Investing in Clean Technology

How did you get involved with Better Place?

 I came out of the investment world in 2006, and became convinced that electrification of transportation was both inevitable and very urgent. I began actively looking for a model that would address the need to get deep market penetration quickly.  I found some battery companies, car companies, and car startups, but none of them addressed the fundamental criteria that I was looking for.  The question I asked myself was, “What is going to make this revolution happen in the time frame that we need it to happen?” I happened to come across Shai Agassi and his concept right around the time that he decided to make the leap from SAP.  The startup company that I was involved in was helping raise some of the capital to get going, and after that I decided that I no longer was interested in investing in other companies.  I just wanted to do everything I could to make Better Place succeed. 

Why electrification? Why not hybrid or biofuel? 

 Electricity is always the most efficient.  It isn’t an energy form in itself— it’s a means of delivering energy.  If it weren’t the most efficient way of delivering energy, it wouldn’t be as ubiquitous as it is.  Furthermore, it brings diversification to the fuel market, because if you have a monopoly on liquid fuels (which is what the oil companies have today), you do not achieve diversification.  Biofuels will never, either as a matter of cost or a matter of environmental strategy, come close to the effi ciency of electricity.  What you need is to find a conduit to bring whatever form of electricity is most efficient in whatever place you are into the vehicle.  We have that— it’s called the battery.  Better Place uses the battery as part of its infrastructure to foster mass adoption. 

Could you explain your subscription model? 

Our subscription model is the opportunity to buy not gasoline, which you only buy as a means to delivering miles, but to purchase those miles directly.  It works almost like the cell phone system.  A cell phone company, after buying bandwidth and installing infrastructure, sells you phones and minutes.  Similarly, we buy electricity put in infrastructure, which is the ubiquitous ability to charge a car wherever you park or to switch out your battery.  Then, we sell you miles.  The infrastructure also includes the batteries themselves, which we own, thus lifting that burden from the consumer.  The final piece of the puzzle is the car, which is made by the car companies and purchased by the consumer. 

Will you subsidize the initial cost of the car? 

We do not subsidize the cost of the car.  It depends on how many miles the consumer subscribes to and over what period of time.  We have a certain margin involved, and we give part of that margin back to the consumer as a “signing bonus,” which effectively serves to reduce the acquisition cost of the car. 

Is this what prevents consumers from just buying a car and plugging in at home? 

Regardless, consumers will do that, but it’s okay because the cars will still be electric. There will still be a fixed-battery electric car market, in which consumers will have to find their own infrastructure or “roam” on our networks, but it will remain relatively small because of the higher associated costs. 

Right now, your project is underway in Israel and Denmark.  Denmark has said that it will eliminate its 180% tax on cars and Israel will reduce its tax from 72% to 10% on zero-emission vehicles.  To what degree are tax incentives necessary to make such projects profitable?

  They aren’t necessary at all.  They simply accelerate adoption.  Israel and Denmark are just attempting to drive the adoption of electric cars faster.  It helps but isn’t necessary. 

You’re also starting up in California and Ontario.  Unlike Israel, Denmark, and other smaller places, they have large spots of land that are underpopulated or are contiguous with areas that won’t necessarily subscribe.  What is the economic feasibility of making sure you have coverage in underpopulated areas and out of network areas?

 This is again analogous to how cell phones came up.  First, the infrastructure was deployed in the most populous areas— we will begin in the Bay Area.  For example, the mayor of San Francisco asked us at the very outset if it could be a location.  We initially declined.  It didn’t make sense because everyone there is driving to or from somewhere else where they would also need coverage.  However, after some research, it turns out that if you draw a 100-mile-radius circle around San Francisco, most of the cars stay within that most of the time.  We told the mayor that if he could get all the surrounding constituencies on board we would start there.  He did that, and now we’re there. If you did that in the other three major population centers in California and put battery exchanges every thirty or forty miles on the freeways which connect them, people in those population centers would not only be able to use electric cars in their own regions but also to operate in other regions as well.  With the more remote locations, it will be a matter of time.  Once there are revenues, it will make sense to deploy the infrastructure deeper. 

    Israel operates as a relatively closed system.  Would it make sense to apply flex-fuel cars or cars that would also use gasoline, to accommodate other areas?

 That’s not part of the deal.  The problem is that once you get into a multiple drivetrain scenario, the costs change radically.  For example, if you look at what GM is attempting to do with Volt, they’re basically saying, “We don’t see any existing infrastructure, so we have to put the ability to extend the range of the car inside the car.”  That’s how they developed this model of putting an engine in the car to charge the battery.  It’s a very elegant solution until you look at the fact that not only do they ask the consumer to purchase the car, but also the battery and the range extension.  The difference is that we believe the battery and the range extension should be part of the infrastructure, not borne by the consumer.  Our method is more conducive to mass adoption. 

What do the finances of installing this infrastructure in America look like right now?

 The total infrastructure cost is somewhere between one and two hundred billion dollars.  If that sounds expensive, compare it to the $450 billion we spent on importing oil in 2008. 

Do you anticipate that a portion of these funds will come from the government? How will partial state ownership affect your business model? 

Our current business model is that we raise the money to build and operate the infrastructure.  It happens to be the case that, as a matter of national priority, it might make sense for the government to step forward and offer to build the infrastructure or apply loan guarantees, given the fact that for the cost of three months worth of oil, we can build a network that gets us off of oil for good.  Better Place could implement the infrastructure singlehandedly, but we have to raise the capital ourselves, which takes time – maybe more time than the US can afford to remain addicted to oil.  

In your effort to be green, you supply energy from renewable sources or renewable credits.  How would you do that in the US, which doesn’t have a strong, sustainable, renewable structure to support an electric car system? 

 The US today has enough zero-carbon electricity for very deep market penetration of electric cars.  As they come to market, the incentive will be there for the renewable energy structure to be scaled up.  By the time we get to 100% penetration of electric cars, we’ll have more than enough zero-carbon electricity to drive them. 

How do you think the current recession and crisis in the U.S. auto industry will affect Better Place?

The problems in the auto industry point to the fact that the oil industry has been favored over it in recent years.  To save the US auto industry, we need to rebalance.  The way to save it is to have a different business model, a model that allows them to produce these new electric cars in a profitable way.  If they produced those cars and we built the network, I think we would see profitable auto companies again.