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Better Place and the future of EV in Australia

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Much has been written already about Better Place and Israeli founder Shai Agassi’s plan to bring a mobile phone-style business model to the sale of electric vehicles (EV).¬† The Israelis, who are set to have their Better Place network installed by next year, have been effusive in their response to the company’s plan. The response elsewhere has been upbeat – in the US, here in Australia, and elsewhere. Inevitably, some have been less than sanguine about Better Place’s vision. Either way, Better Place is advanced in their rollout in Israel, with Denmark not far behind, and aims to have its Australian network ready 6 months after Denmark’s.

The outline of the model is fairly straightforward: since EV batteries are expensive, the company will lease the battery to the consumer for a monthly fee over a multi-year contract, much like mobile phone contracts work. So consumers need only purchase the vehicle itself for roughly the same price as its petrol-powered equivalent, and then enjoy the benefits of paying per kilometre driven. At least in Australia, all the power at the charge points will come from renewables, most likely wind power, which still has the distinct advantage of costing far less than petrol on a per-kilometre basis.

Electric carBetter Place installs its own charge points at the consumer’s place of residence and possibly at their place of work, and for longer journeys it will operate a network of battery exchange stations. Full charges by the consumer take too long to be viable on a long journey (say, from Sydney to Melbourne) and present other technical challenges, whereas Better Place claims that a simple battery exchange (for a pre-charged battery) will take all of three minutes.

I’ve thought for some time that plug-in hybrids (preferably LPG/electrics simply because gas is somewhat cleaner and cheaper than petrol) are the natural solution to the personal transportation problem. This is because most city drivers could survive on a fully juiced-up battery, leaving the LPG tank for longer journeys which are relatively infrequent for most people. But you are left with what remains an expensive car which is charged by traditional power outlets, which for most people means simply switching the carbon burden from petrol to coal.

This is why I like a lot about Better Place’s business model. As CNET points¬† out, it solves the issue of EV battery expense and the range problem (particularly with these early-generation batteries that are only capable of a 160 km range). It solves the chicken and egg problem of adoption by co-opting the “network” model of the mobile phone. It elegantly answers the critics who argue that EV isn’t necessarily clean because it relies on traditional black power – because Better Place guarantees that its power will be 100% sourced from renewables. Hence their partnership in Australia with AGL. This is a huge selling point at a time when consumers remain concerned about their environmental impact even in the midst of the GFC. And the net result of all of it, should the project be even moderately successful in Australia, will be cleaner air and a significant reduction in dependence on foreign oil which is a clear geopolitical advantage. And, if all goes to plan, consumers will be paying massively less for their personal “fuel” costs – even if the cost of petrol continues to fall, EV costs per kilometre run rings around the cost of oil.Charging an EV

The reason why Shai Agassi and his company has captured the public’s imagination is that it presents a comprehensive vision of how a country’s fleet can be electrified. Perhaps for the first time, we have a simple, reasonably elegant model of a clean, renewable, sustainable electric future. Inevitably, there are going to be challenges – for instance, the installation of charging points at every consumer’s home is understandably necessary to Better Place’s success (in large measure, to ensure that the network is providing only renewably-sourced power), but it detracts from the elegance of the solution.

Nevertheless, I am cautiously optimistic about Better Place. It could easily become an important part of the personal transportation sector’s mix in the next few years, and I say this largely because of a very simple test I have: I’d buy it. And I think a lot of other people will – because it has tremendous cost and branding advantages over hybrid vehicles and even questionably-fueled plug-in hybrids.

If I can have an electric car that will reliably get me around Sydney and up and down the NSW coast for a fraction of the fuel costs of a traditional ICE vehicle, and I know it’s powered by 100% renewable energy, surely it’s going to be as much of a no-brainer for many other consumers as it would be for me.

It will be fascinating to see what comes of this company. I suspect it’s going places. Better places. (I couldn’t resist.) Regardless, I suspect that we will be the last generation to suffer from the filthy air that has blackened our lungs, and the noise pollution of that dinosaur technology, the internal combustion engine.


When clean energy will kill coal

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windpowerToday I was discussing the future of hydrocarbons with a colleague whose family has been highly successful in the fossil fuel industry, and in addition to his skepticism on the anthropogenic nature of climate change, he raised the issue of cost. He was of the opinion that we will become steadily more, not less, addicted to oil, coal and gas in the medium- to long-term.

I disagreed strongly with him, and here’s why. Within a matter of seconds, I had him agreeing with me that vehicles are rapidly shifting from oil. We shared the belief that electric vehicles are the future. His objection? Where are we going to get the electricity from? And his definitive answer? Coal. And perhaps some nuclear.

Of course, if we’d had this conversation a mere decade ago, he would have laughed off the suggestion that our vehicles would run off batteries in a matter of a few years. The technology was unproven, expensive, heavy, and on and on. And yet, here we are in 2009, on the cusp of what is widely recognised as the next phase in vehicle production. The future, as they say, is now.

The same will be true of coal. Within the next few years, there will come a point when power generated by one or more renewable sources will be cheaper than coal-generated power. Ron Pernick and Clint Wilder have pointed out that this tipping point already occurred in Colorado after Hurricane Katrina caused natural gas prices to spike, and clean energy produced by wind power briefly became not just competitive with but in fact cheaper than hydrocarbon-derived power. Demand for the local green power program quickly outstripped supply that November in Denver and the rest of that state.

Of course, this was temporary, but it was a harbinger of things to come. Coal is cheap because it is an entrenched, old technology. It is financially “safe” and relatively plentiful. Wind happens to be the clean technology that has become most widespread and most cost-efficient – and as the technology improves and returns to scale increase, costs will dip even further. In the long-run, the same is likely to be the case for solar, tidal, geothermal, wave, and other renewables. And as soon as these technologies deliver energy more cheaply than dirty energy, the growth in takeup will be explosive.

This is the very reason why a price must be put on carbon today. Is pricing GHG emissions “artificial”? Perhaps. But it is simply a policy decision that must be taken to speed up the consumer uptake of clean energy. Rather than waiting for all smokers to die of lung cancer, we put a price on lung cancer by taxing cigarettes and funding public health with the revenue; rather than waiting for double-digit unemployment, we put a price on unemployment by taxing progressively and funding reskilling and work-finding programs; and now we will put a price on carbon to reverse the damage that dirty energy has hitherto caused. The reason in the short-term is that we must put a price on the externality of pollution and climate change, but in the long-term it is a no-brainer: burning fossils – literally – is a 19th century practice that will inevitably be replaced by clean energy.

It is my view that the tipping point will occur with or without what I regard as sufficiecoal_power_plantnt government intervention. The current ETS being considered by the Australian government doesn’t even begin to take the issue seriously. But even this scheme, the CPRS, will drive innovation, and the cost-efficiency of the technology will snowball, and we will rapidly come to the point where we view burning hydrocarbons to produce energy as quaint, if not downright barbaric. Like the mainstreaming of electric vehicles that is about to take place, renewable energy which is already competitively priced today will – inevitably – become cheaper than coal and extremely widespread.

As an aside, US Interior Secretary Ken Salazar today proclaimed that wind power off the East Coast could replace 3000 coal-fired power plants. This is just the very beginning of what is in store for clean energy over the next decade.

Written by Gabriel Sassoon

April 7, 2009 at 6:42 pm