It seems Better Place's road to an oil-free world is paved with deals aimed at making sure they are the only company in Israel providing the infrastructure to make such a world a reality
It's impossible not to be impressed by Shai Agassi. Since 2007 the wonder-boy of Israeli high-tech has poured all his energy into developing the infrastructure for electric vehicles to take over the roads, hoping they will alleviate air pollution and curb demand for oil. The founder of Better Place didn't make Time Magazine's 100 most influential people list for nothing.
It looks now like the dream is coming to fruition. If all goes as planned, within two years, Israeli consumers will have an array of electric cars to choose from. Some of them will operate strictly on an electric engine - such as the Mitsubishi i-MiEV or electric Smart car.
There will also be hybrids which use an electric engines for a certain distance, and then gas engine for longer trips - as in the Chevy Volt or Toyota Prius.
But even as a flurry of carmakers are scrambling to get electric cars to market there is only one company working to develop the infrastructure allowing these cars to hit the road: Better Place. And now the company is set to become a government aided monopoly.
Better Place, which operates internationally, does not manufacture cars and had no intention of importing them into Israel. Its objective is a wide network of charging and battery switching stations.
The electric car consumer will have no option but to make use of their services, which past experience shows can be problematic. Imagine only one choice of gas station on the road.
Better Place's intentions are expressed in the financial reports of Israel Corporation, which owns 30% of the firm. In its summary of 2009 it notes: "Better Place operates in locations where there is governmental support and encouragement for the transition to electric cars ... where the fundamental assumption is that no other charging infrastructure will be installed in that particular place."
Better Place responded that the company "is building the charging grid as open access, so that an electric car (of whatever manufacturer ) can connect to our charging stations even if they are not customers of the company."
Better Place can monopolize the emerging field by taking advantage of three things: installation, grids and cars.
Better Place did not invent the electric car, but Agassi noticed that increasing sensitivity to global warming would necessitate a roadside charging grid to serve electric cars.
The global body in charge of electricity, the International Electrotechnical Commission, includes commercial companies and government bodies, and is actively formulating uniform installation standards which the European Automobile Manufacturers Association has already announced it will adopt. Israel also has two representatives on the commission - both of them Better Place employees.
The standards emerging from the commission will define four kinds of charge for electric cars: a simple charge from a domestic plug; charging from a domestic plug with a standard continuous grounding device to prevent electrocution; smart charging from a central network; and charging from an industrial DC current (which will generally not apply to private consumers ).
Smart charging enables the distribution of electric current according to the required traveling range, intended time of travel and state of the local electricity network. In a parking lot with smart charging stations, cars in short-term parking will be given priority over those in long-term spots. Charging stations contact the computer in the car and the charge supply control center, which will decide which car gets preference and the quicker charge.
Better Place representatives also sit on the Standards Institute of Israel's committee on charging electric cars. The company wants to see smart charging the only system adopted.
If its position is indeed accepted, it will be the exclusive electricity supplier to Israeli electric vehicles.
It seems the company also has the support of the National Infrastructure Ministry. In 2008, then-national infrastructure minister Benjamin Ben-Eliezer announced he was adopting the Israel Electric Corporation's feasibility study on electric vehicles and instructed his staff to lay the groundwork for a law to make smart charging obligatory.
The 20-page study appears to be a serious and in-depth affair, but is written through the lens of IEC interests and based on data provided by Better Place, who commissioned it. Parts, it turns out, are patently absurd. According to the scenario proposed by Better Place, in 2020 there will be 2 million electric cars on Israel's highways - matching the total number of non-commercial cars on the road in Israel today.
In other words, according to Better Place nearly everyone who owns a normal car today will own an electric one tomorrow - which is not likely to occur. Transportation Ministry estimates suggest electric cars will gain at best 15% penetration rates for a decade after its launch.
"[Better Place] stresses once more that it will use the standard plugs regulated by international and national standards institutes and be compulsory to all the charging grid companies and car manufacturers in the world," Agassi's company said. "Better Place takes the view that there is a very great advantage to smart charging over random charging; a simple connection to a domestic plug, as it currently exists is dangerous, insecure and inefficient in both energy and environmental terms."
Even if smart charging will be cheaper and more accessible than domestic charging, the barriers for entry into the industry have been placed impossibly high.
A grid will start being spread as soon as 2011 and Better Place has been quick to ink agreements with Jerusalem, Tel Aviv, Haifa, Kfar Sava, Modi'in, Holon, Karmiel, Maalot Tarshiha and other towns to install stations.
Those responsible for the grids in several of those cities say Better Place did not ask to be the exclusive supplier, over legal concerns. However, all the agreements emphasized that Better Place's brand name charging columns will be installed on the central arteries and prominent sites of the cities - which will make penetration by other charging grid suppliers a struggle.
Better Place has also signed agreements with private companies such as Isrotel Hotels Management and Israel Shopping Centers Group.
Better Place is transforming into an importer (of Renault electric cars ) almost against its will. Agassi previously announced in an interview with TheMarker that he would prefer in the future "to detach from sales and leave just operations ... in this case I was forced to create the market."
Until they can pull back, Better Place is marketing the same cars it is creating a grid for, raising concerns.
The company could sell or rent its cars in a package deal including fees for using its charging stations (apparently on a pay by the kilometer basis ), giving it an upper hand against other auto-importers marketing electric vehicles here.
"As we have always said, the Better Place charging grid will be open to all electric vehicle owners," the company responded.
Is smart charging the only way?
According to Israel Fuel Administration calculations, if all cars in Israel shifted to electric transport, it would cut 32% in automobile energy consumption.
On the other hand, plugging in thousands of electric cars could overload Israel's electricity network. Is smart charging the only answer? It would be possible, for instance, to encourage charging your car at night by reducing rates then.
The National Infrastructure Ministry responded that next month they would publish "a wide-ranging plan to provide clear guidelines for active participants in this field and recommendations of, among other matters, the mode of charge connection, installation and ownership of the charging grid, and an accounting and regulation system to move the subject forward."
In business terms, partnership with Better Place creates vertical integration for the Israel Corporation - it owns several companies which share the various stages of the future of electricity - car manufacture, charging station network and electricity generation.
Better Place does not actually intend to manufacture cars or electricity, but the Israel Corporation does. They have joined Chinese auto-manufacturer Chery in Chery Quantum Auto Company, to manufacture quality export cars. Some of the cars will be electric.
Agassi, who was formerly president of products and technology at business software provider SAP, founded Better Place to create a grid for electric cars, including smart charge columns and a system for quick changing batteries, as required for long range travel.
The payment model is based on a subscription to energy services, where each driver will pay according to usage.
The company's initial investment was NIS 200 million and it raised another $350 million at the start of 2010 from a consortium of foreign investors headed by HSBC. Company valuation at fundraising was an estimated $1.25 billion.
Better Place has already signed agreements with Renault and Chery to manufacture cars with changeable batteries which Better Place will market in Israel and Denmark.
The company has no direct competitors today in the field of smart charging. That said, an Israeli company called Zohar Energy has started representing Coulomb Technologies, a smart charge point manufacturer which may still challenge Better Place in the future.
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