Was Better Place ahead of its time?

‘What has been will be again, what has been done will be done again; there is nothing new under the sun” – Ecclesiastes 1:9.

June 24, 2013 20:41
4 minute read.
Nadav in Better Place car

Nadav in Better Place car_390. (photo credit: Nadav Shemer)

It is astounding how often failed ideas are rehashed as bright new inventions. Nikola Tesla was a brilliant inventor, the father of alternating current. It is Tesla’s vision that makes it possible to transmit electricity over long distances economically. It is Tesla’s vision that enables us to power TVs, refrigerators, washing machines, computers or any other convenience. The idea of the electric car is as old as alternating current.

Better Place didn’t invent the electric car, it reintroduced it with a twist: Better Place owns the battery you, own the car.

Everybody loves the electric car; it is quiet and doesn’t emit any visible fumes. Evaluating the electric car’s full life-cycle impact, however, reveals an invisible tail-pipe stretching all the way to the power plant. In countries relying on coal to generate electricity, the carbon footprint of the electric car can be bigger than that of a gasoline car, a study conducted by The Norwegian University of Science and Technology has found.

The study, published in the Journal of Industrial Ecology, also found that “The global warming potential from electric vehicle production is about twice that of conventional vehicles.” Furthermore, the manufacture of batteries and electric motors requires a lot of toxic minerals such as nickel, copper and aluminum.

We tend to think of the battery as an energy source, however, the battery is merely energy storage – the actual power source is the power plant. The battery has always been the weak link in commercializing the electric car. Some of the shortcomings of the battery include high cost – up to a third of the cost of the car – heavy weight, and limited utility. To address the battery issues, Better Place introduced a subscription-based business model, wherein customers entered into agreements to purchase driving distance; the subscription cost includes the cost of the battery and electricity.

By removing the cost of the battery from the sticker price of the car, consumers were able to purchase electric cars at a comparable price to conventional cars. However, in the end the inherent limitations of the electric car, namely high cost and limited driving distance, doomed Better Place. In Israel Better Place sold around 750 cars and lost $500 million, which comes out to over $600,000 per car; expensive even for Sheldon Adelson.

To forestall its pending demise, Better Place’s CEO Shai Agassi attempted to enter the solar energy business. To build his solar farm, Agassi approached the government and requested free land in the Negev equivalent to the area of four million parked cars. To put this in perspective, that’s an area the size of the city of Ashkelon.

Wisely, the government turned him down. Expanding operations into solar energy would have only exacerbated Better Place’s financial woes.

The lure of free solar energy is very enticing. However, in practice large-scale solar operations are very expensive, require vast areas of land, and can serve only as a secondary source of electricity.

Even if all of the Negev were tiled with solar panels, it would not generate enough electricity to meet Israel’s needs. By contrast, Tamar’s offshore gas operation, with a footprint of only a few football fields, will generate enough gas to meet all of Israel’s electricity needs for decades to come. To date the only sustainable green energy ventures have been those feeding at the tax payers’ trough. Can you say Solyndra?

President Barack Obama touted Solyndra as the technology of the future and awarded the company $535m. in loan guarantees. The wealthy investors returned the favor with generous contributions to President Obama’s election campaign. Shortly after receiving the loan guarantee Solyndra declared bankruptcy. But don’t worry, the billionaire investors made money like bandits. Taxpayers got stuck with the bill. It is estimated that the US government has spent over $90 trillion on failed green energy initiatives.

In a last-ditch effort to save Better Place, Agassi asked the government for a $150m. cash infusion.

Thankfully the government said no. Israel cannot afford Solydras.

Is solar energy useless? The answer is unequivocal no! Solar energy is indispensable for numerous vertical applications.

For example, solar energy makes satellite communication and GPS possible; there are no power plants in space. Deploying the Hubble telescope, to unlock the secrets of the universe, was possible thanks to solar energy. Electric cars made moon exploration possible. In small, remote islands, which depend on shipping, solar energy can be economical.

It is when we attempt to force a square peg into a round hole that we get into trouble.

Gasoline cars are affordable and convenient, electric cars are neither.

Given the freedom of choice, consumers will always choose affordable and convenient products.

The other day I watched a documentary on TV about an enterprising inventor who proposed to build affordable and reliable personal flying machines.

These would be smart autonomous machines communicating with each other to avoid accidents.

Imagine the cost savings from expensive roads infrastructure, no more traffic jams, zipping from point A to B quickly. When markets are allowed to be free, the best solutions inevitably win. The best part of free markets is that the cost of the failed ventures is borne by rich and willing investors and not by the hard-working taxpayers.

The author is an engineer by training living in Silicon Valley California, and a great believer in free markets and individual liberty.

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