Shai Agassi, brilliant Technion graduate, entrepreneur, founder of Top Tier Software (sold to SAP), and rising star at SAP, left SAP to form Better Place in 2007.  Better Place’s vision is to develop the infrastructure for electric vehicles in high-density locations like San Francisco, New York City, Israel, Denmark, etc. where electric car owners subscribe to use a grid of electric recharging stations in their region.  The backbone of the system is of course software to coordinate the use by customers of the recharging infrastructure. 

            The Better Place infrastructure is designed so that any electric vehicle owner can top off his “tank” to always have 100 miles of driving capacity at a recharging station where he works, sleeps, or shops.  For longer trips, battery switching stations will be available so one could actually swap out a used battery for a live battery and continue on one’s journey.  Better Place envisions having an open architecture so many manufacturers can make batteries for the Better Place subscribers. 

            Better Place has signed an alliance with Renault-Nissan to build the zero-emission vehicles to be used with the Better Place infrastructure.  The batteries to be used are regular lithium ion batteries that have been used in other commercial applications, and Mr. Agassi envisions that if hundreds of thousands are called for by electric vehicles the cost of the batteries will decline rapidly with volume production. 

            To get “juice” for the electric vehicle, Better Place envisions both charging stations and battery exchange stations.  Charging stations will consist of units about the size of a parking meter.  The vehicles can just plug in and recharge.  The software in the vehicle will determine the length of time to charge.  The stations are weather proof, and handle the same current as a standard wall outlet.  In addition to charging stations, the battery exchange stations are envisioned to be fully automated where the driver pulls into a living room sized station, and waits for several minutes while his battery is exchanged without human intervention.  The exchanges are designed to take about three minutes.   

            What about all that extra electricity usage?  Better Place believes that most vehicles will use the most charging capacity during off-peak hours during the evening when the vehicles are plugged in at home.  Most electric utilities have excess power during the evening and run close to peak load during the daytime when businesses are in operation.  Thus, using the evening load will benefit utilities that are actually running their plants around the clock anyway, with a lot of evening power simple not being used nor stored.  Thus, the storage of that evening power in the electric vehicle batteries (both in the electric vehicles and in batteries at exchange stations) is actually beneficial to the utilities and society.  The additional demand for electricity during the day is thought to be marginal. 

            It is a grand plan, although one that intends to build slowly in dense markets where electric vehicle usage and environmental awareness are high.  The company has a number of high profile investors from whom it has raised over $200 million, including Morgan Stanley, VantagePoint Venture Partners, and Israel Cleantech Ventures.  The company plans wide scale deployment in Israel in 2011 and in Australia and California in 2012. 

            Better Place will benefit by legislative trends pushing clean energy vehicles, and by the decreasing costs of the components, including batteries.  In addition, Better Place intends to leverage its partners to bear a substantial portion of its costs for vehicle development to charging and exchange stations.  There are obvious challenges, although technology risk does not seem to be one of them.  Better Place is essentially a service, and it is in developing that service that the costs and challenges will become apparent.  There will have to be enough profit in the subscription cost so that the partners and Better Place will see a decent return on their investment.  The automated exchange stations and non-staffed charging stations will have to durable and function properly, and the ongoing cost of capital expenditures for rollouts into new areas will have to be financeable from cash flows and partner leverage.  Large capital expenditure models have not faired well in the past, except those with natural monopolies such as the now-consolidated cell phone industry.  Furthermore, the actual total cost to the motorist will have to be less than the cost of owning a hybrid vehicle like a Prius, and that depends in part on the cost of gasoline.  Accordingly, it is a very innovative idea from a very smart engineer, and the business might be in the right place at the right time.  No business is without challenges, and at least Better Place has a very bright founder and over $200 million of funding to execute on the founder’s vision.