It's Hard Out There For A Transportation Entrepreneur (But It Doesn't Have To Be)

To really get innovation we need to look at electric batteries in cars as distributed sources of energy for the grid that just happen to be on four wheels.

The two energy crises in the 1970s spurred the United States to start the Department of Energy, and in turn, to pour billions of dollars into R&D to prevent another crisis from happening. But much of the progress we have made since then is in the electricity sector, not the transportation sector—the true source of the crises. The reason for this is that infrastructure entrepreneurs don't feel like they have a good chance of seeing a return on their hard work.

For some anecdotal evidence, I just searched on the site Entrepreneur.com for "automobile entrepreneurs." Of course, I discovered a story on Tesla from 2007. There is also a slideshow of brand name companies "servicing" the auto industry that took off with the "insight" of entrepreneurs. We see iconic names like Dent Doctor, Meineke, Midas, and more.

Unfortunately, when we think of automobiles and entrepreneurs, the last real game changer was back in 1903. The name: Henry Ford. With oil prices back up over $100 a barrel, entrepreneurs and government are working on transportation again. This time around, we have seen some progress on second generation renewable fuels, natural gas, efficiency measures, and other opportunities. Mostly, we've seen innovation in electric cars.

Just for the sake of argument, I want to explore this global clamoring for electric cars. And in this area it seems that we must think not about cars, but electric batteries. The beauty of the electric vehicle is not the technology, but the business model innovation. I have counted 17 revenue streams you could charge for with an electric battery in addition to the expected car payment.

One of the biggest is this: The grid must stay at 60 hertz to keep everything running well. Batteries could be used to do this instead of burning natural gas, which is far more valuable as a transportation fuel than for generating electricity. At idle times, charged-up electric auto batteries could plug into the grid in "park."

In California, the peak demand for electricity is roughly 60,000 megawatts. Imagine that there are just 250,000 electric cars out of a total of 30 million registered vehicles. At 20 kilowatts a piece, these electric cars can provide about 5,000 MW of instantaneous power or one-twelfth of the entire grid of storage.  Using 10% of all cars, you could back up the entire grid for a short period of time and support high levels of renewable energy penetration.

So 30 years after the oil crisis, how do we actually facilitate the switch to non-oil-based vehicles en masse?  We need to look at electric batteries in cars as distributed sources of energy for the grid that just happen to be on four wheels.

Instead of buying a car, people could buy a vehicle services contract. The auto industry could work like the solar electricity companies.  Customers could pay on a cost per mile basis only for what they use—at a price cheaper than gasoline, just like many of the power purchase agreements in the solar industry.  While the consumer has the car parked a minimum of 95% of its lifetime, the car battery can be used to create additional revenue from the electric utility that more than pays for the "premium" price for an electric vehicle.

This creates a two-way street for autos and the grid, or V2G—"vehicle to grid"—technology. A pilot project at the University of Delaware, headed by Willett Kempton, has demonstrated that these V2G services have a value of over $5 a day per vehicle.  Utility and government regulators alike love the concept because these batteries can be far cheaper than building new power plants or new transmission and distribution lines.

Business model innovation, such as in the case above, could remove the roadblocks for transportation entrepreneurs to enter the scene. It could create an infinitely scalable industry with compelling financial returns. Doing well by doing good—that's what I call a true impact investment.

[Image: Wikipedia]

Jigar Shah is CEO of the Carbon War Room, a nonprofit that harnesses the power of entrepreneurs to implement market-driven solutions to climate change and create a post-carbon economy. 

Add New Comment

6 Comments

  • Brendan McBreen

    Jigar Shah: I agree - V2G is the model for the next decade! It seems to me that moving from a static grid of facilities to a dynamic grid supported by EVs, will require a series of steps. Each of these steps, as you have stated, will have to be economically viable, and will proceed in experimental and entrepreneurial fits and starts. (1) Will my battery warranty be voided if I upload to the grid? If I have a service contract or a lease, that is irrelevant, but at what price point will I drive out of my way to connect to the grid? (2) When and why does my company (or DisneyWorld or the local mall) install charging / upload stations to enable parked cars to feed the grid? Where is their incentive / revenue stream? (3) When (and why) is it economically viable for utilities to pay for my juice? Will the utilities need to have their arm twisted by regulation? I believe that in the next ten years of distributed development the influence of utilities will decrease, but unlike the internet, the utilities still control access to the grid. That bottleneck will be very important for V2G. What a great challenge to embrace! 
    - BBM

  • Dennis Rowan

    Mr Shah, I've followed your impressive work at Sun Edison and now at Carbon War Room. The full bidirectional v2g system solution enabling more renewables, making them dispatchable leads to energy security, energy independence and increases US energy production by billions of dollars (as you know). I've met with Kempton, Toma Javic and others on the initial MAGICC team. Proposing V2G projects in PJM and NYISO. The simple elegance of renewables integrated to fleets of EVs providing grid support is emerging and is a bigger game changer than the internet. I can't wait to trade a MW of frequency regulation into PJM's market. All the components are here, and the economic model is sound, just need the EV fleets with v2g capability other than the ones curently being adapted in the aftermarket.  I hope to meet you at one of the upcoming summits. Best regards, DR 

  • Andrew Krause

    There are at least a few hundred entrepreneurs out there doing everything from custom choppers to resto-mod classic car overhauls, including alt-fuel vehicles. There are also efforts like Local Motors (www.local-motors.com) and the Open Source car from companies like Riversimple (www.riversimple.com).

    A lack of results is not evidence of a lack of entrepreneurship... only a lack of research skills. Expert blogger indeed.

    Also, America (indeed, most of the western world) is build around notions of property rights and an ownership culture. People won't value something that's not theirs to posses, ergo vehicle service contracts are not attractive.

  • Asko Kauppi

    Thanks, Jigar, for tying the service contract model with the battery-as-grid-stabilizer model. Without the first, I don't see the second happening (if you own the car, what's your incentive to let the battery drain out so grid would be stable?). It needs both, or neither.

    Often, technical ideas are presented without hindsight to the changes required in business model. Both are changing.

    Another market where what you are suggesting is even easier to do is in battery-powered automatic transport systems (PRT). These systems need lots of spare batteries, at least if using battery swap instead of charging at stations. This means the grid stabilizing effects can be received from a central place instead of the cars distributed in a wide area. See our website for more info (though we don't mention this particular business model there; as you say there are plenty new business models out there).

    btw, Seeing you in London next month!

    - Asko Kauppi
    BM Design Ltd.
    http://www.bmdesign.fi

  • Stuart Bogue

    Entrenched Corporate interests in Auto and Oil have been the greatest inhibitor.There has never been a  more subsidized system. To innovate would be to overcome the best efforts of those who have no desire for change.So,despite so many technological breakthroughs in so many areas,essentially Mr.Ford's idea still rules(with considerable refinement).

  • Business Partners

    Wow. And it's been more than a century since Mr. Ford came out with his idea. The auto industry is changing so much, as you pointed out in your article, that perhaps we will only see entrepreneurs serving the auto sector, but not any doing innovations. But let's stay hopeful.