The Only Monopoly Is The One Oil Has Over Transport Now
I have a new piece up at Green Car Reports looking at the official Israeli Government policy on electric cars. It asks (and partly answers) the question “Does Better Place have a monopoly on Electric Cars in Israel”. If you only want a short piece read that one (I have a strict word limit when I write there). This will be a bit longer.
Unfortunately, however, the real question should be “Does Better Place have a Monopoly on Cars in Israel?”. It’s not about competing with a few other semi-practical toy EVs: (sorry Leaf owners) or rich kid play things (yes, you Teslas). It’s about going up against the Mazda 3 and the huge global monopoly of Big Oil that supports it.
So my answer is no, not even on electric cars. For a monopoly to exist one company has to have sole access to a market. As is clear from the official Israeli government policy documents, anyone can enter the Israeli market: the issue is capital and courage. The Israeli government has restricted home charging of electric cars from existing normal domestic power sockets which does raise a barrier to entry, but it’s explanation for this is entirely believable.
I would say (and I’m not alone in this) that the six car importers of Israel seem to behave as a cartel. Ha’aretz has an article on the state of the car market in Israel and it shows all the signs of being a big carve up:
Israel’s automotive industry is another area where reforms seem a day late and a dollar short. A team headed by Yaron Zelekha, the outspoken former accountant-general at the Finance Ministry, was asked to promote competition in the concentrated sector. His team handed down its recommendations in February.
Importers with market shares of 8% or more shouldn’t be allowed to import from more than one manufacturer, the team recommended. Nor should they own a leasing company.
It is these very comfortable importers, who are making a ton of money, who are expected to compete with disruptive little Better Place? They spend as little as possible on sales, service and advertising: they don’t invent anything, they just ship stuff in and sell it at high margins. Or they sell it to themselves and then lease it on. Somebody expects these to take a bold step like bring a Nissan Leaf or a Chevy Volt, explain these completely novel all electric or plug in serial hybrid cars to a sceptical public? No, they don’t have the infrastructure to do that. The small barrier of having to install a charging spot at someone’s home is not the problem here.
Israeli Government Official Policy
The rest of this post refers to the official Israeli Government Policy as published in a PDF and available from the Ministry of Energy and Water Resources website. I have uploaded my annotated version (with a few sections highlighted).
The document starts with a couple of paragraphs on the history of electric vehicles (EVs) even noting the General Motors’ EV1 in the 1990s. The first time EVs played an important role in Israeli government policy was in 2006 with a Master Plan for the Fuel Sector published in 2007.
It’s also clear from early in the document that unlike the case in the US, Israel’s grid and power generating facilities are stretched. Even before the interruptions in the supply of gas from Egypt we’ve been experiencing lately, the rapid population growth in Israel ever since it’s re-establishment, has challenged planners. The rapid upswing in affluence and affordability of appliances like air conditioning has hit Israel hard. For example here is a public service video running right now imploring us to use less electricity (and offering a big discount on a newer, more engergy efficient refrigerator).
This passage makes clear that it is a technical requirement (not something political) that the grid be protected from uncontrolled EV charging:
The technical personnel at the Ministry of National Infrastructures believe that priority should be given to overnight charging, and that rapid random charging during the day is liable to require the construction of additional power stations. In addition, the Ministry emphasized that only after the various entrepreneurs have presented the technical specifications and their plans in full will the Ministry be able to examine how to go about adapting the various regulations that will be issued by virtue of the Electricity Law.
The document presents 13 general principles. Here they are with my comments
1. Stringent safety requirements and minimization of electrocution risks and other harm to humans and the environment will be ensured.
The Israeli press has focused on the safety issues of unrestrained cables on streets and the idea that using domestic power sockets is risky. They downplayed the calls for competition and the provision for smart charging to protect the grid choosing not to explain this complex subject.
I’m not aware of a single reported incident of someone causing themselves harm by plugging in an EV into a regular power socket so this principle is a little puzzling.
2. The charging infrastructure shall comply with high international and Israeli standards.
3. Electric vehicle owners may install a private charging device for their own use in their private parking at home.
Because of point 1, its necessary to state that anyone should be able to instal a dedicated charging point.
4. Electric vehicle owners may enter into a contract with a charging supplier to manage the charging of their electric vehicles, but will not be obligated to do so.
5. Implications of charging electric vehicles on the national electric system, including the need for upgrading network infrastructures, shall be minimized, and optimization of electricity consumption shall be pursued.
6. Electric vehicles charging costs will not be imposed upon all of the electricity consumers.
Points 5 and 6 make it very clear that there is to be no general upgrading of the country’s infrastructure to accommodate EVs. If this has to happen, EV owners will directly pay for it and costs won’t flow through to others.
7. Every business entity complying with predetermined minimal specifications and with the requirements of the law shall be granted a charging supply license.
8. Charging suppliers shall not limit their customers to use of charging devices owned or managed by them only.
9. The principle of open access shall be upheld in private parking lots serving the public; this will enable multiple suppliers’ market and access by “casual customers”.
10. In private parking lots serving the public, the charging suppliers shall not prohibit electric vehicle owners who are not their customers from charging their vehicles.
11. Termination by an electric vehicle owner of its contract with a charging supplier, if requested, shall be quick and simple.
12. Fair competition in the EV industry shall be maintained.
13. Confidentiality of information pertaining to the customers of the charging suppliers, including their electricity consumption routines, shall be strictly maintained according to the law; use of information liable to prejudice customer privacy shall be prevented.
Points 7 to 13 all address directly the kind of anti-competative practices that the Israeli government has spent the last few years stamping out of the mobile phone industry (long multi-year contracts with huge cancellation fees etc). They clearly aren’t going to let this happen in the EV market.
The specifics of charging a car are where we see the stipulation for what will be Israel’s first smart grid. I’ve written about this before but briefly a smart grid is one where parts of the network can be prioritised at times of peak load. That means a car, with a nearly full battery and charging at a peak time of day can have it’s power cut. It’s a vital measure that helps shift charging of cars to the night time where the grid has excess power.
The “smart” charging device will communicate with the charging control system of the IEC or of the charging supplier it is linked to, according to the agreement between them, in order to authorize the charging process, subject to the prevailing constraints within the local electricity distribution network, and subject to the requirements of the IEC’s national control center, in accordance with the electricity generation and transmission capacity.
I know that Better Place’s customer agreement specifically mentions that just because you’ve plugged in your car, it doesn’t mean it will start or continue charging. There is a feature, however, on their iPhone app to request priority charging (free at present) and again that is specifically provided for by the policy document:
Charging that is not limited by the supply constraints in the local distribution network and that is based on higher tariffs defined and published in advance, subject to terms that shall be defined (like confirmation by means of a special button on the charging device, billing at a higher tariff, etc.), will be considered, provided that it does not influence the quality and quantity of the charging of other electric vehicles.
But this smart grid doesn’t need to be in place from day one:
Charging control will be implemented at a time to be defined by the ESP, based on its readiness and on the number of electric vehicles in the market. ….. It is quite possible that charging control will be implemented in certain areas only, and not throughout the entire country.
Because until there are thousands of cars and more particularly high numbers in given areas, plugging them in presents no greater problem than adding a few more air conditioners to the grid.
Finally the sections about protecting customers from lock in contracts and stipulate roaming:
1. The charging supplier shall not constrain its customers from obtaining charging services from charging devices not owned or managed by it.
2. The licensee shall make open access available to any casual customer or customer of another charging supplier, without discrimination. A charging supplier shall not prevent the owner of an electric vehicle from charging his car at charging devices at its disposal, just because he is not a regular customer, and shall enable casual customers to charge their vehicles on an equal basis.
4. The supply agreement between the charging supplier and the customer shall not include provisions limiting the ability of the customer to terminate the agreement at any time. The charging supplier shall enable quick and easy termination of the engagement without exit penalties, at the customer’s discretion.
Roaming is an important issue. As electric cars have started to be slowly adopted in the rest of the world, owners are finding that options to charge their cars away from home are confusing, un-reliable and limited. Better Place are banking on making this much better in Israel and if there is another entrant into the market, Better Place will have to serve their customers and vice versa. Unfortunately this is theoretical at present: one other company has been named in a few newspaper articles but they don’t answer their phones and won’t even give details of their plans.
It is also reported that as and when someone other than Better Place does bring an electric vehicle to Israel, the Israeli Electric Company itself should be able to install a charging point and will charge exactly the same rate for electricity for cars as for any other domestic use. This is of academic interest only to Better Place customers, but important nevertheless.
I will be writing in the future about the specific economics of the Better Place offer and if you have specific questions please comment here.