Friday, May 08, 2009

A Better Place's Possible Pitfalls: Open or Closed Grid? For profit or environmental benefit?

Lots of EV enthusiasts, including David Pogue, have provisionally chosen to give up just a bit of their liberty and endorse Shai Agassi's "A Better Place (ABP)". In Mr. Agassi's world, you'll be billed based on the miles you drive similar to by-the-minute mobile fees.

Great! or not so great? Pitfalls may lurk in the shadows stemming from A Better Place's organization as a for profit company. Like all for-profit enterprises, they're in it for the money and environmental benefits, while great for marketing, take second place to profits.

Each large scale grid infrastructure represents a natural monopoly and governments must step in to regulate these monopolies. Open access to the electrical grid and the telephony network (including the Internet) have provided great benefits to consumers. Closed networks like those run by the cell phone companies and cable companies have provided fewer benefits and greater pain. Which way will ABP steer their Electric Recharge Grid? Will they operate it as an open, competitive arena or as a closed, profit-maximization tool? Only time will tell, but if history is precedent, the ABP electric recharge grid will be, unfortunately, closed.

First, their promise to only purchase and sell clean electricity will disappear either if they max out clean energy supplies (that would be great, by the way) or if a competitor, say Wal*Mart for argument's sake, offers a cheaper mileage plan using dirty electricity. Sadly, economics trump moral positions for a majority of consumers and the low cost leader will prevail.

ABP may then attempt to lock-in their customers either via proprietary chargers/battery packs or via contractual limits that prevent you from using another "network". The proprietary route seems less likely because open standards have already been promised; they're not yet published nor released, but let's give them them benefit of the doubt. That leaves the contractual route. Subsidy locked phones only work on one network. Remember when cell service providers held your phone number hostage within their network? Only government intervention allowed number portability. ABP, as a for profit enterprise, will be drawn to do the same things with battery packs. They might say "feel free to use your car on another network, but you can't take an ABP battery with you" and could effectively lock you into the ABP network.

The devil is in the details. Will ABP allow power from another vendor to flow through their charging stations? How about through your home charging unit? If not, do you have to buy and wire in yet another home charger to switch vendors? Will towns have to have multiple smart charger networks? Will you be charged a "battery handling fee" to swap to another vendor? How about early termination fees? The same problems that folks complain about in their mobile plan, magnified by greater costs, will now apply to their car plan. They are surmountable, but will ABP remove those problems or use them to improve profits?

Finally, a for profit company wants to maximize monetary gain, but in ABP's case, monetary gain and environmental benefits conflict in the end-game. Initially, moving the world's car fleet from oil to electricity will benefit the environment; however, ABP profits even more as those cars drive more. The environment, conversely, benefits less as the cars drive more. An environmentally sensitive pricing plan would make each additional driving increment cost more to encourage energy conservation. Will ABP do that? Unlikely. They already tout an "Unlimited Mileage" plan that is precisely what the environment does not need. Hopefully it's only an environmental loss leader to attract customers and will be withdrawn once enough electric cars hit the road.

As a for profit enterprise, A Better Place will eventually be driven away from its goal of environmental stewardship and toward maximizing profit. To limit the pitfalls and maximize the benefit, the Electric Recharge Grid Operator portion of ABPs business must be a non-profit, open access provider allowing anyone to deliver and receive electricity over their network. Plenty of profits lie in the periphery, but the core grid operator must be non-profit, open to all competitors, and working toward the ultimate benefit of environmental protection. Rushing toward environmentally responsible technology benefits us all, however, let's not lock ourselves into a single vendor's cage along the way.