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Event
February 9, 2011

Replacing the Pump with the Plug: Clean Energy And Its Implications

with
Shai Agassi

By kind invitation of Geoffrey Clifton-Brown MP, The Henry Jackson Society was delighted to host a discussion with Shai Agassi, CEO of Better Place, the World’s leading Electrical Vehicle service provider.  Lauded on ‘most consequential people’ lists by everyone from TIME to Foreign Policy Magazine, Mr Agassi’s company works with government leaders, auto manufacturers, energy companies and others to make his vision—zero-emission vehicles powered by electricity from renewable sources—a reality in countries around the globe.  In 2008, Israel became the first country—and Renault the first carmaker—to embrace the Better Place model of building open network infrastructure to enable mass adoption of electric vehicles and delivering transportation as a sustainable service, which Better Place is now rolling out globally.

Transcript

Thank you for having me. I will give you an overview of the problem we have in front of us and our solution, the solution of Better Place and where we are in our deployment. Better Place is an electric car service provider; we make a very big distinction between electric vehicles and electric cars. We don’t ask people to give up on anything. That was the first thing to say, it is mandatory for us to actually succeed.
To put it in context, an electric car service provider is the same as a gasoline station. It is the same as the fact that you would not buy a petrol car if there was no petrol station in the neighbourhood because you effectively run out of gas in your tank. Much like the gas station, we need to put in a network that will make electric cars as convenient, if not better, to the consumer to use as petrol cars are today. The primary posit that we have put before we started is that we will not end the world’s dependence on oil or a country’s dependence on oil before we are able to engage the consumer in a way that we offer them an answer to the basic posit of why they buy a car. They buy a car for convenience, if they didn’t want convenience they would use public transport.  If they wanted to save money and they would give up on convenience of a car, they would not be in the market for a car right now.

Unfortunately, the market for cars is growing. It is 70-75 million cars a year. When we look at what decision the consumer makes when they come in to buy a car, they choose the cheapest car they can buy, the most convenient one they can get and they are willing to pay the same as petrol to drive a mile. That fundamental posit has not been answered by the alternative vehicle community today. If you look at alternative vehicles offered to the public today, they all ask you to give up on something, be it the three seats in the back, or the range of driving, or the speed or the safety of the car; you are always asked to give up something when you look at most electric vehicles around you that have been offered on the market. Or you are asked to pay more, as we have noticed with the hybrids – anywhere between an extra 5000 euro all the way to today’s Chevvy Vault, which is actually offered for about 40,000 euro, which is 20,000 euro more expensive than the equivalent car from GM. When we put that offer in front of the market, what we got was that the green aware consumer was willing to pay a bit more, was willing to give up convenience and in return got a slight discount on the cost of the mile. Instead of paying for petrol, they paid for something else or they paid for electricity or they paid for less petrol per mile.

The end result, though, is that over the last 10 years we have had 2 million alternative vehicles, mostly hybrid, while the market added about 500 million cars during the same period of time. So we have saved 20% of sub 1% of the oil used. To put it in perspective we add 25 million new additional cars to the streets every year, mostly in China, India, Brazil and Russia. So, we have a problem that is growing, it is urgent, it is massive and it effects everybody. When, an additional 20 million cars are added in China, the world consumes an additional million barrels of oil from day one of the year to the last day of the year and that last million barrels of oil set the price for the entire market, all other 87 million barrels are priced by the last million barrels added in China. In effect, this is the tax that we are getting; the world is getting on the growth in the emerging market.

Add to this, not only the dependence on oil and the cost it has on the economy, also the environmental impact. We all know that if you drive in Beijing or you go to Beijing today, 250 of the days there are actually not suitable for human beings in any other country in the world. You are seeing what happens when lots of the cars are added to the streets and, in effect, most of the ground level pollution that we are getting in most cities, mega-cities around the world today, is not coming from production or manufacture, they are coming from the tail pipes of the cars. If we were able to actually push those emissions, even if not replaced completely with renewables, but push them out of the centre of the cities, we would get a very different experience in the cities and the end result would be a significant reduction in health related deaths mostly coming in the form of cancers and respiratory illnesses, that are killing twice as many people as the number of people killed by car accidents. All in all a very big economic, social, geo-political problem that we need to tackle.

The challenge, as you all know, was that definition. How do you get an electric car that would actually be cheaper and more convenient than a petrol car, given that a battery that we can fit in a car today can go about 100-120 miles? One of the solutions that were put in front of us was to wait for a magic battery – a battery that will get 400 miles and be able to charge in five minutes and will enable us to go at the same speed with safety as petrol. Unfortunately, that magic battery is probably a few decades away, if at all, and the reality is even, if we had that magic battery, a battery that can last for 400 miles that can charge in 5 minutes, in order to charge it, the national grid would actually have to provide cables that feed the empire state building to charge that car in 5 minutes and we will need to hold that cable and plug it into a car when there are two kids in the back.

So, we have looked at that problem and said we need to find a car that will fit that convenience bar that we have set for cars today. When you ask the average consumer, not the guy living inside a dense urban setting, but most commuters that go from suburbs to the city, how many times a year they stop for petrol, the answer is about once a week. When you round it up it is about 50 times a year that they would stop, at least in their minds, most of them actually stop more than once a week. When you ask them how long they spend at the petrol station, they tell you about 5 minutes, in some cases it is shorter and in a lot cases it is actually longer but the mental bar is 5 minutes about 50 times a year.

So, we have set that bar for what is called convenience. Unfortunately, for the car to charge in 5 minutes is not a possibility that we have today, given physics, given the design of the grid. So what we have designed is a dual system, one that allows you to charge when you are at home and at work. The way you charge is you simply plug your car into a smart socket, that smart socket is actually managed like utility does in order to balance the grid load across all the cars that are plugged at any point in time. We install the socket, it is metered separately, it is taken off the bill either at your workplace or at home, it is managed for safety so if a kid plays and it is a rainy day, they do not get electricity into their body. It is also managed intelligently so that if your mother in-law comes and plugs in her car, you do not pay for her electricity. So, it is the aggregate collective question mark around a charging network. At the same time, as a result of that, always when you park, home or at work, you are coming in and you have a full battery.

We then had to solve for the exceptional event, the trip that goes longer than 120 miles. What we have designed, a machine, it is not a very complicated machine, that actually knows how to take a depleted battery from below your car, while you are sitting inside the car, put it in storage and bring a full battery from storage and plug it back in your car. That entire cycle we have demonstrated in Tokyo at a taxi network that we have built, at the request of the Japanese government, takes less than a minute. In fact we average 59.1 seconds in Tokyo to do that cycle. So, we have taxis that do about 250 miles a day that go without charging, only switching their batteries, switching and going, switching and going, for the last 200 days in Tokyo, driving passengers along erratic routes that the passengers had to choose, it is their choice, given that it is a taxi. We have demonstrated that the toughest drive cycle, a taxi, can actually be done with an electric car that has, never stopped. If you asked a taxi driver if they are willing to stop and charge for 2-3 hours, you can understand why electric vehicles didn’t make it as taxis in the past.

That network, that combination of charge spots and battery switches are now being deployed across 3 countries. The first one is Israel, the second is Denmark and the last one, because we were always teased that we are only fitting small countries, we have picked the island of Australia. If you are looking at the size of the deployment, in Israel we will deploy 56 stations in order to create coverage of 4 stations along any route on the country’s roads that last for 100 plus miles. So, every 100 miles that you can travel in Israel will have 4 switch stations that you can choose from. Obviously all of them are all connected through a computer system, through a GPS and we will tell you where the most optimal place is for you, depending on your route, but you can choose to do it somewhere else.

The most amazing number is that the cost of that network, which is already sufficient on day one for 150,000 cars to be deployed without any additional infrastructure, is the same cost as Israel spends in one week on gasoline. That number is the same for the UK. At a cost of less than 7 days of petrol used for the UK, we could wire the entire country with an infrastructure project made in the UK, done with UK jobs to replace the need for dependence on oil, whether it is British oil or foreign oil for the future. That network can be deployed today, it is being deployed today in Israel and will be deployed in Denmark, to be launched and tested by consumers in the middle of this year and then opened to the public by the end of the year, this year. We have signed an agreement with Renault and, in order to get out of the chicken and egg problem between getting the cars if you do not have a network, and building the network if you do not have the cars, somebody had to break a few eggs. We broke $3 billion worth of eggs and placed an order for 100,000 electric cars from Renault. The largest order by a factor of 10 in the industry – in the history of the industry. The second order was from GE to GM for an order of 10,000 cars, we have placed an order for 100,000 cars.

Those cars are actually going through a full design cycle, they are mass produced cars, which has brought the price down significantly, much like gasoline cars. The most amazing number in there, the number of parts in a gasoline, petrol car drive chain is 400. The number of parts in the electric car drive train is 6. All 6 parts, with the exception of the motor, are electric components and you know what happens to the cost of an electronic component, they cut in half every 18 months. So, the costs of an electric car is going to look very much like a Moore’s curve, as we have seen with computers and laptops and cell phones and music players. The cost is bound to go down, unlike the cost of petrol cars, which if you hear all the complaints from the industry, just the cost of making them, supporting the regulatory frameworks, imposed by Europe and the US, is going to cost more than the cost of an electric car to most car makers. So, we are seeing a huge shift in cost balance towards the electric car, as well as towards batteries.

Furthermore, our business model better places the operator role. We are an operator much like gas stations with one difference; we do not rely on digging a hole in the North Sea and praying to God that the rig does not blow up. We actually buy batteries with a process that looks like an exploration production process with a 100% success rate. We buy a factory, we know how many batteries the factory will produce, we know how long these batteries will last under warrantee, and we know how much the cost is. The amazing cost of batteries plus electrons on a per model basis, on an equivalent gallon if you want, the equivalent to the leader that you buy outside to generate the same number of miles with batteries and electrons, today 2012, is 40 pence, the equivalent of a litre. That cost goes down by 50% roughly every 3 years.

So, we can actually do what the cell phone industry has done so magnificently over the last 10 years. Consumers sign up for four years and we will give them  a discount on their car and if you can calculate what that discount is, you should assume that somewhere between 2015 and 2017, an electric car in the streets of London would cost less than £10,000 to buy. When that happens the question is no longer do you want to be a green person or an evil person, the question becomes do you want a new car or an old car for the same price. When you ask most consumers whether they want a new electric car or an old petrol car, for the same price, the answer is fairly obvious to most people in the industry. That trend is not lost on everybody, actually, if you went to the Detroit auto show, and interestingly enough the consumer electronics show in Vegas, there was more electric car introductions at that show than the entire industry has seen in the last century.

Now, every car maker is showing a different program but when you add it all up, the components, the parts, the supply chain is actually building up to generate an industry that  is probably one of the most exciting industry today. We are replacing an existing product that is being consumed at an inordinate amount of money. Today, a petrol mile, which is what we buy at the petrol station, is consumed at an order of $2 trillion a year. That entire industry, $2 trillion a year, will probably be tipped to electric within 10 to 15 years. There has never been a $2 trillion industry generated in less than a decade; this is the first one. The previous time we saw this kind of a shift was when Edison invented the light bulb. When that happened we went away from oil, kerosene, into electric light and the end result of that, after about a decade of shift, you actually had oil pouring into rivers in Pennsylvania, with the cost of the barrel being too expensive to put it in a barrel. We are about to see the same thing happen around the world in about 10 to 15 years.

This is real, it is happening, it is no longer a vision, and it is being deployed. If you come to Israel 50,000 people have been through our visitors centre in Tel Aviv. They have driven the cars, the most amazing thing you can actually say, there’s always been this saying that the cars will been made but the public won’t buy them. 18% of people, who have gone through our centre, in the first 10 months of the centre, have actually signed up for a car during their visit. If you look, that centre, it is the biggest dealership on earth. It was not actually designed as a dealership, it was designed as an educational centre, it’s inside an old gasoline depot, north entry into Tel Aviv, but what it became was the largest dealership on earth. Quite a phenomenon, for those of you who are in Israel, come and see it.

The battery itself actually lasts on its first life, 100 +/- 10 miles, about 250,000 kilometres. Then it becomes in the industry jargon ‘dead’ meaning it can only do 90 miles, which we can then use for quite some time with lower paying students, we can do that for another 150,000 miles and it is now a 75 mile battery and we can use that in Jersey.  We will send it to them, we won’t tell them it’s already been used and they will think it has been designed for their island.  You run that for another 150,000 miles and then those batteries are actually sent out to Hawaii and then they can be sent out to India, eventually that battery will be recycled after it has done about 1 million kilometres. I want you to imagine 250 kilo sized battery, 80% of it will be recycled, the equivalent to that, 1 million kilometres is about 100,000 litres of petrol. In order to get a really vivid image in your mind, set that on fire and compare the pollution you have with that with a recycled battery sitting on the other side. If you can image 100,000 litres of petrol going on fire and anybody can convince you that that is less polluting that a recycled battery, 250 litres, they have got to be really good sales people.

One of the things that we are doing,  to ensure we can generate the additional energy required in Israel ,is the we democratise the energy inlet into the car. Today, there is no democracy, it is the biggest monopoly on earth – you can only put in energy in the form of liquid fossil fuel into the car. Less than 1% of the energy from cars comes from other sources, mostly in Brazil, by the way. If you look at what you could do with electric, you have a menu of options. You could choose to go with what you have already got or you can actually choose to do what Better Place is doing, which is to match the usage of energy with our purchase of renewable resources. So, we go out and buy for every thousand cars, one mega of solar or one mega watt of wind, we will then match to the consumption of our cars. We buy from a new project so, what we effectively do is what governments do today. We come and say, I am putting a car on the road, for the next 12 years it will need that much electricity, I will guarantee you the purchase of that electricity for the next 12 years. In some cases we get it in the middle of the day, cases of solar in Israel and in some cases we get it in the middle of the night, cases of wind in Demark. But, in both cases, what we do is we enable the renewable industry to actually get a massive purchase order that lasts for a long time that they can take to the bank and use as collateral to go build their projects.

Do not assume that you need to generate electricity from gas, you could generate it from a windmill and then you get to an absolute zero carbon footprint. If you think of the offshore windmill farm that you are about to create here in the London area and you add that to these stations that we talked about, you have effectively built a virtual oil field for London, which will go on forever, it will never stop. It is better than digging for oil off the continental shelf. If you wanted to do a comparison with just pure natural gas, you are getting a CO2 emission improvement, order of magnitude about 50 to 60%, depending on if you are doing combined cycle, but you are getting zero ground level pollution. So you are getting absolute, 100% elimination of everything that causes cancer in urban dwellers as the result of cars. Separate for a second climate effects and pollution effects. Pollution you get 100% improvement, climate, if you went natural gas about 50%.

We do something really great for wind. I think it is important to understand that today, wind is not competitive with coal for a very simple reason, half of the wind comes in the middle of the night in the form of intermittent wind gusts, that half is not sold to the grid in most cases because nobody wants to sit at 3 am in the morning and watch TV and have that TV go on, off, on, off. So, what happens is that most of that wind is actually not used and definitely not solved at premium prices. We are willing to buy that wind from wind projects and pay the price, which actually makes the other half of the hours, the other 1400 hours during the day more competitive than coal. So, if you are doing a massive wind project, the yin yang of it, the other half to it, has to be massively distributed storage. In other words, a network of managed charging electric cars.
Much like any other climate or clean tech industry, the wind energy industry goes through a cycle; there is a certain percentage of improvement every year. There is a lot of investment in wind energy, so it is improving all the time. We are going to bigger and bigger windmills, they are big and heavy and complicated to build but they work. If you bring in an electric car to buy the intermittent hour in the middle of the night, the price is getting very comparable to that of coal.

In order to encourage the purchase of electric cars, what we have in Israel and in Denmark is a long term tax differential between gasoline cars and electric cars. That long term is a time horizon as well as a number, what happened in Israel is that they set the tax on gasoline cars well before I got there, 72% on petrol cars and 10% tax on electric cars. In Denmark, 180% for gasoline cars and 0% for zero emission cars. If you look at that and that signal is there in both cases, in Israel’s case until 2019 or 20% of the market, in the case of Demark until 2015. That is a clear price signal to consumers saying if you are going to be an earlier adopter, you are going to get a benefit that those who are sitting on the fence are not going to get. Interestingly enough, if you buy early you are probably going to be able to get a very good resell price when the tax benefit goes away. Those two signals create enough of a consumer movement up front. In a sense what they are also saying is that we are giving away a tax that otherwise we would not get because if we didn’t do that kind of a tax incentive, those cars would be sold somewhere else. The network will be built somewhere else and the cars will be sold somewhere else. So, they are not really losing anything even though they are giving a massive investment or incentive up front.

We are seeing in other places and in particular France a budget neutral tax scheme, which says we will tax a very low amount on gas guzzlers and will give a big incentive on the smaller numbers of electric cars. In the case of France they did, I think, 1000 or 1500 euro tax on the guzzlers and a 5000 euro incentive on zero emissions. What they do is they keep a line and you can imagine where that line is, between the good and the bad and as the number of good increases and the number of bad decreases they actually shift the line downwards to keep the balanced budget between the good and the bad going on. To put it in perspective, so we are all on the same page, China put a tax incentive of $8800 per electric car and they put a massive budget, they actually created a budget to put this network across the entire thirteen urban centres, including Beijing and Shanghai, and others across the country as a government funded budget. The reason they did this is primarily because they want to leap frog the European and American car industry. They won’t do it with a better diesel engine but they can definitely do it with a better electric car.

Some argue that demand may exceed supply, thus raising the prices. I disagree, you really need to understand why this works, the fundamentals. There is nothing more wasteful than the engine of your car. If you actually opened up the engine to your car you will see that you are creating a burn, a controlled burn, so that the entire collection of parts around it are there to make sure that the engine does not blow up. In other words you are trying to waste the energy by cooling down that engine.  Whereas if you went into a power plant and saw fossil fuel burn,  you are trying to use every bit of heat that is created and convert it into motion, from that creating electricity. So you get a 3 times difference in efficiency in both cases. The result of which is that you are literally wasting two thirds of the energy of whatever we brought in from that oil field. Add to that the fact that the oil is 25 times more expensive per unit of energy than any other fossil fuel and you get a 75 times delta between oil and other fossil fuels in terms of economic displacement. We live in that 75 times, that’s why our business model is so successful

Now, the flexibility of supply and demand on the case of oil is terrible. We are at 86.5 million barrels a day, today.  At 88.5 million, we were at $147 per barrel. At 83 million barrels, we were at $35 a barrel. We are at that edge where you really fall off the pricing graph any which way you want to look at it. We have reached the end of the supply and demand equation, not that we do not have reserves, but we just do not have enough pipes to take those reserves from out of the ground fast enough with the growth we are seeing right now. On the other hand, if we look at batteries, which was the big story two years ago, between the US, China, Japan, Korea and Europe there were enough incentives put, and we are not talking about big amounts. The US and China put about $2.5 billion, Japan is putting about $1.5 billion but, between all these incentive programs, we have created enough factories so that by January 2013, 3 million electric car battery packs are going to be produced every year. 3 million packs every year, the packs that I just described. That was done within a span of about 2/3 years with incentives that were given over a span of 12 months. If we wanted to scale that 10 times we are looking at a $50 billion investment to get 30 million cars. $50 billion investment in the oil industry is nothing, it disappears. Unlike the case with oil, those batteries are made with national resources that are easy to find. There is a story about lithium being something that we are going to run out of. Lithium is one of the 35 most common elements in nature, we have so much of it that we can have 3 million cars go on lithium batteries with today’s technology, just from the reserves we know and we have mapped on the earth today. The availability of mining and resources is there, the availability of man power and resources to build factories is there, the ability for the car industry to scale 10 times in eighteen months, supply is not going to be an issue.

One of the things that we were relying on is this great invention called the grid, the beauty for us is that we do not need to build a new pipe system; we are using electrons that are transmitted at the speed of light on the grid that has already been built. We are just latching onto a virtual private network of electrons, generation on one side, charging on the other side. If you want to put it in local charging network, you could. If you wanted to generate your own electrons you could, but we do not do it because it is not economical. The most economical thing is to put the generation where it is best, we push it to the south of Israel or the north of the North Sea in Denmark. We then use the cables that are already into the ground to send it into our grid and we use our components, the battery switch stations as balancing devices on the grid. If you think of it, in the case of Israel, these 56 stations are actually almost like a standby power plant, they can either take more power if it is available, or send back power. It is actually improving the state of the grid.

We have always said from the first second we entered Israel, same in Denmark and same in everywhere else that our charging network will be absolutely open, standard based and will provide full roaming to anybody who wants to connect to it. We do not believe in competition inside the electric car space, we believe that everyone who comes into that industry helps the shift away from petrol. Whether it is our model or someone else’s model, whatever we do is open to everybody else to use. We cannot take somebody else’s battery if it is not switchable and we cannot take someone else’s battery if we have not seen it before, that is just because we have to protect our investors and our shareholders. But the charging will not hurt us and so we have opened the network. As a matter of fact our network in Denmark has been operating since December 2009 and we have been managing an open charging network for over a year now, for the public to use.

The Department of Energy in the US has published a study that 200 million can go electric on US roads without a single change to the electric grid in the US, not one additional generation capacity, not one additional transitional capacity, if it is a managed grid. Charging patterns around the world are roughly the same, we don’t consume much energy in the middle of the night; we consume most energy in the middle of the day. We have to design for the peak and so what you see is that most grids are running at 50% capacity when you average it out. If you take the UK capacity and you divide it by the number of cars you can probably do about 75-80% of UK cars without a single change to the UK grid.

I’d like to mention that I did not start with electric, I started with how you can run a country without oil and I can tell you that for about 2 years I have made every possible mistake. Luckily, this was on paper and not in reality. In the last week of March, I started off going to bio fuels and then to hydrogen, I even looked at the compressed air engines. They are all terrible forms of transmission of energy. If you think of what electricity does, it actually allows us to distribute energy at the most efficient way, high energy concentration without mass, which is the best form physics, knows how to distribute energy. We’ve looked at all kinds of combinations, I am not going to tell you that people will not come up with good solutions but what we found out is our solution is so much better than oil, cost wise, business wise. If you find something that is better than that, which maybe out there, it will just accelerate the end of oil.

The real question, most people need to think about, is you have a massive industrial shift in front of you. In the UK, even though you do not have a lot of big car brands, you have a lot of people who are employed in the car industry. If engines are going to go out of fashion over night, in literally 2-3 years; if motors are the future; if oil is going out of business; if batteries are the next future, how do you design for that? The earlier you start; the better you will be. The implications of what we are saying here is it may not be the only solution but it is already an order of magnitude better and improving all the time that oil.

Oil guys are actually investing in Better Place. The biggest investment is actually someome who owns the oil refineries in Israel. Our biggest investor in Denmark is a company who deals with Danish oil and natural gas. What we found out with most of the guys in the oil industry, when they hear and understand the economics of what we do, and understand that we sell the same product, a mile at a station and we buy it at the decreasing cost. You can argue that the decreasing cost at an increasing price but what you are really arguing is when it will tip, you are not arguing whether it will work. Wait six months, my model actually improves.

The way we charge is the car makers sell the car to the consumers, like they do today. That car is sold without a battery. Because it is sold without a battery and because the number of components is smaller and because in the beginning with the government incentives, those cars are cheaper than their counterpart, similar equipped cars will be cheaper on the electric side than they are in gasoline. How much cheaper? It ends up being about $5000 cheaper today with the incentive around the schemes around the world. To give you a comparison, in Denmark the price is almost half as much for an electric Fluence, the first car we are putting on the market, than a gasoline car. So, it is a massive difference. The weak price a mile is the same as you pay for petrol, but we lock it for the next x years you want to sign, in that sense, think of going into a BP station right now and signing an agreement with BP that you will pay £1.3 per litre. Imagine you sign up for 10,000 litres over the next 4 years and you pay £1.3 for the next four years. Most consumers, if you went out on the streets, and told them you could get an agreement like that with BP would sign it right now because they will all assume that it will become significantly more expensive over the next four years. Now, we also provide ability, whenever you want to, to back away from that agreement, to reset the clock if the price actually comes down.  So, imagine that miraculously oil is going to become cheaper and abundant and the price goes down to £1, you can always come back and reset the clock and sign an agreement for another four years but now with £1 per litre instead of £1.3 per litre. Effectively you are guaranteed a cheaper price than petrol and a cheaper price on the car.

In Israel there are about 2.2 million cars, almost a tenth of the UK. Sales are about 220,000 a year. About 60% goes to fleets, in the case of Israel those cars go to the employees of Microsoft Israel, Google Israel, the high tech industry, the banks etc and they get a car and a gas and petrol card. These guys actually consume an inordinate amount of petrol compared to the rest of the drivers because if you do not pay for petrol, you drive. So, the average distance for that car is about 30,000 kilometres a year. We went to that community, the top 200 fleets in Israel, which account for 100,000 cars, and 150 of them have already signed a contract with us that said, if you actually put those stations where you showed us on the map, if the cars are as good as the ones we drove in your visitors centre in Tel Aviv and you save me a percentage on the total cost of ownership, I will take it because I want to be a company that saves money and does the right thing. That percent actually moved between 0 and 20% with about a third of them saying 0%. Some of them actually said, I do not want to pay less because I do not want it to become that I tried to save money, I want to actually say I was a good person. But some of them say we actually need to save 5, 10, and 15 all the way to 20% before we will switch our fleet. But, once you get to my threshold of saving, I will switch my entire fleet, over a period of x years (x averaged 4 years) and I will switch y percent over the first year (that averaged 12%). So, it is a very aggressive switching scheme if you think about it. The main reason they are doing it is because they are saving money, I know that if I can save 10% compared to the first year improvement, by next year it will be more than 10% because the cost of petrol goes up. We are better than 10% already today.

So, if you think about we went and created the simplest incentive for fleets, it’s cheaper, they get it. There is a tipping point that most people missed in this industry, those fleets rely on financing. S they have to go to banks and the collateral towards the bank is a 3 year old car. If you internalise what I have said, somewhere around 2015, a 3 year old petrol car will be more expensive than a brand new electric car, which means the collateral that the industry is relying on, a 3 year old car is not sub-prime, it is worse than sub-prime. When the risk officers of the banks realise that, the entire fleet switches electric. All we have to do is convince 10 risk officers.

With respect to the wider energy and climate debate, I will tackle it from two very different perspectives. I will first tackle the climate issue. Nick Stern’s report was the first to actually put a number on the cost of climate. What he said here was very controversial. I think at least in Australia they are no longer arguing that, this year anymore. At least in Brazil they are not arguing that, I think most people do not understand that climate change effects are happening, they are happening fast, they cost a lot of money and they are compounding. In 2005, around the time Stern’s report came out, there was a once in a century drought in the Amazon, that drought was disastrous for the Brazilian economy and for the agriculture around the Amazon but, it was really disastrous for the climate because, what happened is, you had a lot of rotten trees dying and then instead of absorbing CO2, they actually rotted and released CO2 into the atmosphere. That once in a century event repeated last year, it was actually worse last year than it was in 2005.

To understand the impact of that, the aggregate of the no absorption of CO2 in 2010 from the Amazon, plus the effect of the dead trees releasing CO2 into the atmosphere, just in 2010, neutralised the entire effect of the Amazon over the last decade. There was actually more CO2 released in the Amazon in 2010 than the entire United States released in the same year. These effects that were supposed to happen once in a century are now happening twice in a decade. They’re big and they are compounding. If you do not believe me, ask the people in Brisbane. They had a 10 year drought, followed by a flood, followed by a typhoon. It did not happen over a century, it happened over the same year. We had a year where we had El Niño and La Niña in the same year. Half way through the year we had El Niño reverse and go the other direction, this is a seven year phenomena, it happened in the same year. If you do not believe it is compounding, you just have to understand the data.

Now, we have to cut what’s called the Eight Princeton Wedges, we have taken climate CO2 and divided it into 15 pieces, 15 chunks, think of them as pie wedges and we have to solve for 8 of them, solve meaning eliminate 8 of the 15. A single wedge is the aggregate of all tail pipes in the world, which is one. So, Better Place is one. We need Better Place to work and we need 7 more Better Places. We need to understand that until we actually get to a point where we abolish certain behaviour, absolute zero, not half way, not 20%, absolute zeros, it will not end. Going to 20% improvement on hybrids and then getting 2 million hybrids out of 5 million cars does not help; it does absolutely nothing except clear the conscience for some brand of people. Absolute zeros at absolute scales. It is not that hard. I am assuming these are not LED lights, we know how to make a LED light today that plugs into the same socket as an incandescent light bulb, it will generate exactly the same light, not like CFLs, the exact same temperature as an incandescent light bulb and if you actually created a business scheme similar to Better Place, where you price the devise cheap and took back some of the economic savings on the energy, because that light is actually 8 watts instead of 100 watts, the energy savings over the life of that bulb, paid for that bulb many, many times. If UK abolished incandescent light bulbs and made LED lights the only light possible, you would also cut 16% of electricity consumption. Remember the argument we had before over the 8% saving on the cars, just changing the type of light bulbs will create twice as much electricity from the existing generation capacity in the system. If you abolish carbon based cement for buildings, if you abolished windows that leak out heat, if you abolish air conditioning unit without a heat battery, you could do all these things. We were arguing over a percentage by a certain year when we should have argued over which technology has to be adopted.  Put a menu of options in front of a scientist and an economist, put them in the same room, prove that it works and then abolish and continue. That’s the carbon side, the climate side.

On the energy side, what we are seeing is a shift towards urbanisation and when you shift 25 million Chinese a year from a village to a city, they do two things. They go up from 1500 calories to 3000 calories on their diet and they consume electricity at a higher rate. If we actually took the entire planet in 2050, 39 years from now, and shifted everybody to the level of energy efficiency of Papa New Guinea, it is not an efficiency question only, if we did all that we are still short 18,000 single Giga watt power plants to supply the people beyond the planet in 2050. 18,000 1 Giga watt power plants in the next 39 years. Where does this energy come from? If you wanted to do it on nuclear that means you have to build a nuclear power plant, I think the calculation comes to about every 18 hours, that means if you actually ran the number, that means ever neighbourhood will have its own nuclear plant, not going to happen. If you wanted to go hydro and you went into every river that is not dammed yet, you would get about 2000 Giga watts. If you wanted to convert all the food we eat into bio mass and burn it into power plants, 7000 Giga watts out of the 18,000 missing. If you decided to put windmills on every route, we ran out of fish because we put hydro dams, we ran out of food, let’s kill the birds anyway, you would get another 1000 Giga Watts. The reason for this is very simple, most of the energy on this planet comes from one source and that is the sun. It is either material left from the sun, which we have inside our earth or the power that the sun projects on here. The first power the sun is light, the heat that we are getting. The second power is the delta between the two, meaning air movement, the third power; the next derivative is wave, which is an aggregate of winds. The further you go down on derivatives, the less power you have, this is basic physics. But if you look at the amount of power that the sun shines on this ground, 800,000 Giga watt plants can be built right now. So, there is only one real solution, if you look at the scalable side of the equation. It is only solar, now we are in denial to the fact because we are saying well it is too expensive. What is not expensive? Is oil not expensive, is coal not expensive, is climate not expensive, is drought not expensive? What is not expensive? The reality of energy is that we are no longer in the situation where we can choose between options, we literally only have one scalable option and a lot of intermediate solutions between now and then.

An interesting point to note is that the policy in the UK is not putting the UK in the fore front. If you look at what the Chinese are doing, that really pushes them at the forefront.  Within Europe, the French have a much stronger, aggressive policy. German’s are in denial, they are concerned about the protection towards their diesel engines and the car industry. The French, given that they have both infinite nuclear power and the cars are French, the firsts cars are French, they are seeing that as a great opportunity to go beat up on the Germans, so you are seeing a bit of nationalism across the countries in the Union. UK is actually taken a bit of a step back. The UK is not taking a seat at the table yet.

As far as America consumers on SUV, we have called an electric switchable SUV, the Diet Coke of cars – it has all the pleasure, no guilt. In the same sense you will see a SUV come to the market, roughly priced at the consumer given the current American Federal incentives at about $15,000 with a $250/$300 a month unlimited drive, within the next 3.4 years. When that happens, the odds that you are not going to see those cars, think of how many Prius you saw in California at $25,000 now think of at SUV at $15,000 and you can understand what kind of phenomena that will be.

To finish, if you came into Israel today, you will see the stations are going into the ground, station 8 went into the ground last week, we had 50,000 go through our visitor centre in the North of Tel Aviv, if you come in it will be a fantastic hour and half tour, you will get to see a movie, drive a car, see a switch station in action. If you have residence in Israel, we will even sell you one if you want. We have in the middle of the year the first consumers are actually getting the first out of 75,000 people between the fleets and the consumers will actually get their cars to start driving, by the end of the year if all the perks are gone and all the bugs are de-bugged and everything is working, hopefully the network will be open and we expect to get thousands of consumers driving within months of the network opening.

Thank you very much.