I have been a fan of Better Place and their unique model around electric vehicles since I watched Shai Agassi’s presentation at the DLD conference in January 2008.
If you are unfamiliar with the Better Place model, they looked at the idea of electric vehicles and people’s ‘range anxiety’ and asked how best to solve it. Their plan, put charging stations anywhere people park and build cars (or have a partner build cars) with readily swappable batteries, so if you are traveling beyond the range of the battery in your car, you drop into a swap station when your battery starts to be depleted, swap batteries and drive on. Simple!
In the Better Place business model, Better Place owns the battery in your car and charges you for the energy your battery uses - similar to how a mobile phone company charges you for minutes talktime.
Being a fan of the Better Place model I watched Shai’s talk at the TED conference earlier this year with great interest and he didn’t disappoint. A very inspirational talk. Until you start to do the maths!
Shai mentioned a price of 8c per mile (in the US) for driving a Better Place car. Frankly this sounds expensive to me.
I filled the tank in my car yesterday and took a note of the price. It was €0.948 per litre. Now my maths are not the best so bear with me while I work through this (and please do point out any errors in the comments - I want to be proven wrong on this!).
I use 5.1 litres per 100 km in my car so to drive 100km costs me €4.8348 (5.1 x €0.948).
This is €0.048 per km (€4.83/100).
This is €0.077 per mile (€0.048/.625).
This is US$0.10 per mile at today’s currency conversion rate.
If my current miles are costing me US$0.10 per mile and Shai is offering miles at US$0.08 it is not a hugely compelling case he’s making!
Now in fairness to Shai, I drive a 2008 Prius and the 5.1L/100km is roughly equal to 46mpg (using US gallons) which is about as good as you are going to get (esp as that figure is an average of urban and long-distance driving, not the maximum achieved on long-distance).
Still, for me, Shai’s 2015 figure of US$0.04 per mile is far more compelling than the 2010 US$0.08.
How much do you spend per mile and is US$0.08 attractive to you?
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Tom Raftery said:
but if the car knows you need a 1 hour charge to top up and that you are (at work, for instance) going to be parked for 8 hours, it can decide when is likely to be the best time for Better Place to buy those electrons to sell to you (where best = most profitable)!
And at the swap stations, the batteries will all be charged at times of low price and then sold on for the US$0.08 Shai mentioned.
When it starts to get interesting is when the economy picks up again, demand for oil ramps up and hits inelastic supply. When that happens we get another oil shock, high prices at the pump and Shai starts to look very prescient!
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Wed, 2009-04-29 10:55 — Tom RafteryGeoffrey Styles said:
Wadr Tom,
"Virtual power plant" seems like nebulous jargon in this context. Batteries don't generate power; they consume some across every "round turn" of charge/discharge. They also have a high capital cost that must be factored into the "arb" calculation--this is why you don't see more of them deployed in this way already without the cars. And even off-peak power isn't free. So I see how you can buy power for 2 cents and sell it for 20 cents and make money, but not if you have an obligation to have it available for your customers at a fixed rate whenever they turn up. You can't sell the same electron twice.
Agassi is a smart guy, and I'm sure he's analyzed all this. I'm just saying the numbers are not intuitively obvious to this old energy trader.
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Wed, 2009-04-29 10:23 — Geoffrey StylesTom Raftery said:
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Tue, 2009-04-28 18:43 — Tom RafteryGeoffrey Styles said:
I've been equally intrigued by the Better Place model, though I admit my fascination comes from trying to understand how he intends to earn a profit. From my simple back-of-the-envelope calculations, I came up with $0.06/mile as the minimum needed to cover the carrying cost of the battery at current interest rates and battery costs, even ignoring the cost of power that must be embedded in there somewhere (roughly $0.03/mi. at the current US average of $0.11/kWh and between 3-4 miles/kWh.) When I look at that curve, I doubt he's betting on interest rates coming down much, and I know he's not betting on power prices falling. So there must be a pretty big bet on battery prices in there. I wasn't aware that Moore's Law applied to energy storage as well as information storage.
As for competitive cost per mile, even with a car that is quite average for the US fleet, and requires premium unleaded in the bargain, I'm spending $0.11/mi. this year, though I hardly expect that to persist for more than another year or two. Compare to an average of $0.17/mi. last year, and even 8 cents looks pretty good in the long run.
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Tue, 2009-04-28 17:57 — Geoffrey StylesPost new comment