Saturday, April 11, 2009

Exciting Infrastructure Support for Plug-in Hybrid Electric Vehicle (PHEV) Adoption

Slowly but surely innovation in the automotive industry is pushing toward PHEV technology. On a recent trip to Shanghai, I spoke with the CEO of Ford, China. He believed the PRC officials in Beijing were going to leap-frog the U.S. - going straight from combustion engines to PHEV technology through blunt force (as is typical in China). U.S. national policy seems focused on providing incentives for consumers to purchase PHEVs (mostly in the form of rebates), and putting a gun to Detroit’s head by forcing PHEV innovation with strings attached to the bailout money.

Some controversy about the actual mpg performance of existing models has questioned the economic savings at the pump. Several DOE tests done under real-world driving conditions showed only 51mpg performance for vehicles that were capable of 100mpg performance under lab conditions.

Despite the challenges there are several firms who are locking-in their first mover advantage in the U.S. urban markets they think will be early PHEV adopters.

Two top competitors in this space are starting their efforts in California. Coulomb Technologies has plans to install 500 PHEV charging stations along California highways in 2009. Better Place is focusing on charging stations that also offer battery swap services. A San Jose news report stated that a Coulomb’s “ChargePoint” charging station was installed in twenty minutes and cost only $2,000 dollars (paid for by Coulomb). The unit is only three-feet high x one-foot wide and in this case they had strapped it onto a modified street lamp. Coulomb customers who have an account, sign-up for a access key, that when swiped at a charging station, opens the door to the outlet. Once plugged in, you close and lock the door (so that no one is tempted to unplug you). What I found fascinating was that Coulomb is emulating the electric utilities’ rate model by charging customers a “subscription fee” which blends the cost of the electricity that they consumed at the charging station with maintenance costs, and the up-front capital cost it took to install the station. Most importantly, the units have bi-directional metering so if your car is plugged into a charging station at a parking deck during peak hours, Coulomb’s software will stop charging your battery during those peak hours to help the electric utility “peak shave” demand. There is a revenue sharing business model with “hosts” who buy the charging stations, although this isn’t released. They have also integrated with Google Maps to not only show the location of charging stations in their network, but through their network software they can determine which station is occupied at a given moment. This will allow customers to plan their route and choose the closest unoccupied station. The company has already formed a joint venture with a German company to distribute Charge Point stations throughout Europe, the Middle East, and Asia (EMEA). Although GridPoint’s V2Green has through their partnership in the “Pecan Street Project” marked Austin as their target. There are two PHEV vehicles on a proof-of-concept project with Austin Energy to determine the value of PHEVs as load-management resources. It will be interesting to see if these two California players make inroads in the Austin market in the next 3-5 years.

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Chris Smith said...

Obama has set the goal of bringing one million PHEVs to market by 2015. While this initially sounds like an ambitious goal, when put in perspective this would only make a minor dent in the US' vehicle fleet. Currently there are about 250 million registered vehicles in the US. While one million PHEVs would certainly help reduce costs and would incentize the construction of infrastructure to support such vehicles, I think we need to think more realistically about what scale of penetration is needed to make a significant mark in reducing auto pollutants, particularly CO2.

Nirav Shah said...

We are getting ahead of ourselves by prioritizing support infrastructure for PHEVs. Instead, attention should be focused on improving the performance, life, durability, and cost of lithium-ion batteries in order for PHEVs to be competitive and marketable. Industry experts believe that the cost of producing a lithium-ion battery is three to five times higher than it should be, making PHEVs much more cost prohibitive to the average consumer. The weight and volume of lithium-ion batteries – the battery in the PHEV Chevy Volt weighs approximately 400 pounds and is six feet tall – is significantly hampering the performance of PHEVs. Additionally, lithium-ion batteries for PHEVs are not durable enough to last for 15 years. The success or failure of PHEVs will be highly dependent on the performance of lithium-ion batteries.

If the United States is not dedicated to having a competitive advantage in the development and production of advanced lithium-ion batteries for PHEVs, we might as well not pump any more money in the auto industry to just let them fail. Currently, the major producers of lithium-ion batteries are all abroad with China, South Korea, and Japan leading the pack. However, President Obama is making an effort to get the United States into the race. He has dedicated $2 billion of stimulus funds to the development of advanced battery technology in the United States. Additionally, the President has given the Department of Energy authority to loan out $25 billion to U.S. firms developing advanced battery technology.

Before spending money on support infrastructure we must first prioritize advancing lithium-ion battery technology to the point where PHEVs are competitive – on both price and performance – with traditional fuel-powered autos. Furthermore, if this is done within the boundaries of the U.S., we may even see the resurgence of our domestic auto industry.

Jeff Otto said...

In response to Nirav’s comment above, nowhere in my post did I mention “prioritizing support” (I assume you mean government subsidies) for PHEV infrastructure. Please read it again. My discussion was a brief summary of private sector investments, namely two California companies who are looking to establish a first-mover advantage in supporting this emerging technology. As with any free-market, private sector investment, there will be winners and losers. The risk that Coloumb Technologies and Better Place face is a slow drawn-out transition to vehicle electrification which could be caused by a failure of battery technology to mature beyond today’s weight and discharge limitations as you suggested. Either could likely fail as their aggressive burn-rates eat through their venture funding as they waiting for this transition to catch up.
But there is a “chicken or egg” problem that these two firms are recognizing and positioning for. Residential charging stations are not going to be enough should vehicle electrification take off. Battery-swap stations like what Better Place is proposing, or networks of fast-charging stations in public places will be needed to meet the convenience that today’s drivers demand. A commonly known principle in competitive strategy is that if you are in an emerging technology field, steer the standards in your favor. An example is Better Place’s business model. It is very different from Coloumb Technologies and offers several tradeoffs. Whereas Coloumb is “battery agnostic”, Better Place has developed open standards that they are advocating to battery and vehicle manufacturers to design products to their standards and will open their inventory to improved battery capacity and dischargability as the technology becomes available. They are currently sourcing lithium-ion batteries from both NEC and A123 Systems. Another key differentiator is their battery swap stations. Better Place claims to have automated battery-swap stations that can swap a depleted battery for a fresh one in less than three minutes. They have already installed 900 charging stations in Israel (their primary test bed) and are unveiling their first battery swap stations in Japan this year . Locking-up the Israeli market with Renault-Nissan in 2008 was a big win for the company, and Israel is the perfect market for vehicle electrification given its relationship with its oil-rich neighbors. Better Place is aggressively pursuing partnerships with other vehicle manufacturers who agree to design electric vehicles to their battery-swapping standards. China is looking to leap-frog the west by going straight to PHEV manufacturing. Build Your Dreams (BYD) and Nissan are already producing PHEVs for the Chinese market , and Better Place is courting Beijing to be the infrastructure provider .

Garthwaite, Jose Earth2Tech:
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McGirk, Tim Time Magazine:,8599,1705518,00.html