Professional Documents
Culture Documents
Sustainable development
Better Place project and its expansion in Israel
Accelerating The Transition To Sustainable Transportation.
Table of content
Executive Summary.... ..P.3 The importance of the project . P.4 The presentation of the project and .P.4 its costs.
The offer.. P.6 Is it a monopoly?.. .P.8 Better Place in the future.... .P.8 The car sharing service... ..P.10 Conclusion P.11
Executive summary
The world is most definitely shifting to environmental awareness. More and more companies are being created in order to improve, reduce or at least take into consideration the environment. Better Place was created exactly for these reasons. Shai Agassi, the founder and chief executive of Better Place, the leading electric vehicle services provider, was inspired by a profound question posed at the World Economic Forum in 2005, How do you make the world a better place by 2020? With a passion for tackling large-scale challenges, Agassi sought to answer this question with a pragmatic solution to change the world and reduce global dependency on petroleum, by creating an infrastructure that would support the electric car. Agassi works with government leaders, auto manufacturers, energy companies and others to make his vision, zero-emission vehicles powered by electricity, a reality in countries around the globe.1 Israeli President Shimon Peres and Prime Minister Ehud Olmert were prime forces that believed in this project. This effort will lead Israel to be the first nation in the world that partnered with Better Place to have an all-electric car infrastructure that will free the country from gas consumption. 98% of transportation vehicles are powered by oil whereas only 2% are environmental friendly. The obvious question is why only 2% is environmentally friendly if the world is becoming greener? The answer is that the electrical car factors have made it impractical for drivers: the price, the size, the constant need to charge the battery for long hours, distance restrictions and speed. Better Places solution is to combine a vast country-wide network of convenient recharge points, with the ability to switch to a full battery in less than a minute, less time than it takes to fill up a regular car with petrol. The car that was chosen for the project is a very comfortable family car manufactured by Renault the Fluence Z.E2. Without suitable infrastructure, a well spread grid, this project could not succeed. Just as the cell phone without antenna coverage providing reception could not work. The plan is to have entire areas around the country covered with battery switching stations providing drivers of electric cars with an unlimited driving range for long distance trips.
1 2
http://www.betterplace.com/the-company-leadership-detail/index/id/shai-agassi http://www.betterplc.co.il/default.asp?catid={5BFEB3E8-E777-4F8B-8A3D-71BE7B826A33}
Subscription to Better Places project will provide the customer with access to the switching and charging network for an overnight or workday charge. Members will pay a monthly fixed fee which is similar to the cell phone companies system. However, regardless of ones usage one will have to pay this fixed price. If a customer drove more than he paid for, he will have to add the additional fee. What will happen if he went on vacation or just did not use his full quota? Well, he will have to pay it anyway. This point is creating a negative approach toward this project as people do not accept paying for what one has not consumed. The company has its own reasons for this fixed charge; however, we have a solution Car Sharing. Car sharing is a form of car rental where people rent cars for short periods of time. This is attractive to customers who make only occasional use of a vehicle, as well as others who would like occasional access to a vehicle of a different type than they use day-to-day.3 The principle of car sharing is simple: individuals gain the benefits of private cars without the costs and responsibilities of ownership. It is a group of people that share the same resource. The car sharing concept was actually implemented for years in Israel, in the kibbutz. Unfortunately its the only place where it exists today. Car sharing is the solution for these fixed fees and in addition will market the new cars across the country. The benefit from this new service is only positive and will help the citizens, the company and the environment. Better Place had already changed the Israeli way of thinking regarding vehicles. Its concept can increase the mind switch even more by adding this service in order to create better environmental conditions through sustainable transportation.
3 4
http://en.wikipedia.org/wiki/Car_sharing http://www.betterplace.com/the-opportunity-environment
will harm the environment, however; Better Place stated that more than 95% of the battery materials can be recovered and reused.
Economical The oil industry represented a market of $440 billion only in the US in 2008 and globally nearly $3 trillion in the same year. Research has shown that the global demand for oil has increased at an average of about 1% per year with a strong volatility of pricing. A shift to an electric transportation system based on renewable energy would inevitably result in a significant reduction in oil demand and potentially create one of the economic opportunities of the 21st century: The development of renewable energy, the construction of a new infrastructure to support electric vehicles, and the efficiencies of electric power for transportation provide significant economic opportunity for the countries and the individuals willing to take on the challenges. The shift to EVs also provides an opportunity for transportation cost savings in the future due to the stable cost of electricity relative to that of oil and the economy scale related to EVs production.5
http://www.betterplace.com/the-opportunity-economics
It has a growing solar power sector that stands to gain an important new
market for its green energy with the electric recharge grid.
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Israels need to be independent of oil as most of the oil producers are unfriendly to Israel.
Israel will be the first nation in the world that partnered with Better Place to have an all-electric car infrastructure. The reason Denmark was chosen is related not only to its small size but also to its citizens environmental awareness. Agassis vision is to move the world from oil-based transportation to a sustainable one. In order to achieve his goal, the company has created a strategic partnership with Renault - Nissan after announcing a Memorandum Of Understanding (MOU).This is a document describing a bilateral agreement between two parties. It expresses a convergence of will between the parties, indicating an intended common line of action. It is a more formal alternative to a gentlemens agreement. Under the agreement, Better Place will build the electric recharge grid and will provide the entire infrastructure whereas; Renault will provide the electric cars with swappable batteries. Renault-Nissan was willing to contribute over $1.5 billion in capital to see the vision turn to reality. The companys goal is to enable electric cars to sell for $5,000 less than the price of the average gasoline car sold in the US. "We environmentalists made a mistake," Agassi says. "We ask people to pay more to be green, and we should ask them to pay less." Agassi estimates his customers will pay no more for battery power than they would spend on gasoline to travel the same distance. The only way this could be possible, is by selling electric cars separately from their batteries just as petrol cars are sold separately from their fuel. Better Place will allow customers to pay incrementally for battery costs including everything that is related to the battery: electric power, battery life, degradation, warranty issues, maintenance, capital cost, quality and technology advancement. The company owns the batteries and the consumer buys a monthly contract to charge their cars. Better Place plans on decreasing the charge as the company will charge US$ 0.08/mile in 2012, then US$ 0.04/mile by 2015 and US$ 0.02/mile by 2020. In addition, the company believes that the price of cars and battery will decrease as more people will use electrical cars and the competition will increase. Another factor that supports the decreasing price in the future will be related to the raw material. The price of gas is going up whereas the price of battery is going down. The car market in Israel represents two million vehicles.7 Better Place will be able to provide electricity for two million electric cars without adding a single electricity generator or transmission line by using software that will oversee and
6 7
http://www.betterplace.com/global-progress-israel http://www.euractiv.com/en/innovation/better-place-ceo-biggest-obstacle-electric-cars-autoindustry-scepticism-interview-500451
manage the recharging of electric cars that connect with Better Place. The system which generates electricity only when its needed and sends it only where its needed, could reduce the number of new electric plants. An experiment which shows five electric cars hooked up at a charge post in the company garage used 20 percent less power than they would have consumed without smart-grid management.8 Most of the cars will be charged by night when there is less pressure on the electric system. Moreover, Better Place is searching for an Israeli utility company to purchase electricity from solar generators, to reduce his companys carbon footprint. The Israeli government has already approved a 600megawatt solar project in the country's southern desert that can power a halfmillion cars a year. 9 In order to succeed with this project Better Place needs to provide and cover Israel with at least 70 switching battery stations. Every 25 miles there will be a station. As the range of the car running on just one battery is from about 160 kilometers (100 miles) to 190 kilometers (120 mi)10 Each station costs about 1million U.S$. The entire project in Israel should costs 150 million U.S$.. This entire cost is equal to the price of one week of gas for the entire state of Israel. This project, equal to 7 days of petroleum use, will pay for the countrys independence on petroleum forever. The same proportion is equivalent to the US. (plus minus two days). A battery switch station using only 15 batteries has the ability to swap batteries for 2,500 EV's less than 1% in store for the number of cars. The company already raised 700 million dollars.11 In order for this project to be profitable the company needs to cover 1 per cent of the Israeli car market which is about 20,000 people.12 Better Place has bought from Renault 100,000 Renault Fluence Z.E and already sold around 70,000 vehicles mostly to commercial vehicle fleets.13
The offer
EV is Faster The electric car is two-times faster on acceleration versus a traditional combustible engine car equivalent. The electric car may not reach the top speeds of traditional gasoline cars; however, since EVs have no gears, instant acceleration is achieved. Improving Battery Technology
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The cost of lithium-ion batteries has come down by over 75% in the past decade, creating both a cost effective, and high-performance solution for EVs. The batteries are expected to perform for over 8 years and 2,000 recharges. If each charge gets 100 miles, the battery is projected to last 200,000 miles.14
Declining Cost Curve Over the last 35 years battery life has traditionally doubled every 5-7 years. In addition, the cost per unit of energy and number of cycles on a battery is doubling every two years. Moreover, the consumer benefits as some of the cost savings are passed on to lower the cost of the car. On a total cost per mile basis, Better Place cars can be 70% lower than a gas-powered vehicle in some markets, even after accounting for the amortized cost of the battery. Convenient Networks The most common type of charge spot will provide a standard charge, which will take anywhere from 4-8 hours to fully recharge a typical EV lithium-ion battery, depending on the amount of charge remaining in the existing battery. As far as battery switching, about 70 station will cover the country and in many cases the process will take less than a minute, less time than the average petroleum refuel. There will be no more trips to gas stations or the volatility of the charging price such as with gasoline prices.15 Customers simply swipe their membership card, which authenticates the car and subscription via the Operations Center, to activate the battery switch. The rest of the process is automated, similar to going through a car wash, so the driver never has to leave the car. In just a few minutes, a robotic arm removes the depleted battery and replaces it with a full one and the driver is back on the road.16 The company offers a subscription for 3 years that will include:17 Car + 25,000 kilometers per year = 32,000 Euro This car is 35% cheaper than the same car with petrol as cars are very expensive in Israel as the tax rate is extremely high (150%). Table 1: Presentation of pricing packages per month Kilometers per Up year 20,000 to Up to 23,000
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Up to 26,000
Up to 30,000
14 15 16 17 18
Price month
per 1,090 1
1,300 0.95
1,470 0.90
1,599 0.85
Is it profitable? The price of gas in Israel is 7.22 shekels per liter19 A family cars average performance is 10.1 kilometer per one liter of gas.20 20,000/10.1= 1980 liters of gas per year 1980* 7.22 = 14,297 gas expenses per year 14,297/12= 1,191 gas expenses per month 1191- 1090 = 101 saved shekel per month 101* 12= 1212 saved shekel per year
Is it a monopoly?
People that criticize the project are afraid that this situation where the company has no competitors will create a monopoly that will eventually harm the citizens. Better Place thinks otherwise. The company has stated that every country that joins the EV system has to adhere to two things:
All charge networks will be forced to provide open access to all other
charge networks at the same price across networks. This is in order to provide a fair chance for all potential actors in the market. In case of competition, all players will have the same connector and the connector has to be decided by the ISO (International Organization for Standardization) not by Better Place nor by its future competitors. The physical lock is gone. In the future Better Places customer will be able to charge the car with competitors and vice versa. The companies will transfer a fee to one another not the customer. This will be similar to the use of ATMs across banks with no fees for the customer.21 Better Place battery switch stations can swap multiple battery types of all kinds of electric cars as long as the battery can be removed from under the car. From day one, accommodation of multiple battery types has been a core engineering requirement for the battery switch stations. The company had made significant R&D investments to develop an adapter in the battery switch stations that can
19 20 21
anticipate and supply different battery types for different vehicles with different battery-to-vehicle connection mechanisms. Therefore, Better Place does not require one single standardized battery type. In fact, the only element that requires standardization is that the battery be removed from under the vehicle.22
SWOT Analysis Before launching an innovative idea, it is important to analyze the environment in order to evaluate the companys strengths and weaknesses in relation to the opportunities and threats the company might face. Table 2: Presentation of the SWOT analysis: STRENGTHS Hugh database Existing platform Improving customer service Support services Easy access for customers Well equipped cars Very Green
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WEAKNESSES Two projects rely on each other. Customers are not paying for their use
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OPPORTUNITIES Fixed prices Exposure to new clients Becoming even greener Customer satisfaction Strengths
Hugh database: In order to start a car sharing service, the company has all the information of the EVs in the company that are connected to Better Place Israel. Existing platform: There is no need for big investments as the platform and technology already exists. (website, cars, database, customers) Improving customer service: Today people are criticizing the companys business model as they are obliged to pay even when they dont use the mileage. This new services will provide them with the possibility for narrowing their expenses by offering the possibility for car sharing to potential new customers. Support services: The company is providing all EVs services and therefore, in case of a problem it will provide technical help for the renter. Easy access for customers: As Better Place will be known all over the country it will be easier to market the new service to the potential buyers. Well equipped cars: The driving experience is very pleasant as its smooth, calm, has a GPS that gives information about the battery and changing battery stations. Very Green: This service will provide people with the possibility, instead of using a taxi or renting a regular car, to use the greenest possibility.
Weakness Two projects rely on each other: Incertitude of the Better Place project, as it is an innovative idea in Israel could affect the car sharing project. If the project will not work the car sharing will not work. Customers are not paying for their mileage use: Today People are paying for unused mileage Opportunities Fixed prices: Users are already paying for the car and their mileage therefore, no extra charges are required. Exposure to new clients: One of the main reasons to do car sharing is to experience a new car. No doubt these EVs will create a buzz in the street once they are going to be all over the country. This way a potential client can try the service, tell people about it and maybe, when the time comes buy one of his own. Becoming even greener: Instead of people renting a car from the rental cars agency, they will rent the greenest car possible. Customer satisfaction: 11
Knowing that as a customer you have the possibility to share your expenses whenever you need to or want to will always create satisfaction. Threats Volatility of the electricity price. Price of electricity might rise. Competition Rental companies and public transportation. The SWOT analysis provides us with an optimistic evaluation of this innovative service.
Conclusion
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Will Better Place make the world a Better Place? Only time will answer this question. Personally I think it will. The biggest challenge the company has to deal with is the installation of a grid that will support an entire country. The nature of transportation as we know it cannot change until Better Place provides a complete new system. Nobody has ever tried anything even remotely close to the entire system Better Place is working on today. Some build electric cars, others batteries and charging systems. However, no one has ever even attempted to create an entire revolutionary transport system. There are electric taxis in Tokyo that are driving 180 days, non-stop, day in day out and are providing really good results. If this project is working with taxis, Better Place believes it will definitely work with private users as well.25 If this effort will succeed, Israel will be the first nation in the world that will have an all-electric car infrastructure that will free the country from gas consuming. The company will continue to grow and spread in other countries while creating better environmental conditions through sustainable transportation. Today, Better Place is in communication with many countries, carmakers and other potential partners around the globe in order to expand their project worldwide. Even if for some reason this project should fail, it has already succeeded in changing the global way of thinking regarding vehicles and transportation. .Better Place has created a revolutionary concept of human transportation and greatly increased our awareness of the environment and the various possibilities of improving how we treat planet earth. In this report we are suggesting a solution to the company for its main criticism, the subscription package for three years - Car Sharing. This will provide Better Places customers with the possibility of sharing their expenses with others. In addition, this service will promote the marketing of new cars across the country and will probably attract new customers. The benefits from this new proposed service are only positive and will help the citizens, the company and the environment.
25
http://www.euractiv.com/en/innovation/better-place-ceo-biggest-obstacle-electric-cars-autoindustry-scepticism-interview-500451
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Web Sites
Israel gears up to go electric: By Gavin Rabinowitz (AFP) Feb 12, 2011
http://www.google.com/hostednews/afp/article/ALeqM5hywFVhqyu6QVnz6NcTQxhgsu8YIg ?docId=CNG.f6fcd5bb2a7f891c8156a12d7845d240.c11
http://www.betterplace.com/the-company-leadership-detail/index/id/shai-agassi
http://www.betterplace.com/the-opportunity-environment http://www.betterplace.com/the-opportunity-economics
Better Place - Better Place opens first electric vehicle demonstration center, 11 Feb 2010
http://www.betterplace.com/global-progress-israel
http://www.betterplc.co.il/default.asp?catid={220A159B-BA86-4C72-8CA9AC77D98EB8B2}
Better Place CEO: Biggest obstacle to electric cars is auto industry 'scepticism' -13 December 2010
http://www.euractiv.com/en/innovation/better-place-ceo-biggest-obstacle-electric-carsauto-industry-scepticism-interview-500451
Charging Ahead With a New Electric Car, Joshua Hammer, Smithsonian magazine, August 2010
http://www.smithsonianmag.com/specialsections/40th-anniversary/Charging-Ahead-Witha-New-Electric-Car.html
http://pcworld.about.net/od/softwareservices/Catching-up-With-Shai-Agassi.htm
Shai Agassi: A Better Model? Common wealth club Jul 23, 2010
http://www.youtube.com/watch?v=Hk-aVB7LgFI
http://www.msnbc.msn.com/id/3036789/#40471407
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http://www.betterplace.com/the-solution-batteries
Are Electric Cars About to Deliver Electrifying Profits? By Wade Slome Wall St. cheat sheet, December 16 2010
http://wallstcheatsheet.com/trading/are-electric-cars-about-to-deliver-electrifying-profits2.html/
Better Place unveils Europes first battery switch station in Denmark 28 June 2011
http://www.greencarcongress.com/2011/06/bp-20110628.html
http://www.kml.co.il/
Cnet Australia- Better Place's electric car plans, brilliant or nuts? By Martin LaMonica on April 24, 2009
http://www.cnet.com.au/qanda-better-places-electric-car-plans-brilliant-or-nuts339296126.htm
Better place blog: can our switch stations accommodate different battery types? By Mirko Kerschbaum, Dec7,2010
http://blog.betterplace.com/2010/12/myth-buster-can-our-switch-stations-accommodatedifferent-battery-types/
Promoter of electric cars sees global change, associated Press, 01.29.11 Israel Business.
http://www.ynetnews.com/articles/0,7340,L-4020489,00.html
http://en.wikipedia.org/wiki/Car_sharing
Carsharing in Europe and North America: Past, Present, and Future, by Susan Shaheen, Daniel Sperling, and Conrad Wagner ,Summer 1998
http://76.12.4.249/artman2/uploads/1/UCD-ITS-RP-98-14.pdf
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http://www.betterplc.co.il/default.asp?catid={5BFEB3E8-E777-4F8B-8A3D71BE7B826A33}
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