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Interview conducted by Kristian Steenstrup in February 2009.
Kristian Steenstrup: Shai, did the concept of electric cars and environmental issues give you motivation to leave SAP? Shai Agassi: Well, I will give you the basic chronology: In the middle of 2005, I was asked two questions, one by Hasso Plattner (one of SAP's founders — Editor): "Would I like to be the next co-CEO of SAP?" and, interestingly enough, I said, yes. I was asked a different question when I joined a group called the Young Global Leaders, which is a part of the World Economic Forum, who asked me how I was going to make the world a better place by 2020. I started thinking about the next version and the next version and the next version of SAP, and none of them made me feel like I would make the world a better place by 2020. I started thinking of the question, "how would you run a country without oil?" as the answer for "how are you going to make the world a better place?" I would go to the Young Global Leaders meetings; I'd read at night. It was sort of the stuff I did to get my mind off the 100 projects that I was doing at SAP at the time. Do I miss SAP? No, I think it was the best thing for me to do this, because I have found my passion. I wake up every morning full of life and full of energy to do this. I think SAP has been one of the most instrumental tools to get where I am right now, the ability to do something like that. Kristian: What will be the things that come from that experience at SAP, global activities? Shai: The understanding of how you take the same concept and replicate it across multiple regions in the world, (and) the concepts of key processes that need to be replicated. A lot of learnings are from the industries that I have worked with. Most of the industries that we are now interacting with, whether changing or disrupting or evolving, have been my customers (at SAP). The oil companies, the utilities and the car companies have all been my customers, so, I have a deep understanding of them. But I also have a deep understanding of the cell phone industry that we served and the financial services industry that we served. So, a lot of that understanding comes to bear right now, but I can't tell you that this is something that is the same. Better Place is not a replica of SAP in any shape or form. We didn't take a lot of people that worked with me at SAP. We took a very small group of people, tiny in all measures. Out of the 100 people, plus the 300 contractors that we have around us, maybe 10 people worked at SAP. Kristian: Electric cars were right there in the beginning, 1898. Electric cars held the land speed record and then slowly they all fell away. And by 1914 or so, we had petrol engines in front of the car, and they were driving around spewing smoke. Why do you think it will and not go off on a tangent again and fail as electric cars have done in the past? Shai: Actually, for the same reason that you have specified, it's easy to build an electric car. What Better Place brings into the discussion is convenience and affordability. If you put the Better Place network in place, an electric car becomes more convenient by definition of the fact that you stop less times to fill it up, to switch a battery than you would to fill up gasoline in a gasoline car. The biggest inconvenience that we have always had is the how long we stop, and how many times we do it? So, if we can guarantee in a contract that you would stop less times, and it would take you less time each stop, we guarantee you a convenience service-level agreement. And if we are able to sell you the car at the same price or cheaper on the mile, then we have provided you affordability. Kristian: You have mentioned oil independence before, and there's been quite a lot written about it from a political point of view. Your background and some of the background of the company is tied to Israel. Should people view this as an Israeli company exporting technology to the world, or do you see yourself as an international company where origins are a coincidence?. Shai: We pitched the model to six countries when we started. Israel picked up on it first, because it's - let me put it this way: The oil lobby in Israel is not that strong these days. Israel is in an easier position vis a vis oil than the U.S. Most people don't recognize that. U.S. oil imports are on order of a 100 times more than Israel, so, the problem in the U.S. is aggravated by a factor of 100. The U.S. suffers from the same problems. It has military presence to secure oil; it has an emissions problem. There are 16,000 people (each year) dying from respiratory problems in the U.S., coming mostly from exhaust pipes. Tail pipes kill more than bumpers, more people die out of what comes out of the exhaust than out of car accidents. So, the U.S. is aggravated by a factor of 100 above Israel, and yet, it is easier to do it in Israel than it is in the U.S., mainly because of the complexity of the country, the size of the lobbies, and the variety of different factors that come into play. But this problem is a universal problem. Very few countries don't have an oil import problem or an emissions problem. Kristian: The way the oil markets change, particularly with the price of oil coming down rapidly, does that change the whole economic model and sideline things for a few years, until it gets back up to expensive? Shai: If oil came down as a result that we found more oil, then the answer would have been, yes. Oil prices came down as a result of the fact that demand for oil went down by about 5% to 7% in a very sharp decline of the economy. Now, we are not assuming that the economy is dead forever. But even if we accept that the current state of the economy is a new state that we need to expect for lets say a long period of time, we need to ask ourselves, how long is the 5% decline going to last in the current economic state? We are adding (globally), roughly about 50 to 60 million cars on the road, about half of them are net new cars, so Chinese cars — 10 million cars that will come into China this year are not replacement for an old cars, they are net new cars coming on the road. The Indian cars that will come in, the Russians, the Brazilians are all net new cars coming on the road this year. So, roughly about 25 million cars getting added each year, we have about 750 million cars right now on the road, so, 4% are being added every year. A 5% decline in the global demand is about a year to a year and a half of net new cars joining the roads. So, within a year, we are getting back to the same demand. Even though the average demand per car has gone down, we are going to get to the same absolute demand of barrels per day. But at this price, we are depleting the easy oil, and we are not digging new holes. So, at this price, which you are going to see that, within a few months, Russia will stop supplying, within a few months, the Canadian sand oil — all the shale oil — will stop supplying. Even the Mexican oil is in danger, because of deep sea oil (costs —Editor). These prices are not conducive for a new exploration and production. So, when the demand comes back, we are seeing a whiplash effect. Effectively, the prices will go up. It's not going to go back to where it was; it's going to go beyond where it was before. Even worse than that, imagine if three years from now we've added about 4% each year, adding 12% of demand. Let's say the stimulus works, everything comes back your readers are happy, what happens, you are going to add the 10% back on top of 12%. We are going to add 20% to 30% demand of oil in a period of roughly about two years' time, right after a period where we couldn't dig a single hole, because the price was down. The effect is a devastating effect on the global economy. We are going to get the price of oil again to $150 to $200 per barrel; the economy goes down in a tank again. It's short spikes, followed with long recessions and they are going to get aggravated more and more and more. Kristian One of the differences in the concept, though, is, rather than as many have done before — essentially trying to market electric cars to consumers and selling them car by car — you are really selling a whole infrastructure concept on a country-by-country basis. Would that be accurate? Shai: We're selling conversion of the transport energy on a country-by-country basis. The infrastructure is a manifestation of a component of the entire system. You cannot get cars going in a country where the infrastructure is not in place. You also need somebody that holds the customer relationship, an operator. You need somebody that takes the financial risks of the system, the financial risks of the batteries; who buys clean electrons; who puts all the system together; who brings in software that brings predictability to the OEM. So, it's a complete system, it's not small. Let me install infrastructure across the country and then it will happen. It's a "Whack-A-Mole," the game where these moles come out of ground and you whack them all. Kristian: This current administration seems to be more focused on the energy sector but in terms of electric power and renewable resources. Do you see that you are in the right place at the right time with this changed administration and the way the U.S. is moving? Shai: The model that the current administration is plugging is actually an interesting one, because they are coming in saying that we need to change the way by which we deliver electrons to homes, to consumers, to businesses, and they are going down the path of renewables, which I've seen in other places. Denmark and (the) U.K. are going down that path, and to make a difference, they are basically saying that we need to cut about 20%, 30% maybe 40% of our coal and make it into renewables. The problem with renewables is that most renewable types of generation are "spiky" — they are intermittent; they come at night. Because wind, which is the primary source that they are talking about, is usually a night effect, and not a lot of people will like to sit at night watching ESPN going on and off and on and off. So, you need some sort of intermittent consumer to match an intermittent supplier. So, as a result of that, they all came back and said we need a ton of batteries. But that's too expensive to buy, unless you put the batteries inside a car, and you use the batteries to drive the car, in which case, it's becoming cheaper than oil. So, they started from wind and came back to the electric car. I started from the end of oil and came in to the electric car, and joined it to wind. But any way you look at it, it's the same system in a broader sense. There is, of course, much more receptiveness in the current White House than there was before. They are also coming in at a time where, if I had told the previous president, when he came into office that the price of oil would be at $100-plus he would laugh. This president has already seen it. Kristian: The economic stimulus package (the ARRA) includes some substantial expenditures for the electricity grid. Do you see that as being something very beneficial for your projects with the assumption that this will be rolled out on a large scale in the U.S. at some point? Shai: We don't know yet. I mean, the stimulus package today is in big buckets. We don't know how these big buckets translate, because you could look at the electric grid modifications and think of them as the backbone modifications. You could think of them as the edge modifications for electric cars. We don't know yet where it's going to fall so it's hard to say right now. But I can tell you that if the U.S. was focused today on solving that problem I just described to you, the spikiness of the oil price. Oil spikiness can destroy the U.S. economy? And then it needs to get to a point where more electric cars join the road than gasoline cars. To get to that point you need a massive project, this is the Manhattan Project of the 21st century. Kristian: One of the characteristics in some of the markets you've gone to is there is a very dominant or exclusive power company in the country. Does that change how you engage with people, does that complicate things for you, or does it make it easier because if there is commercial competition? Shai: I think that you will see, at the end of the day, that something happens in the cross section between three, maybe even four entities: the energy companies, the utilities and the car companies. So, this is somewhere in the middle between utilities, which are regulated electron vendors, and oil companies, which are unregulated energy providers for cars. Don't forget, they are in this current business; they are not just going to walk away. So, if you sold miles in the form of gasoline, you are not just going to say "hey, you know what? I'm not interested, in this market that sells miles in the form of electrons." Kristian: From your perspective, though, would things like gas stations be attractive real estate in partnership with an oil company? Shai: Absolutely. There is something beyond petroleum. I don't see Shell coming out in 2018 and saying "you know what? It's been a great run for the last 250 years — we ran out of oil. We are going to distribute the pipes among our shareholders, thank you very much, we are out of business." These guys have to be in the next business, I have never seen a company, a major company — I mean these guys are in the top 10 companies in the world — that will just say, "we'll run out of business, who cares?" They always go to the next business. Kristian: On the concept of partners, have you an exclusive automotive partner? Shai: We currently have partnerships with Renault-Nissan. They have one CEO, but they are two very different companies. There is a lot of value in dealing with Renault in the beginning, as we both had to share a lot of thoughts in the early stages, and there's a level of confidence in sharing information that was very valuable to both of us, the fact that we knew we could go into a room and what happens in that room stayed in that room was critical. We've had other conversations with other car makers as they have had with other potential operators we know, both of us knew that in some point in time that we would have a second carmaker and they would have other business models in other places. It will happen naturally within the next months or years. Kristian: How far down in the rollout do you want to be before that starts to happen? Shai: It will happen, it's natural. I mean what happened in the early days, was that most people thought this was crazy, and as we get more and more and more people to understand what we are going to do, we get more credibility and more locations, and it becomes a segment of the car market that they find hard to ignore. Kristian: Unlike selling a product to a consumer, which is competitive and they've got alternatives, some might view your plans in Israel and Denmark and other places to be exclusive to you initially, a monopoly in essence. Shai: We are competing with the biggest monopoly on earth, oil. You've got to remember that, because we are an alternative product to a product that already exists that has a 100% market share. It's kind of funny to call us monopolistic, when we haven't sold the first car. What we ask governments to do is to force everybody that comes into this business, the electric recharge grid networks, to be bound by international standards, ISOIC standards, so we don't use a connector that is unique, that will lock anybody out. And we will provide open access across networks, because we want to optimize for speed of adoption. So, I'd rather have a second competitor that comes in and installs more of the network with their own money but with the same connector. In everything we do, we are working on open standards with standard bodies, so we are not locking anything out, but unfortunately, I find it hard to find a second competitor. It's not that we don't want to have a competitor. We'd like to have a competitor, but we'd like to have a competitor that pushes on the same vector — puts a similar network, puts the same kind of open access — so we can connect to one another. Kristian: So, in terms of the detail, you are more inclined to open standards to increase adoption, rather than to protect IP or maybe derive revenue from licensing. Shai: We are going into a market today that is $3 trillion at the pump. That's what we all pay. If I had to choose between getting to 10% of it and having nine competitors, each one taking 10%, I would rather have competitors. But we will only get our fair share, even though we were the first movers, and we fought and everything. At the end of the cycle, we'll only get our fair share. Kristian: Do you draw directly on technology and experience from other sectors? Shai: Yes, a lot of our systems are effectively modifications of telco systems from CRM billing service, installation, management, asset life cycle management. Kristian: Do you see similarities then in things like roaming charges and out-of-area billing? Shai: I'll give you an example: Hypothetically, you could drive in (Las Vegas) on a contract. Vegas is about a 15-mile-radius city, and you have a smaller battery inside. But on the edge of Vegas you might pull out your battery and put in a long-distance battery. In theory, you pay roaming charges as long as you have not returned that battery to the station. So, it would be a convenience thing. You'd go to L.A.; you'd drive a lot more; then you'd come back three days later; you'd drop the battery and take back the 50-mile battery. Kristian: But when I plug-in in L.A. whose power am I using? Shai: You never pay for the power; we always pay for the power. Better Place buys power; we sell miles. We are just like a cell phone company in the sense that if you are using a certain tower you don't pay for that bandwidth, nor do you pay for the electricity that powers the router at switch; you pay for minutes. The electricity is bought by the infrastructure supplier, not by the consumer. Kristian: So, to use your example, if I drove from Vegas to L.A., when I get to L.A. I have to find a Better Place location? Shai: Your GPS will put all the network spots on your SatNav. It will show you where to charge, where to connect and what we are hoping [for] in that agreement. That's why we said we want standards, is that if there is a second network, an "almost Better Place" — whatever it is — then you can come and plug there and we would do the reconciliation with them: "My subscriber used your network; I need to pay you something." Kristian: With some of the technology that is being installed or prepared for the vehicles themselves, are there other significant technology investments that have to be in the vehicles? Shai: Yes, this is huge distributed software challenge. We have a computer in every car that knows a lot of stuff about you but doesn't tell us. I need to know when you came into a location, what's the probability that you are going to leave that location, and when, so I can distribute the charge. Kristian: So, there is analysis of human behavior and movement? Shai: Yes, I come into this office, it's 8 o'clock in the morning, it's every morning Monday through Friday, and the computer knows it's the office. It says Shai's at the office. Shai, unfortunately, rarely leaves until 7 p.m. at night, so I don't need to charge it immediately, because he's going to be here, unless it's Wednesday. For some odd reason on Wednesday, Shai leaves at noon and comes back at 2 p.m. — won't tell you where he's gone, but we know that he goes 50 miles in that period. So, I need to make sure that his battery is full on Wednesdays. Kristian: In that scenario though, doesn't Better Place then create a specter of "Big Brother"? Shai: We don't hold that information. The car knows, but not Better Place. The same as your cell phone, your cell phone company theoretically knows everything about you, but it doesn't share any of that information — the same as your OnStar system. Your OnStar system allows you to decide how much information they can get at an event, so you can call up and say "I've locked my keys inside the car." On Star asks you for information and ensures that your identity is protected and then says: "Now that I know its you — you've confirmed it — I can open up your car for you." Those are the kinds of things that can be done, that have been done for years now on car services. Kristian: There is a lot of money being spent rolling out an intelligent grid, smart meters. Do you then have a complication where a smart meter program for electrical outlets and managed electricity is already in place, and you come along some time after with a different system? Shai: Look, most of it will happen in the next three to four years. So, we'd love to piggyback a lot of that effort. If you send a person from a utility to install a smart meter, then why not install our smart connector as well. So, there is a great ability to do this at the same time. We have to remember that some of the people miss the point of these connectors. Let's say a home connection on this car will be between 3 kilowatts and 6 kilowatts per car, you have two cars in the household. So, you are looking around somewhere between 10 to 12 kilowatts — it's about five to six times more than your home. You can do smart metering, when you have a ton of appliances that are all small slivers of usage. So, I can decide whether I want to turn it on. If I turn on the TV, I might not want to turn on the heating right now, or I might not do the dishes right now, if I am doing the washing at the same time. But they are all slivers that are in the 10% to 15% of consumption that you can play with — 10% to 15% to optimize. But if you have one appliance that is six times bigger than the rest of the home, then it's not a lot of optimization that you can play with that. Kristian: There is from a timing perspective, though, isn't there? Where you selectively time, when you are charging and maybe slice that? Shai: If they were all piled up at the same time — 8:15 in the morning or 5:15 in the afternoon — they would destroy the grid. But between them, if you spread them, they are meaningless, they are 10% of the grid, and that's what we can do, because we know stuff inside the car. The knowledge inside the car is more important than the knowledge of which appliance is working right now or not. It's "how urgent is it to charge this car right now," versus my neighbor's car, at this point in time. Kristian: Do the utilities then own and manage that demand, that is, demand management? Shai: They can't do it, because utilities will have a very, very hard time managing the micropayments around this charge-stop, charge-stop, charge-stop, whereas, if what the utilities love to get, as with Dong Energy (a Danish utility — Editor), is one company that all these electrons pushes them to the time when Dong tells us to use them. Kristian: So, the utilities are controlling the power dialogue with Better Place, but not with the consumers? Shai: Right, what utilities will do is say: I have 10,000 cars you can charge right now; sorry, I have 9,700 cars; sorry, I have 8,000 cars; no, I have 1,800 cars; I have 2,400 cars; I have 10,000. Every few seconds I get a message that says, here's how many you can charge, and they let us figure out which ones to turn on and off. Kristian: They then would be able to, through, Better Place, have a demand management capability that they wouldn't have if they were doing it directly through the meter. Shai: That's right. Kristian: Now, further along that theme, is there a potential then to use this as vehicle-to-grid (This describes the process of discharging power from the vehicle's battery to provide power to the network — Editor) and to use it as a contributor to load stabilization on the grid? Shai: You can, but you have to remember the economics. The biggest cost in our model is the cost of the battery depreciation. So, effectively, every time we use a kilowatt hour that went through the battery and out of the battery, we have sort of taken a coupon of that kilowatt hour off the book. The cost of the coupon is about 25 cents a kilowatt hour roughly. The cost of a kilowatt hour is about 5 to 10 cents. So, the cost of buffering is five to six times more than the cost of the actual element you are putting in the buffer, which means that it is very expensive to do this buffering for no good reason. So, will you use vehicle-to-grid in exceptional cases, when the price of that kilowatt hour for the grid will be more than 25 cents. When does that happen? When I have a spike of immense proportions, and I need to start a new power plant just for that, for a very short period of time, a very, very short period of time and that's about 40 hours a year or when I don't have a power plant, and the alternative is bring down the grid, which happen once every few years. Those are the two cases where you will see vehicle-to-grid. The other cases, all you'll see is a buffer of vehicles that will go on-or-not, on-or-not, but they won't send in reverse. Kristian: But their demand management for load stabilization is a benefit to the utility anyway. Shai: Right, it's a buffer of intermittent consumers more so than a buffer of intermittent suppliers that is interesting to the grid. Kristian: Which is why you would then be complementary to wind (generation), because the variation has a destabilizing effect on the network? Shai: Absolutely. Wind power represents 20% of capacity in Denmark today, but, for example, the U.K. government has decided on a 40% target for wind. But they won't even get there in 20 years. Their goal is 40% of the full generation will be wind in about 25 years. The problem is that 40% without batteries. We don't know what to do with it. It's going to be a waste. Kristian: Why haven't we seen, do you think, a utility do this itself? Shai: Because it's impossible for a utility to do. Utilities are regulated entities that sell electrons, and the business model here is not to sell electrons, but to sell miles. If you sell electrons, you need to somehow justify installing public charge spots to people who buy electric vehicles. Once you can't do the battery exchange, you are stuck with the notion that, if I drove beyond the distance of the battery, I'm stuck and waiting to charge the battery, and it's a long, long, long, long wait to charge a battery. So, it's not a car; it's less than a car. It's a strange thing that has four wheels but doesn't really behave like a car. And if you do that, you can only sell electrons, you can't sell miles, because it's not a comparable product. And if you did get to a point where you sell miles, then the regulator would jump in and say "sorry, you can't sell something, because you sell electrons." Most utilities are not allowed to sell something else. They have the infrastructure, but they are not allowed. It's the same reason they don't sell you your phone; it's the same reason they don't sell you your cable. Kristian: The focus has been on personal transportation, but oil is consumed in other areas. Do you see this model as workable in areas like trucking or corporate fleets or defense. Indeed, because corporate fleets or defense or government might actually give you a more immediate large-scale attack, why not start with commercial fleets or trucks or defense? Shai: A sense of urgency. My view is that it is probably easier to do on public transport, taxis and buses. The Beijing Olympics had electric buses with exchangeable batteries, it sounds familiar. It's easier to do with vehicles that have no volumetric preconceived notions, the main problem with batteries in electric cars is volumetric. It's where do you fit the battery and still keep it looking like a car. So, we attacked the toughest problem first. Maybe that's my SAP legacy — to go after the toughest problem first — but the notion was that if you can solve this, you can solve everything else. Kristian: You said that you want to keep it looking like a car. Do you think that is a main factor in consumer adoption? Shai: It's got to look and feel like a next-generation car, but it still has to be — the key word is car, and not something strange. Kristian: It seems to be that applying technology to these problems of environmental issues or oil dependency is an enabler of change. Without applying some of the new technologies, it's pretty hard to get this stuff done. So, would you say that technology is going to save us? Having got ourselves into this problem with Industrial Age technology, that we are going to have Electronic Age save us from what we have done? Shai: Yes, to a certain degree. If you think about what we do in this digitization of energy, we are going from delivering molecules to delivering electrons, and we have seen that happen in so many businesses before. We've seen it in music; we've seen it in information technology. And we used to send invoices around on paper. Today there is almost nothing being sent around — it's all electronic. Trade was done that way, and during that transition. It is almost hard to imagine that transition end state, when you started, but it happens much faster than most people believe. Kristian: So, like moving from paper to electronic documents, you had the fax machine for awhile? Shai: Yes, absolutely, an exact metaphor — that was the hybrid vehicle. We took molecules and converted them to electrons and got molecules at the other end, because we wanted the familiarity of holding a piece of paper. It's the same in music. If you remember when MP3 showed up, Sony's reaction? remember when Sony used to be 100% of the music player business, called Walkman? Sony's reaction to it was to create the hybrid Walkman, which was a CD player that you had to master your MP3 songs onto a CD to play them on your hybrid player. Which didn't last very long, but was cool. I bought one, because I thought, "hey I can put all my music collection from my computer and have 5,000 songs on a CD." And I thought it was cool for about two months. The notion that suddenly every kid in the world will have two-and-a-half hard disks and 16 Gigabytes worth of memory in their pocket for nothing else other than playing music, you couldn't even imagine it. But it took a span of three to four years to tip the market. Same thing on e-mail; same thing on everything else. Kristian: Along the way in the music industry, to use an example, record stores started to become a little bit superfluous. Shai: Yes, because they delivered molecules. Kristian: Who gets eliminated from the value chain as we move through the Better Place model? Shai: There is no doubt, the guys that are in the molecules business get less demand for molecules, but the issue here is that we have 750 million players that are going to be on the roads for a long period of time. So, how long does it take for them to be superfluous? Probably another 15 years, at the very best. Now the interesting thing is, what happens in between? What happens to you if you are in the exploration production business, what happens to you if you are in the refining business? Can you start a new refinery if you know where the market is going? I mean how does this market end? We have never had a $3 trillion to $4 trillion market tip, its never happened. This is the first time we are going to see a $10 trillion tip? if you add up oil, gasoline and cars and all the services that happen around them it's a $10 trillion a year market. We have never seen something like that tip. Kristian: You pointed out that in contrast to Israel, you have a lobby group in the U.S. making resistance to this change. Shai: They are not as strong now. Kristian: It's pretty high stakes though. You get a multi-trillion-dollar industry with probably a lack of enthusiasm to what you are doing. Shai: Actually it is interesting. I am finding that they are having a lot of enthusiasm for what I am doing, and I think they got scared by the same oscillation that we are seeing right now. There is nothing worse than this up-down cycle, because, if you remember at $147 a barrel they were brought on their knees to Congress to explain why the price of oil has gotten to $5 a gallon, and all they could say was: "Guys, we got nothing to do with it. We ran out of it. What do you want from us? We are trying to dig as many holes as we can, are trying to supply everything that we got." Now that is goes back to $40, no one is bringing them back to Congress and saying take some more money, dig some more, dig faster. So, at $40 they have got to stop some of their production. You know what will happen, as soon as they stop some of their production, they will get called back to Congress and asked, why is it at $100? So, they are in the worst position possible. If you look at Shell, only 15% of Shell's business is gasoline at the pump, 85% of their business is not cars. That business is pretty stable, it's natural gas, it's a variety of other different businesses, which is fairly stable and is not negatively perceived. When you deliver natural gas to a home to heat it up, nobody calls you evil, but when you drive next to a Shell station, and the price is too high, you say these guys are evil. They would like to get out of that business, they would like somebody else to take that business, because it's the only business that is oscillating, is not predictable and makes their brand look bad. Kristian: Do you see that would continue if they stayed in a fossil fuel business, but just not in automobiles? Shai: They would love to get out of automobiles, which is so consumer-intense, so emotional, over a period of time. I don't say that they are standing in line to get out of that business today, but if they can find a way over the next 10, 15, 20 years to get out of that business, then I think they will be happier. Kristian: Do we then see the attention turned to utilities? In the power generation, wind would be ideal, solar would be ideal. But the reality is that most electricity is coal fired. So, are we replacing one pollutant with another? Shai: Yes and no. There is a difference in that, with renewables, the more you build, the cheaper it gets. So, we are going to put on line so much demand, about 10% new demand that comes only in the form of renewable and that 10% would bring the price down to be more-competitive than coal. Because we only buy renewables. So when we put a car on the road, we buy a power purchase agreement, a long-term power purchase agreement of the equivalent size of the number of cars that we have put on the road that month from a renewable source. Kristian: So, it won't lead to increased fossil fuel burning or nuclear? Shai: Actually it is the other way around. Use Israel as an example. When we get to 2 million cars we've built a 2 gigawatt solar plant by that point. Well — we didn't — somebody else has. When you've got to 2 gigawatts of solar you are at sub-5 cents per kilowatt hour in your cost to construct. You started at about 9 to 9.5 cents per kilowatt hour, and, as you build more and more and more, the expertise increases, the machinery and everything else becomes cheaper, you get to sub-5 cents. When you get to sub-5 cents, nobody builds another coal plant, not because I am buying it, because the market won't buy it. You have an option to buy 5 cents, and so our presence, our entry accelerates the Moore's curve on renewable generation, because we are bringing volume and when we are done buying our power, everybody buys that power. Same thing with hydrogen, no one will build hydrogen infrastructure right now — not just because it is a crazy physics — the economics of it never works because you need 50 years of amortization on that investment, and then I need 50 years of monetization. If you can't get 50 years of monetization, then you can't secure financing for it. So, any model of infrastructure that requires building up a whole grid from scratch requires years and years and years of monetization, which means that just the doubt that there is an electric car that is better than hydrogen five years out makes every utility say, "I don't want to be in this business." Now if you look at our costs, what we put in which was? The interesting part is that we didn't need to build power plants; we didn't need to build the grid. It was built for this (for office power) for lights. What we build is the last foot; the cost of which is a fraction of the cost of oil, so suddenly your monetization is fairly straightforward. We are creating a business model for clean renewable generation. The nuclear guys are in high demand anyway. What we add is incremental demand, but what we are saying is that we are only going to take this incremental demand from the sliver that didn't get attention. Because I am willing to buy every kilowatt hour — not just the ones that come when I need them — because I have a repository, a huge distributed repository. Kristian: Thank you, Shai.  |
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