What’s the Business Model for Owning Car Batteries?

In following up yesterday’s review of the “All-Electric America” book, I asked co-author Leah Y. Parks what the business model for having utilities own car batteries is.

She kindly answered that question and pointed to a press release by a company called Green Mountain Power.

That press release introduces an offer to customers of getting a Tesla Power Wall home battery installed in cooperation with Green Mountain. Customers can choose between different models of buying or leasing the battery. In some of the variations, the utility ends up owning the battery.

That’s interesting, but it does not answer the question directly. The question was about the business model for car batteries.

I have searched a bit and came up with the unfortunately failed company Better Place. That company burned through over $850 million trying to sell batteries separate from electric cars. Their business model involved building stations for replacing batteries.

That failure shows that it may be difficult to come up with a business model that makes economic sense.

It also shows that anyone trying to start owning batteries in other peoples’ cars should try to keep cost down. Don’t try to build expensive new infrastructure. Just find some way to keep ownership of the batteries separate from that of the car that makes sense.

Here are a couple of ideas.

One.

Another article I found was about America’s biggest utility Duke Energy. Duke vice president of emerging technology David Mohler was cited with the idea of picking up batteries second hand from car owners.

If so, someone could have a program where they guarantee Tesla customers to buy the battery three years later at some price or other, with Duke picking up the tab for that as well as the second hand battery.

Such a deal would in turn be a good basis for a battery leasing contract, since the value of the battery after three years would be fixed in advance.

Two.

Have the utility own the whole battery. In exchange, have the customer pay a fixed amount per mile the car runs. Reduce that amount slightly for electricity sourced from the utility. Reduce it further if the utility gets to use the battery for grid backup purposes.

Note that neither of these models involves rolling out any expensive battery exchange infrastructure.

Note also that neither of these models requires that the car manufacturer is a party to the deal. If Tesla does not want to sell their cars without batteries, that does not keep a Tesla owner from selling his battery to the utility, or to someone else leasing it right back to them.

For Tesla, this kind of thing would be just another way to lower purchase costs. Eventually car batteries will be so cheap that electric vehicles don’t cost more than gasoline cars. But that’s not true yet.

As long as the battery cost is substantial, some such model might contribute strongly to accelerating the switch away from gasoline cars.