Plugging into the next generation of the electric car
You don't have to be Elon Musk to imagine an electric car transportation network that connects cities and suburbs and in some cases, even stretches for hundreds of miles. In fact, you don't even have to imagine it—just hit the history books and and you'll get some idea of the electric streetcar system that once existed in an elaborate form in many U.S. towns and cities.
That system long ago passed into oblivion with the rise of the car and the highway system. And there's no shortage of conspiracy theory, mixed with fact, about its demise—the big auto companies and oil monopolies with a grand destruction-by-design plan dismantled electric streetcar networks and streetcars burned as scrap metal.
Fast forward to today's market. In a back-to-the-future scenario, a wave of electric vehicle and smart grid innovation is once again reinventing our nation's transportation system. It's exciting times for auto makers and clean tech ventures driving change in this emerging niche like Musk's 10 year-old Tesla Motors.
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For car enthusiasts who want to change gears—and save on rising fuel costs—the road ahead offers an increasing number of electric car options. Tesla's Model S has become the "Palo Alto Camry of the future" in the words of the company's marketing manager Ted Merendino, while the Honda Prius awes the market with is tiny carbon footprint. That's the good news. The bad news is that the technology is way ahead of the infrastructure curve.
Today, there are only about 13,000 of electric car charging stations in the U.S. with the majority in California, Florida and Texas, according to the ChargePoint, a six-year-old venture company that has raised $80 million to build a smart EV network throughout the country. The roll out is being hampered by the learning curve around production and installation of EV chargers, and the lack of an industry-wide standard, says Zach Pollock, a senior analyst at GTM Research.
To help turbocharge the market, ChargePoint, is taking a unique approach. It plans to launch a no-money-down solar lease model for EV charging stations in hopes it will stimulate adoption. This will allow customers to pay off the cost of their charging equipment over time. The idea comes from the solar financing world where companies like SolarCity, Sunrun and others have built a business in leasing or writing contracts that offer owners low-or no-cost solar panels in exchange for long-term payment contracts.
ChargePoint hasn't yet announced whether its financing program would apply to individual residential installations, or larger-scale commercial installations. It will launch the program in San Francisco, a city that is one of their innovation partners. It is also not clear how the program will create a predictable income stream because of the uncertain number of EV drivers plugging in to charge.That's a statistic no one can forecast.
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Despite the nascent market's challenges, Ryan Popple, partner at Kleiner Perkins Caufield & Byers, and a lead investor in ChargePoint, is optimistic about the industry's prospects. Kleiner Perkins has also made an investment in Proterra, which manufactures heavy duty alternative fuel vehicles and has developed a local charging solution for the municipal transport market.
Popple knows a thing or two about the electric car market and how drivers like to "fill up"—he was previously a senior director of finance at Tesla Motors, and before that, worked for Chevron and Exxon Mobil in energy finance. While he finds it fascinating to watch how his old employer Tesla is tackling the long distance EV travel challenge, he thinks buying an airplane ticket still makes more sense for long-distance travel, and it's more fascinating to watch Tesla as a car manufacturer than charging infrastructure company.
"We don't need to be dragging around 500-mile battery packs. We don't need EVs that go 3,000 to 4,000 miles. I think the sweet spot will be in the 100 to 200 mile range, and the infrastructure in places where we logically take cars. Then it will start feeling convenient," he said.
ChargePoint CEO Pat Romano thinks Tesla is doing important work and its long- distance EV charging highway network is important to help it sell cars. But he said, "Fast chargers are not the answer. The problem with a lot of analysis in this industry right now is it's being based on 100 years of using gasoline."
Romano said that in the same three minutes it takes a person to fill up their gas tank it would take a small sub-generation station—or nuclear power plant—and a cable the size of Golden Gate Bridge Cable, to "fill up" an electric car battery. "We're not going back to gas depots," Romano said. "We don't need 50,000 chargers on the highways. The question is how people keep their EVs going while they lead their daily lives, including work and chores like shopping, until they can return home and recharge overnight.
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Who pays for the topping off of the tank is a big part of the equation, though, and it's still being tested. Tesla is self-funding its long haul fast-charge network, and some progressive towns like Santa Monica, Calif., are paying for early adoption, ChargePoint expects more employers and merchants and real estate companies to step up and invest in a multi-billion dollar economic investment spread over a large number of players. Time will tell how the race plays out.
ChargePoint sells charging station hardware which can cost in the range of $2,500 (excluding installation), and offers software to set prices for charging and collect payment from drivers, and offers customer service support, through an annual fixed subscription per port. It also takes a small percentage of each transaction—an administrative fee—though the company said this is not a primary source of revenue, and it doesn't plan on it ever being the driver of its business.
Alistair Haywood, an electric car market analyst with IHS, said that there needs to be more investment from the private and commercial sectors, because people are likely to want to charge where they park most often. The challenge though, is how adopters justify the expense. In the end, there needs to be an economic model.
"It's great that Google has charging stations, but what about smaller companies with no AAA balance sheet. Is it a good thing if only Silicon Valley engineers can get a charge at work?" Popple asked.
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ChargePoint's hook is that a charging stations offer benefits that make the investment worth it. For employers they are a good employee benefit. For merchants they help attract customers. And for landlords they are a convenience tenants would pay for.
Some businesses that have made the investment in charging ports offer it for free, while other businesses are using public pricing models. Either way, ChargePoint and its backer Kleiner Perkins, believe drivers are ready and willing to pay for a charge. "We're still setting a price that's better than gasoline," Romano says." I don't think consumers expect EV charging stations should suddenly be free."
As it continues to build out its coast-to-coast fast charge network in preparation for the cross country trip to be taken by its founder and CEO Elon Musk, Tesla remains skeptical that the topping off model will take off. Tesla Chief Technical Officer JB Straubel said he isn't convinced that the local charging model will solve a big problem. Tesla drivers express strong support for the company's approach, too. Next July, a group of Tesla owners is planning a cross-country caravan to try out the coast-to-coast fast charge network.
Despite the controversy, Romano believes there is no reason why both approaches can't be part of the solution. As he explains, the ultimate goal for the industry is to provide consumers with a way to plug into the electric car revolution. Right now the road is bumpy, but we are all working hard to spark change.
—By Eric Rosenbaum, CNBC.com.