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Another EV Startup Failure and What This Means for the Industry

electric carNo, this is not a story about Fisker. I’m talking about Better Place, the battery-swapping startup that was set up in Israel in 2007 and was deemed the next big thing. Six years on, having raised over $850 million from huge corporations such as HSBC Group, Morgan Stanley, General Electric, Vantage Point Capital Partners, and Israel Corp, CEO Shai Agassi was forced out in October 12, his successor quit in January, and the startup has lost over $500 million. But first – why battery swapping?

The battery issue for EVs is a big one. Although battery life has improved by quite a bit since the first EV, its price and lifetime still makes the value of an EV depreciate quicker than its conventional counterpart. Why go for an EV knowing full well that your vehicle will be worth so much less than a regular car in a few years time? 

There have been attempts to get around this, with Renault and Daimler AG selling electric cars and leasing out its batteries, so that the electric car (the electric Smart, in this case) would only cost 16,000 Euros (approx. $20,000), with the battery leased out at around 60 Euros per month ($80). 

All this had been preceded by the hugely innovative Better Place, who pioneered battery swapping for vehicles in Israel. Instead of taking hours to charge your vehicle you simply drive up to a station (much like a gas station) and get your battery swapped in around five minutes. Lauded with praises, Deutsche Bank even suggested the business could lead a “paradigm shift” causing “massive disruption” to the car-making industry, and could even make gasoline vehicles obsolete. Renault-Nissan even agreed to 100,000 vehicles tailored to Better Place specifications. So much for success, then, as Better Place seems to have stalled and have delayed plans to roll out internationally.

Why has the business lost over $500 million in a country where gasoline costs a hefty $7.50 a gallon (hefty by US standards) and where most citizens live clustered around two main cities (Tel Aviv and Jerusalem)? Analysts suggest that the company had actually not done anything wrong, just that the time was not ripe for such an innovative idea. To strike at the heart of it, the world may not yet be ready for a paradigm shift like the gasoline fuel tank did decades ago. Until something that revolutionary comes along, the battery may not be able to compete, at least, not until its capabilities are much improved.

Better Place, like Fisker, is not the only EV startup to have hit hard times. Have we just hit a bump in the road, or is the EV destined to be a failure? Good ideas may take time to catch on, but the truly brilliant ones shift paradigms and change the way we live, which is exactly what the modern ICE engine did. And for the moment, EVs are not quite on the same level. But perhaps I speak too soon, for this year EV car sales are already increasing, and are predicted to be much higher than previous years. If we look at it from another perspective, they are actually doing quite well. 

If you look at the figures, EVs are doing just as well as hybrids when they first came out. In its first year, Toyota’s Prius and the Honda Insight sold a total of 19,244 units, whereas in the first year of the EV, the Leaf and Chevy’s Volt (not technically a full EV, but is a plug-in) sold 17,345 units. In the second year the hybrids sold 20,300 versus the 33,300 EV units. It should be noted that half of all Volt sales were in California, where owners are incentivised to drive their Volts which are eligible for a Carpool Line sticker, which makes things much easier in the car-clogged state (government incentives, yay!). EVs have had a tough time on the market – when the first hybrids came out, they kind of sneaked up on everyone. It was a cool new gadget, but expectations were low. But all the hype began building up for the plug-ins, and when it did not become the instant superstar it was expected to become, naturally people would be disappointed, no matter how unreasonable the expectations were.

Ford Focus Electric and Mitsubishi’s i-Miev have already joined the Leaf and the Volt this year. Plenty of other carmakers are putting their plug-in models on the market next year, with Cadillac, Honda, BMW and Audi jumping on the proverbial bandwagon, with Audi’s R8 e-tron making an appearance in Iron Man 3 – now who wouldn’t want one of those? I haven’t even mentioned the Tesla yet, which has an insanely long wait list, but hopefully would become a little shorter soon, as the company recently announced they were to increase production to 20,000 units per year. 

Sales are increasing, and this is not because the auto industry is expanding, because it is not (at least, not quickly). As gasoline prices continue to increase, the EV looks increasingly more attractive. And this is the case around the world. Nissan Leaf sales are quickly picking up, setting a record for March. According a recent report by Pike research, “sales of plug-in EVs will grow at a compound annual growth rate of nearly 40% over the remainder of the decade, while the overall auto market will expand by only two percent a year,” estimating that 3.8 million EVs will be sold annually by 2020.  

Sales will continue to increase, as the prices of the EVs are now coming down, not because of tax incentives, but because of actual economics. Enough cars have been sold to drive manufacturing costs down so that those of us who aren’t quite as adventurous as the trend-setters can now afford one. The price of the Leaf has been dropped from around $36,000 to just $28,800, with GM announcing a similar price cut for the Volt. Of course, tax credits are still available so you might even get it for as low as $18,000, which is really not bad at all.

Yes, there have been some bumps along the way. Quite a few, in fact. But as it stands, EVs aren’t actually doing too badly at this stage of its development. The first real EV only hit the market three years ago, and only in the past year hasn’t come up against any real competition within its category. It will take time for it to establish any sizeable market share, and actually looks like they are already doing that. The EV hasn’t quite made its mark yet, but give it a few years before you decide whether it is here to stay or not. 

And now onto the bigger question – most of these plug-ins run on electricity provided by the national grid (unless you own a big house with solar panels, ie. not me). When is the grid going green? Because as long as these cars are running on electricity produced largely from coal, it’s not really going to help lower emissions significantly.

Sandy Tung's picture

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Bob Meinetz's picture
Bob Meinetz on April 13, 2013

Willem, though you continue to maintain everyone in the country has essentially the same impact from using electric vehicles, this is simply not the case. Chevy Volts are significantly cleaner than similar internal combustion vehicles if driven in electric mode in most areas of the country. Per Environmental Protection Agency:

“Power Profiler will:

  • Determine your power grid region based on your ZIP code and electric utility
  • Compare the fuel mix and air emissions rates of the electricity in your region to the national average
  • Determine the air emissions impacts of electricity use in your home or business

Power Profiler is very easy to use and takes about 5 minutes. To start, all you need is your ZIP code.”

http://www.epa.gov/cleanenergy/energy-and-you/how-clean.html

“Many consumers now have a choice regarding the source of their electricity, and some seek cleaner sources, such as wind and solar power. Data from eGRID underlies EPA’s Power Profiler application, which enables individual consumers to identify the environmental impacts of their own electricity usage. Power Profiler is updated with the eGRID2012 year 2009 data.”

http://www.epa.gov/cleanenergy/energy-resources/egrid/faq.html

Bob Meinetz's picture
Bob Meinetz on April 14, 2013

Willem, I’ve read your two articles. Although I agree that the MPGe rating is flawed and irrelevant for comparative purposes, that does nothing to address the fact that regional system operators are very much in control where their power comes from, and in fact depend on that control to maintain stability. From the California Independent System Operator:

“Clean, green electricity accounts for nearly 15 percent of the power supply delivered in California. We are working with our stakeholders to support meeting the state’s 33 percent renewable energy goal…in support of the state of California Renewables Portfolio Standard, the California ISO is working with participating transmission owners, the California Energy Commission, the California Public Utilities Commission, industry experts, adjacent control areas and owners/developers of renewable resources to identify integration issues and solutions for the integration of large amounts of renewable resources into the ISO Control Area.”

http://www.caiso.com/informed/Pages/StakeholderProcesses/IntegrationRene...

The rate of the onset of electrical transmission is a useful characteristic for balancing purposes, but the rate is just as fast whether 1 watt or 1MW are being pushed through the line* (though the light from the sun travels at 186,000mi/sec, all I need to do is wear a pair of sunglasses to reduce the amount of energy reaching my eyes). If you want to continue on this tack you might provide an outside reference to back up your claim, as I have several times. Right now you’re 0-2 against information provided by government agencies.

As far as your comparison of gasoline efficiency vs. electrical efficiency, you’re relying on a classic straw man argument by considering the complete well-to-wheels energy efficiency for electric but only tank-to-wheels for gasoline. For example, you neglect the efficiency losses of fuel extraction, refining, and transportation of gasoline to 50,000 service stations across the U.S., etc.

But rather than trying to debate the details of this complex topic here, I’ve taken the most complete model to date, the GREET (Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation) Model from Argonne National Labs and run a simulation using California’s power generation mix. Although efficiency has deteriorated slightly from its 2010 baseline year with the closure of San Onofre Nuclear Generating Station, it shows that electric vehicles are 53% more energy efficient* in comparison to an internal combustion counterpart. There are literally hundreds of assumptions made in the calculation of that number, but I welcome you to download the model (it’s runnable on any standard version of Excel) and point out any flaws you can find in its assumptions. You can even substitute your own numbers and see how they affect the calculation. Those are results anyone can check for themselves, and the basis for a more productive discussion.

*edited for corrections

Bob Meinetz's picture
Bob Meinetz on April 14, 2013

Willem, grid control systems match available power to demand, and they do it using thyristor controlled series compensation (TCSC) which offers the following benefits to ISOs and RTOs:

  • –  Elimination of subsynchronous resonance risks

    –  Damping of active power oscillations

  • –  Post-contingency stability improvement

  • –  Dynamic power flow control

The subset of advantages provided by the last item, dynamic power flow control, are:

  • –  Minimizing system losses

  • –  Reduction of loop flows

  • –  Elimination of line overloads

  • –  Optimizing load sharing between parallel circuits

  • –  Directing power flows along contractual paths

More info: Thyristor Controlled Series Compensation – Keeping Grids Together

So if ISOs can direct power flows as described, they have the ability to choose the source of that power. That the selection is made automatically in realtime doesn’t matter; control systems are programmed to select appropriate sources in various circumstances. And sometimes those circumstances involve contractual obligations, like commitments to use renewable energy.

Though regional differences exist and are important, ultimately EVs are cleaner than ICEVS using a national average anyway. In their Well to Wheels Analysis of Energy Use and Greenhouse Gas Emissions of Plug-In Hybrid Electric Vehicles, a summary of the calculation results of the GREET model, Argonne concludes that:

  • “PHEVs recharging from a mix with a large share of efficient electricity generation from natural gas (e.g., natural gas combined-cycle [NGCC] generation in the Western Electric Coordinating Council region) produce GHG emissions comparable to those of gasoline HEVs (with a range from -15% to +10%) but significantly lower than those of baseline gasoline ICEVs (with a range from – 25% to -40%). The range of results is primarily attributable to the different generation mix for the charging scenarios considered and the different PHEV types (power-split versus series designs).”
  • PHEVs recharging from a generation mix comparable to the U.S. average mix produce lower GHG emissions than baseline gasoline ICEVs (with a range from -20% to -25%) but higher than gasoline HEVs (with a range from +10% to +20%).
  • To achieve significant reductions in GHG emissions, PHEVs and BEVs must recharge from a generation mix with a large share of nonfossil sources (e.g., renewable or nuclear power generation). PHEVs recharging from a potential renewable or nonfossil generation mix reduce GHG emissions by more than 60% for the power-split PHEV configuration and by more than 90% for the series configuration compared with baseline gasoline ICEVs. BEVs can virtually eliminate GHG emissions (per mile traveled) if recharged from nonfossil electricity generation.”
Nathan Wilson's picture
Nathan Wilson on April 14, 2013

“…Analysts suggest that the company [Better Place] had actually not done anything wrong, just that the time was not ripe for such an innovative idea. “

Huh?  It’s remarkable that they managed to convice investors to fund a company based such a “risky” idea.  I used the term “risky” instead of “innovative”, because there was always a huge risk that they would not deliver a satisfactory owner experience.

A battery swap is basically inferior to plug-in charging in every way except time.  Home charging is super convenient, even if it takes all night, so it was always clear that they would mainly be serving appartment dwellers.  I’m not familiar with Israel, maybe there are enough renters for their business case.  

So they were basically betting that fast charging would not work.  One could maybe argue that 30 minute chargers would be as expensive as 5 minute battey swap stations, on a per use basis.  But it is clearly not true of 3 hour chargers, which will be so small and cheap that they could be put at office buildings and shopping malls, were EVs to catch on.  And in many cases a slow charge at the destination is better and faster than a battery swap that is 10 minutes down the road.

I think their plan was fundementally flawed from the beginning.

Bob Meinetz's picture
Bob Meinetz on April 15, 2013

Willem, utilties do not dump energy willy-nilly on the grid (like water into the ocean, as you say) hoping someone will buy it – it would bring the entire grid down in a matter of seconds. Generation is carefully coordinated with consumption, and that is the role the independent system operator plays. By choosing which utilities will contribute in “day-ahead” forecasting, then fine-tuning with realtime generation ISOs have complete control over where energy comes from and to where it goes.

I’m done belaboring this point, I’ve presented multiple references so that you can educate yourself on this subject, and you have yet to provide one reference besides your own articles in support of your “ocean” theory. I should point out also that your characterization contradicts the assertions in the paper I’ve provided from Argonne National Laboratory, which was formed to carry out Enrico Fermi’s research for the Manhattan Project.

Can we agree that scientists at Argonne probably know a thing or two about physics?

Sandy Tung's picture
Sandy Tung on April 15, 2013

I definitely agree that home charging is by far the easiest and most effective method, which works in the suburbs and smaller towns and cities. However, in most large cities, a substantial proportion of the population do indeed live in apartments, or townhouses with no private garages, where home charging is not possible, and public charging spots are few and far between, and nowhere near as convenient.

Nathan Wilson's picture
Nathan Wilson on April 15, 2013

Bob and Willem, as I understand the grid, I think you’re both partly correct.

The Ocean analogy does a decent job of describing the physical flow of power, but not for the grid in general, only for a given “balancing area”.  

A “balancing area” is a sub-portion of the grid in which a given automatic control system forces electrical supply to exactly match demand. Of course some (most?) generators are manually dispatched, as is the transfer of power between balancing areas; the solar PV and wind are uncontrolled (but forecasted); there must be enough automatically controlled generation to cover all planning errors.  The areas are typically tens of miles across, but NREL’s 20% Wind study suggested that much larger balancing areas would be helpful to their scenarios.

Power is transferred between balancing areas using transmission lines, the power flow over which can be controlled using multi-tap transformers whose turns-ratio can be adjusted on-the-fly.  (While a “series compensator” may affect power flow, it’s not the main control mechanism).  A super-grid could in principle use 800KV HVDC and 765KV AC lines to join the entire nation into one big balancing area, but that is not what we have today.

As Willem says, the grid (within a balancing area) does not allow power from specific generators to route to specific utilities, it’s all shared, as all electrons are equal (except there is a bias toward shorter distances due to Ohm’s Law, which says the current on a transmission line is determined by the Voltage drop along it and its resistance; this is true as long as the length of the line is much shorter than light_speed/60Hz). 

However, tradable Renewable Energy Credits (RECs) can represent real physical power on the grid.  Even though the power for a particular user can not be traced to a selected generator, the RECs can.  To the extent that the value of the REC is the cost penalty for using renewable power, and when the costs are the main determinant of the renewable deployment, this is a good way and effective way of allocating the fossil fuel reduction to a given user. 

If however, a renewable portfolio standard is driving the generation mix rather than RECs, then the REC loses its meaning.  In the real world, there are system difficulties integrating variable renewables.  The problems are small for renewable penetrations below 10% of the average demand (but grow very quickly above 30%).  So renewable penetration must be low for RECs to be meaningful.  On the other hand, if the “marginal cost” of fossil actually rose above the “levelized cost” of renewable power (it is not there yet), then the renewable installations would surely grow independent of the number of RECs sold, so again the RECs would lose their meaning.

So in summary, I agree with evaluating electric car emissions using a local/region generation mix rather than national one.  

Furthermore, for early adopters of EVs, buying renewable energy credits can be plausibly used to allow near zero-emission operations (but this will not be true at the renewable penetration that California is aiming at).

 

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