diligence processes that are commensurate with the size of investment.

Given Renault’s commitment and the infusion of equity, don’t be surprised if the next country where Better Place rolls out its cars and its unique business model is France. Higher gasoline prices in Europe make Better Place a better business there.

Which brings us to the economics. While you’ll get arguments about the specific numbers, most people who have looked at electric cars will tell you that as battery costs come down, electric-powered engines are more efficient and less expensive to operate that gas-powered ones. Better Place’s Wolf says the cost per mile of fueling an electric car is two to three cents for the electricity, plus another five to six cents for the battery when amortized over the life of the car. Figure a dime a mile. In the U.S., with gasoline priced at $3, powering a car with gas costs 12-14 cents a mile. In Europe, where drivers pay $6 to $8 per gallon of gas, you can double that. The point is, there’s enough money to be made so that carmakers and consumers can both do well as electrics roll out, even though the upfront costs of an electric car are higher.

Not surprisingly, the start-up companies who are building only electric cars expect the technology to be embraced relatively quickly and widely. Established automakers, even those committed to electrics, are more cautious.

“We view this as a revolutionary journey,” said Nancy Gioia, director of global electrification at Ford Motor. Evolution might be more like it: By 2020, she said, Ford expects that between 10 and 25% of its new car sales will be electric. The bulk of those, she added, will be hybrids like the Fusion. With a hybrid, a gasoline engine can be used to overcome what the industry calls “range anxiety”–the driver’s worry that a battery could run out on long trips.

But Kevin Czinger, the dynamic CEO of CODA Automotive (who will be speaking at FORTUNE’s Brainstorm Green), proudly says that his company will be “100 percent independent of the oil industry.” CODA intends to start small, selling cars only in California beginning later this year, but Czinger is counting on market dynamics to both improve the product and drive sales.

“Do I think I can sell 1,000 high quality electric cars in California? Absolutely,” he said. That will signal markets that the business is real. “Do I know what the market will do with that signal? No. But market forces should work to drive down costs and drive up performance.”

He’s got a point. You never know what will happen with a disruptive technology comes along. When is the last time you bought a CD? Or a a new landline phone?

Says Czinger: “We envision an affordable electric car in every American garage.”

My favorite green technology

No offense to those working hard to bring wind, solar or geothermal energy to scale, or to people who are jazzed about energy efficiency, but I’m going to end my blogging for 2009 by saying that I am really excited about electric cars. It’s my favorite green technology, and one that’s on the verge of a breakthrough.

Recently, I’ve had a chance to ride (briefly) in the Coda and in the Renault Fluence EV, part of Better Place‘s Denmark rollout. I’ve written at length about BYD, the Chinese electric-car company owned in part by Warren Buffett’s Berkshire Hathaway. And next year I am hoping to check out the Chevy Volt and the Nissan Leaf, as well as the Aptera from entrepreneur Bill Gross and the Tesla if the price comes down.

The electric car could bring about the biggest transformation of the auto industry since its invention. If  all goes well, we will be seeing many more of them on the roads in 2010 and especially 2011.

With thanks to Plug In America, a nonprofit group that promotes plug-in vehicles, which put this list together, here are12 myths about electric cars that, just in time for the 12 days of Christmas. Plug In America began as a group of electric vehicle (EV) drivers, so its members are speaking from experience.

I’m now going to do my best to slow down and stay away from my laptop between Christmas and New Year’s Day–so enjoy your holidays, happy new year and I’ll be back in 2010.

Aptera

Aptera

1. MYTH: EVs don’t have enough range. You’ll be stranded when you run out of electricity

FACT: Americans drive an average of 40 miles per day, according to the U.S. Dept. of Transportation. Most new BEVs have a range of at least double that and can be charged at any ordinary electrical outlet (120V) or publicly accessible station with a faster charger. The latter, already in use, will proliferate as the plug-in infrastructure is built out. At present, all it takes is planning for EV owners, who can travel up to 120 miles on a single charge, to use their cars on heavy travel days. Alternatively, a PHEV goes at least 300 miles on a combination of electricity and gasoline.

2. Myth: EVs are good for short city trips only

FACT: Consumers have owned and driven EVs for seven years or more and regularly use them for trips of up to 120 miles. [click to continue...]

COP15: Nothing shy about Shai

Shai Agassi has a deal for you.

Shai is the founder and CEO of Better Place, the audacious electric car startup based in Palo Alto, CA, that not only wants to change the way cars are powered but the way they are sold.

Here’s his offer: Pay about $12,000 for a family-sized all-electric sedan made by Renault, known as the Fluence EV. Drive as much as you want. Pay $300 a month for all the electricity you need (or less if you drive fewer miles). Emit no CO2 or other pollutants. And help the world break its addiction to oil.

Sounds  good, doesn’t it?

There’s just one catch: To get the deal, at least anytime soon, you’ll have to move to Denmark or Israel–where Better Place plans to launch in 2011.

The all-electric Renault Valence

The all-electric Renault Fluence EV

Yesterday afternoon, I took a ride in the Renault Fluence EV and sat down with Shai in Copenhagen, where Renault and Better Place have teamed up to offer test drives for the first time. Since Shai unveiled Better Place early in 2007, auto industry insiders have scoffed at his plans. He’s a Silicon Valley guy, a former hotshot at software giant SAP, with no auto industry experience. A 41-year-old Israel-born enterpreneur, he has a lot of chutzpah and he can come across as glib. Skeptics say Better Place, like much of the electric car industry, is deliver more talk than action.

But guess what? Better Place is starting to look very real. It’s also starting to look like a  big missed opportunity for the American automakers.

Better Place has already placed an order for 100,000 cars with Renault. Agassi plans to order another 100,000 cars in the first half of 2012.

I won’t explain the Better Place business model here except to say that the company is a service provider, akin to a mobile phone company. Just as mobile phone companies discount their hardware and make money by selling minutes after building a network of towers, Better Place will build out a network infrastructure of charging stations and battery-switching facilities for its cars, sell the cars at or below cost and then make money by selling electricity. You will own the car, they will own and maintain the battery. Watch the video below if this is the first time you are reading about the company.

The economic model works, at least in theory, because electric cars are fundamentally more efficient and cheaper to operate than gas-powered ones. It works especially well in Europe where gas is heavily taxed and costs at least $7 a gallon. And it works best of all in Denmark, which imposes a whopping 200% taxes on new cars–so a car that retails for $20,000 sells for $60,000—that is waived for electric cars.

Denmark is also a good match for electric cars because so much of its electricity comes from renewable sources. As The New York Times recently reported:

Dong Energy, Better Place’s partner and the biggest utility in Denmark, wants to power the anticipated fleet of electric cars with wind energy, which already supplies nearly 20 percent of the country’s power.

With Better Place and the smart grid working together, cars would charge up as the winds blow at night, when power demand is lowest. Charging would soak up the utility’s extra power and sharply shrink the carbon footprint of electric vehicles.

Better Place is also rolling out rapidly in Israel — which wants to get its economy off oil for obvious reasons, and would love to see the rest of the world do the same. Agassi has agreements with governments to roll out Better Place in northern California, in the urban regions of Australia and in Hawaii. France, too, has made a major commitment to electric vehicles, one reason why Renault says it will launch four electric car models in the next several years.

Shai Agassi

Shai Agassi

Government backing for electric cars is crucial, just as government policy was needed to unleash private capital to create the Internet industry and mobile telephony. Today, Israeli President Shimon Peres was scheduled to hold a news conference today in Copenhagen to promote Better Place.

“What we’ve seen in Israel is that the president of the country wanted to get it done,” Agassi said. “In Denmark, the minister of climate, Connie Hedegaard, said let’s move forward, and they did.”

By contrast, Agassi has run into dead ends in Detroit and Washington.

“Most car companies looked at us an anomaly,” he says. “Not a competitor. Nor an ally. Because we’re not a car company and we’re not a supplier. In the car industry you’re either a supplier or competitor. We’re an enabler, but it’s an industry that did not have enablers.”

Besides, automakers had other things to worry about. “Most of these companies have gone through a massive, massive change,” Agassi says. “Some of them have changed CEOs. Some of them have changed CEOs twice. Most of them have government cash infusions.”

Still, he notes that Chrysler dropped its plans for an electric when it restructured after getting government aid. “How is that good for the taxpayer,” he asks.

Agassi says the cost of building a network of charging stations and battery-switching facilities comes to no more than between $40 and $75 a car.

“At a cost of $40 per car in our country, we can get off oil,” he says. “It’s a crime not to do it.”

Below are photos from Renault of the Fluence and the Kangoo, an electric van, as well as a couple of photos I took of a cute little single-seat EV for urban driving called the Twizy. Below the photos is the explanatory video about Better Place.

Renault Fluence EV

Renault Fluence EV

Renault Kangoo EV

Renault Kangoo EV

Renault Twizy concept car

Renault Twizy concept car

Renault Twizy concept car

Renault Twizy concept car

Uh-oh: Obama’s “battery gold rush”

A lot of smart people—Warren Buffett, Andrew Grove, Nissan’s Carlos Ghosn—believe that electric cars will be a big answer to our climate and energy problems. GM and Ford have apparently come around to that view as well, and even Chrysler recently released a cool little neighborhood vehicle called the Peapod. (See below.) I’m impressed by BYD, the Chinese battery and electric car company, and by Better Place, Shai Agassi’s bold electric-car startup aimed at transforming the global automobile industry. Batteries are the key to making electric cars affordable. So why did this Wall Street Journal headline make me cringe?

Obama Administration Sparks Battery Gold Rush

Companies, States Vie for $2.4 Billion in Funding Aimed at Turning U.S. Into Top Maker of Fuel Cells for Electric Cars

The story went on to say that the Department of Energy has received 165 applications from companies seeking some of that $2.4 billion. which is “aimed at turning the U.S. into a battery-manufacturing powerhouse.” The Journal’s William M. Bulkeley reports:

Companies vying for the federal money include General Motors Corp., Dow Chemical Co., Johnson Controls Inc. and A123 Systems, a closely held battery maker backed by General Electric Co. and others. States including Michigan, Kentucky and Massachusetts are also weighing in with applications, usually in alliance with their favored battery makers.

When the winners are decided, as soon as the end of July, the Energy Department may anoint Livonia, Mich., or Indianapolis or Glendale, Ky., as the future U.S. hub of car batteries.

Reading carefully, it’s clear that The Journal (“free people, free markets”) is not happy about this news. Note the use of the word “anoint,” hinting that the government is assuming divine powers. The article characterizes the DOE grants as “one of the government’s biggest efforts at shaping industrial policy”—fighting words in Journal-speak.

They’ve got a point, though, don’t they? One unhappy result of all the bank bailouts of the fall is that $2.4 billion doesn’t seem like much—hey, Citi alone has collected north of $45 billion, last time I checked—but a billion here, a billion there, and you’re starting to talk real money. And if electric cars are going to be as big a business as a lot of people think, then why government investment should be needed at all? Particularly since we have a climate change bill making its way through Congress that will, at long last, if all goes well, put a price on carbon emissions—thereby giving low-carbon energy sources what they desperately need, which is a fighting chance to compete with fossil fuels on something resembling a level playing field. I thought the whole idea behind cap-and-trade (which I strongly favor) is  to capture the externalized cost of global warming pollutants, and then let the market figure out how best to reduce greenhouse gas emissions: regulation that would have a light touch but a profound impact.

But no—with Waxman-Markey, CAFE standards, biofuels mandates, subsidies for “green jobs” and the like—the administration is giving us a belt and a couple of pairs of suspenders, too. Much as I admire Steven Chu, the energy secretary, do we really want to entrust him and his staff to decide which battery technologies are likely to succeed and which companies can most wisely spend that $2.4 billion? What’s more, since the states and their legislatures are competing as well, you can be sure that the likes of John Murtha and Robert Byrd will weigh in on these investment decisions. Indeed, the states themselves are already competing to subsidize battery makers, as The Journal notes:

“If you’re the place where the batteries are made, there’s an opportunity to spin it into other things as well,” said D. Gregory Main, president of the Michigan Economic Development Corp., a state agency that has committed up to $400 million in incentives for battery manufacturers.

Kentucky is promising $110 million in aid and a 1,550-acre site, in Glendale, that it assembled in an unsuccessful effort to land a Hyundai plant several years ago.

Some of these batteries, by the way, could well find their way into cars like the Tesla (sticker price:$109,000) and those made by Fisker Automotive, a California firm that plans to sell $88,000 luxury-hybrids next year. So tax dollars collected from working people and the middle class go to subsidize rich boys and their toys.

Please don’t get me wrong. I think electric cars are a great idea. The faster they arrive, the better. But judgments about which battery-makers to finance should best be left to venture capitalists, investors like Buffett (who bought 10% of BYD), big investment banks and the like. They may be no smarter than the people at the DOE but at least they are putting their own (or their investors’) money on the line. If they’re wrong, they’ll be held accountable, or at least they should be. You can be sure that some of them will be wrong, and that’s fine.

This is why I respectfully take issue with Jesse “Watthead” Jenkins of The Breakthrough Collaborative, who with me is a lead blogger at The Energy Collective, a website that aggregates blogs about energy and the environment. Jesse’s a smart guy and a good guy, but he has more faith in government than I do and so he favors substantially more federal investment in clean energy research and development. If we’re talking basic research, that’s fine, I suppose—the private sector can’t be asked to underwritethat, because the potential payoffs are so uncertain and long-term.

But this battery program is explicitly about picking winners and losers in one industry sector, which may or may not turn out to be a real business. It reflects, I’m sorry to say, the Obama administration’s faith that the best and the brightest Ivy-educated government executives can figure out what needs to be done, and just how to do it. I have no doubt that the people around Obama are smart, well-intentioned and hard-working. I dearly hope that they can, in fact, figure out just what needs to be done. But if we learned anything from Bush II, it is to worry about people in Washington who think they have all the answers.

images17

Charging ahead with electric cars

As the electric car is business gets more and more crowded, it feels like we are approaching a breakthrough. It could come from a U.S. automaker like GM with its Volt, from a European company like Renault (and its partner Nissan) which are committed to electric cars through an alliance with Better Place, from a Japanese firm like Toyota which has led the way with hybrid cars like the Prius, from a Chinese or Indian carmaker, or from one of the many startups—Tesla, Think, Fisker, ZENN—that are hurrying to market.

I’m fascinated by electric cars, so I went to a panel on “Bringing Electric Cars to the Mass Market” at the Net Impact conference at Wharton. They had great people—Michael Granoff of Better Place who has the title, “head of oil independence policies;” Charles Gassenheimer who is CEO of Ener1, a startup company that makes lithium-ion batteries for electric cars; Vicki Northrup, an industry veteran who has worked for Think, Zen and is back at Think, and moderator Bill Moore, who runs a terrific website, EV World, and knows the business inside and out.

Of course, it’s not much of a business yet. Sure, Toyota has sold more than 1 million hybrids, but most everyone agrees that today’s hybrids (which recharge their batteries from the braking power of the car) are an interim technology, a bridge to the future. They are likely to give way, first, to plug-in electric hybrids (where the battery can be recharged by plugging in the car) and then to pure electrics. After all, it doesn’t make a lot of sense of build a car with both an internal combustion engine and an electric engine—that’s one reason the Prius and other hybrids are pricey. Besides that, the Prius battery technology will soon be surpassed by lithium-ion batteries, the kind used in laptops and cell phones, most experts think. They are more efficient, lighter weight and more powerful. Gassenheimer said a government energy lab tested a Prius with one of his company’s lithium-ion batteries and found that it delivered 77 miles per gallon, even before the software was optimized for the new battery.

Batteries are the key to the electric car business. The trouble is, lithium ion batteries that are powerful enough to provide a reasonable range—say, 60 to 100 miles on a single charge—and long-lasting enough so that they can be charged and discharged year after year are frightfully expensive. They can easily cost $15,000 to $20,000, the panelists said, accounting for as much as 50% of the cost of a plug-in electric hybrid or an all electric car.

So how do you get costs to come down? Several ways, it turns out.

First, obviously, is by improving the technology. Lots of big and small companies are working on that—Panasonic, Toyota, Sanyo, BYD, startups Ener1 and A123 and a venture-backed firm called eeStor.

Economies of scale will surely help. “Getting the battery into volume production is the best way to drive down costs,” Gassenheimer said. Ener1 has a deal to make batteries for the Think cars, which should ramp down their costs; they are building a production line now in Indianapolis.

Another approach: Radically transform the automobile business model, as Better Place wants to do. Their plan is to own the batteries and charging stations, and recharge and replace them when needed. This should assure wary buyers, if they believe in Better Place. “You subscribe to Better Place for your energy,” Granoff says. “You pay for the miles that you drive.” Better Place has struck deals to build out electric-car infrastructure in Israel, Denmark and Australia, with more to come, I’m told. You can watch this video of Shai Agassi, Better Place’s charismatic CEO, at the EV World website.

Still another approach is to lease the batteries. Think is thinking about this idea, according to Northrup, but is wary of trying to introduce a new technology and a new business model at the same time. “We’re not sure Americans will go for it,” she says.

One thing I learned from the panel: Batteries, when they are no longer powerful enough to drive a car motor, can still hold enough charge so that they could be resold to electric utilities that want to store intermittent renewable energy from the wind or the sun.

Finally, the government can and probably will play a role in driving the adoption of electric cars. The $700-billion financial rescue bill included $7,500 tax credits for the first 250,000 buyers of plug-in electrics, which could help the Chevy Volt and the Prius plug-in if they come to market, as expected, by 2010.

Gassenheimer says: “The only way to encourage penetration at this early stage ,when the prices are higher than consumers are willing to pay, is government intervention.”

I’ve come to believe that plug-in hybrids and then all-electric cars will reach the mass market in the next three to five years, although I can’t tell you how we will get from here to there. The fundamental reason is that electric car engines are more efficient than gasoline engines, although there’s debate about how big the efficiency advantage turns out to be. Besides that, electric cars are cleaner, they will help wean us from imported oil and they are quieter than gas-powered cars.

As Carlos Ghosn, CEO of Nissan and Renault, said last month, when Nissan and France’s biggest utility announced plans to roll out an electric-car network in France:

We have decided to introduce zero-emission vehicles as quickly as possible in order to ensure individual mobility against the background of high oil prices and better environmental protection.