Q&A: Better Place's Mike Granoff

The head of oil independence policies at Better Place says EVs will 'disrupt' the global car market sooner than most people think; and that they are renewable energy's best friend.

Mike Granoff was the first outside investor in the electric vehicle network operator Better Place, and is now the head of its oil independence policies. 

Granoff is currently visiting Australia as Better Place prepares to launch its first networks in Denmark and Israel, and gets ready to do the same in Canberra next year. This is an edited transcript of his interview with Climate Spectator.

Giles Parkinson: Mike, you head up the company’s Oil Independence Policy and Strategy. That sort of sounds like a declaration of war against some vested interests. What exactly is it that you do?

Mike Granoff: I don’t know about that. My background is in financial investment and then the other part of the last decade I became very interested in the clean technology sector, and the fact that astonished me then, and astonishes me now, is that global transportation is virtually a monopoly of a single dirty commodity. And the more I understood it, the more I realised that didn’t have to be the case. And as an economic matter, I came to learn that it would not continue to be the case. And, in fact, there was an inevitable disruption that was going to take place, just as 120 years ago we went in a very short period of time from oil based kerosene lighting to electric based lighting. And just as we’ve seen the economic disruptions in recent times around digitisation of music, and of media, we will see that same sort of process take place much faster than most would have you believe – what I call digitisation of transportation, which means electrification of cars.

GP: I guess there’s a very big industry, as you say, that has a monopoly there. Are they going to be lying down and letting you do this?

MG: Well, it may sound counterintuitive to you, but first of all, our first big investor was, effectively, an oil company. The conglomerate in Israel that owns the refineries there, that represents ...big oil there, invested a hundred million dollars and has invested in each round since that time. But more to the point, in conversations I have had, believe it or not, with people from the oil industry, they have told me they are rooting for us. And I said, at first, what do you mean you’re rooting for us? And they said, here is the problem: There are 750 million cars in the world – that number is expected to double over the next 20 years. And we all know the rate at which China is adding cars. It’s a phenomenal rate. And everyone understands that we pull out of the ground today 85 million barrels of oil every day and everyone understands that number is not doubling.

Now, you know, we maybe can move it up, although some doubt we can move it much higher than it is. It’s never been higher than 86 before, right? We saw what happened in 2008 when they tried. The oil companies know this. And the worst thing for the oil companies is not being able to figure out how to invest, because if there’s a hole that I can drill, but it’s going to cost me $80 to extract oil from that hole, do I do it? Well today, oil is $100, right? But what happened in 2008? Well, it spiked at a $148 a barrel; killed the global economy. It goes down to $30 a barrel. And then it goes back up. This instability will characterise the oil prices and the global economy until the monopoly on oil transport is broken. And the oil companies understand just as well and they are not going to get poor anytime soon. Eighty-five million barrels a day is not going to zero. But a smooth landing, a predictable demand curve would suit their interests as much as everybody else’s.

GP: You were the first investor in Better Place. I guess it’s good to be ahead of the pack, but as an investor in solar reminded me recently, it’s not always good to be too far ahead of the pack. Are you worried about that?

MG: That’s a good question. Lots of friends have cautioned me that sometimes people have gone broke having the right idea at the wrong time – too early. But I don’t believe that. I believe that the approach Better Place is taking to electrification is the approach that will be successful. And while, undoubtedly we will make lots of mistakes along the way, we’re moving into what is, globally, a two trillion dollar a year market – which is petrol at the pump – and, you know, we, I think, have a solution that is less expensive and more convenient to consumers and that is our declining cost curve. And you put all those things together – I feel very optimistic about our prospects, both to build a successful business and to significantly point the way towards an economy that is not completely held hostage to oil.

GP: Better Place has gotten a lot of recognition for thinking well ahead of the curve. At the same time it’s reasonably controversial in the sense that, for every person that thinks it’s a brilliant idea, there’s someone else who thinks that its model might be redundant before it starts. Why does it attract such polemics?

MG: I think that's not uncommon in revolutionary concepts. If you look, you can find consulting reports from the ‘80s that said that the global market for cellular handsets in the year 2000 would be no more than a million units. You’ve got consulting reports from the ‘70s that the global market for personal computers by 1990 would be no more than a million units. Now, you know, these big ideas are naturally polarising. Some people see them as revolutionary and some people see them as stupid. That doesn’t bother me at all, I think, because I have a healthy result that people have strong opinions on either side of the spectrum about them.

GP: You’re starting the rollout of your networks. You’re just about ready to go in Israel and then you’ve got Denmark and then you’ve got Australia next year and other places to follow. Do you think it’s going to be a little bit like clean energy in the sense that one country is just going to take the lead on this and go, go, go? Be it a country in Europe or be it a China or an India or an America. Do you have any thoughts about how that might pan out?

MG: Well, you know, there are a few different aspects to this. I think what we will prove in Israel, Denmark and Australia is that, indeed, by separating the battery from the car, by offering packages of kilometres with guaranteed mobility at fixed cost, that we will reach penetration levels that far exceed those of other approaches to electric cars and non oil transportation. And so, obviously that will be to the benefit of those countries. It will also be to the benefit of the carmakers that supply the cars to us. And I think you’re beginning to see governments and companies position themselves for this.

Right now you have three large car markets as in US, Europe and China. The advantages that Europe has going for it is that it has traditionally priced petrol very high, with taxation that makes it very attractive to folks that think they have a solution for the 100 per cent market share of petrol. The advantage that China has going for it is that the government has put $15 billion in a program to lead the electrification. The question is only one of sequence, here. The economics are moving on an intractable curve and that we will see electrification take place in a disruptive way.

GP: Do you include the US in that? Because I guess that’s where fuel and gas is probably cheaper than elsewhere.

MG: Here is where I have failed miserably in my own job, which was to get us the policies in the US that would put it on even playing fields with those other markets. And the reality is that we have a situation today in the US that we have a fairly paralysed political system and we have a slow growing economy. But I think there’s no question that electrification will take hold in the US as well. Personally, I wish the US would lead – and I think it can and I think there’s a strong interest, nationally, for that to happen. We’ve raised, now, $US750 million from the private sector. We have, actually, a legal duty – a fiduciary responsibility – to get the highest return on those dollars for those investors and the way that we do that is to move into geographies that have favourable economics and favourable policies for our model. And right now – while we do have some operations from demonstrations that are going on in North America – Europe, Israel, China and Australia are just more attractive markets.

GP: You’re not just trying to tip up the transport industry, you’re also going to be playing a key role, deliberate or not, in the transformation of the energy industry, simply because of the role that EVs can play in the smart grids of the future and the distributed generation of the future. Are you leading too far out on this? Is the energy industry going to be with you? And what are the possible impediments to your business model if they don’t come on board?

MG: What I’ve seen is the large diversity of use among utilities on electrification. But frankly, I’ve also seen that the ones who are least supportive are also the ones that are the least knowledgeable. The more the energy producers understand the storage, the versatility that having massive options of electric cars distributed across their grids has, the more positive they are. And we’ve certainly seen that in the markets where we’re operating.

I think that electric cars are renewable electricity’s best friend and I think more and more of that’s beginning to become noticed. I’m not sure if you’re familiar with the story of Denmark where it’s very vividly the case, given the fact that they’ve been so successful in producing wind generated electricity; but at a certain point they had to start actually paying Germany to take wind electrons off their hands at night. And they understand that by creating the conditions that permit hundreds of thousands – ultimately millions – of electric cars to be on their network, on their grid, all that wind electricity at night will get to go into those car batteries that can then be turned around and used to support the grid at peak hours rather than their dirtiest producing plants that they now use for those peak hours.

GP: So, you describe this technology as disruptive. How disruptive is it going to be? And who’s it going to hurt?

MG: I think we will see a tipping point occur in this decade at which it’s clear to all that the trends are moving in fairly aggressive ways and once those trend lines are known to people, then you know it’s not that the cars suddenly appear, but the markets do react very quickly, as we saw in 2008 when car sales fell basically by 40 per cent overnight when oil was at $149 a barrel. And so, the problem I see is that I think there are a lot of parties have conceded that electrification is the future, but are looking at this on a 20 or 30 year horizon, when I think we’re looking at a 5 to 15 year horizon.

GP: And what’s it going to take to get the public on board. Is there going to be a magic trick?

MG: There is a real magic trick to get the public on board. Don’t make the make them pay a premium for the car. That is it. And make it more convenient. And this is frankly the biggest misconception around Better Place – and I’ll make it as plain as I can: the people who are going into dealers in Israel and Denmark today to buy Renault Fluence on the Better Place plan are not paying more than they would pay for gas versions of that car. That is not true of any other electric car. Why? Because other electric cars ...you are paying for that battery and that battery is a big premium. And plus the fact that the battery switch networks enable unlimited mobility; enable us to make the promise to consumers that they can keep going as much as they want, they’ll never get stuck.

And so, that’s basically affordability and convenience – that’s what is going to shift the market. And I think you have such a low proportion of people that have ever driven an electric car; you have such wide misconceptions about them that every person I’ve seen who’s got into the car, their expectations have been vastly exceeded. And so I don’t have any doubt that, you know, you get their attention with the competitive price and the network that permits unlimited mobility and they come to test drive it and every person that gets out of one of our cars at one of our visitor centres in Tel Aviv and Copenhagen – and next week we open one in China – everybody’s got a smile on their face; they can’t believe that car performs as it does, quieter and smoother.

GP: Yeah. What can go wrong then? Oil prices stay low? Or fuel efficiency in internal combustion engine cars improve dramatically?

MG: You know, the fuel economy improvements are no match for this. Oil prices being stable could only result from a protracted global economic recession, or worse. But, like I said, even in the very slow global growth we’re in today, China is still adding cars and, you know, we could be off on the timing of this by some small amount, but the way that we’re seeing these cost curves go, I think the tipping point does happen in this decade.

GP: Ok. And what sort of car do you drive?

MG: I drive, actually, at the moment, a very unusual car. It’s a Mini Cooper that is part of a 400-car program in North America – all electric – that I’ve had now for a couple of years. And the BMW is swapping out later this month for a BMW Active E, which is a 700-car program for consumer testing of their electric cars leading to the deployment of their I Series in 2013. But I should say I also bought a Chevy Volt for my mum, and so she’s driving the Volt.

GP: Oh. So, you paid a premium then, huh?

MG: I did pay a premium for that because I’m in the small percentage of ideological consumers that is willing to pay the premium and, you know, if everybody would, and could, do that then we wouldn’t need to have such an innovative model. But the reality is that there’s 1 or two 2 per cent of the public that buys on ideology and can afford to pay a premium and the rest of the public really just is buying cars on value and what they’re getting for their money. And that’s why I think our model is going to deliver to those consumers more car for the money and a better driving experience.

GP: Terrific. Mike, I really enjoyed that conversation. Thank you very much for doing it.

MG: My pleasure. Thank you.



GP: Mike, you head up the company’s Oil Independence policy and strategy.  That sort of sounds like a declaration of war against some vested interests.  What exactly is it that you do?
MG: I don’t know about that. My background is in financial investment and then the other part of the last decade I became very interested in the clean technology sector, and the fact that astonished me then and astonishes me now which is that global transportation is virtually a monopoly of a single dirty commodity. And the more I understood it the more I realised that that didn’t have to be the case and as an economic matter I came to learn that it would not continue to be the case.  And in fact there was an inevitable disruption that was going to take place just as a 120 years ago we went in a very short period of time from oil based kerosene lighting to electric based lighting. And just as we’ve seen the economic disruptions in recent times around digitisation of music, and of media,  we will see that same sort of process take place much faster than most would have you believe of what I call digitisation of transportation, which means electrification of cars.
GP: I guess there’s a very big industry as you say that has a monopoly there.  Are they going to be lying down and letting you do this?
MG: Well, it may sounds counterintuitive to you, but… first of all, our first big investor was effectively an oil company. The conglomerate in Israel that owns the refineries there, that represents sort of big oil there invested a hundred million dollars and has invested in each round since that time. But more to the point, in conversations I have had, believe it or not, with people from the oil industry, they have told me we are rooting for us and I said at first, what do you mean you’re rooting for us?  And they said here is the problem.  There are 750 million cars in the world.  That number is expected to double over the next twenty years. And we all know the rate at which China is adding cars.  It’s a phenomenal rate.  And everyone understands that we pull out of the ground today 85 million barrels of oil every day and everyone understands that number is not doubling.
Now, you know, we maybe can move it up, although some doubt we can move it much higher than it is.  It’s never been higher than 86  before, right. We saw what happened in 2008 when they tried. The oil companies know this.  And the worst thing for the oil companies is not being able to figure out how to invest because if there’s a hole that I can drill, but it’s going to cost me $80 to extract oil from that hole, do I do it?  Well, today oil is $100, right.  But that… And what happened in 2008?  Well, it spiked at a $148 a barrel, killed the global economy.  It goes down to $30 a barrel.  And then it goes back up.  This instability will characterise the oil prices and the global economy until the monopoly on oil transport is broken.  And the oil companies understand just as well and they are not going to get poor anytime soon. Eighty-five million barrels a day is not going to zero. But a smooth landing, a predictable demand curve would suit their interests as much as everybody else’s.
GP: You were the first investor in Better Place. I guess it’s good to be ahead of the pack, but as an investor in solar reminded me recently it’s not always good to be too far ahead of the pack.  Are you worried about that?
MG: That’s a good question. Lots of friends have cautioned me that sometimes people have gone broke having the right idea at the wrong time, too early, but I don’t believe that.  I believe that the approach at Better Place is taking to electrification is the approach that will be successful and while or undoubtedly we will make lots of mistakes along the way.  We’re moving into what is globally a two trillion dollar a year market which is petrol at the pump and, you know, we I think have a solution that is less expensive and more convenient to consumers and that is our declining cost curve, and you put all those things together.  I feel very optimistic about our prospects both to build a successful business and to significantly point the way towards an economy that is not completely at the… held hostage to oil.
GP: Better Place has gotten a lot of recognition for thinking well ahead of the curve.  At the same time it’s reasonably controversial in the sense that for every person that thinks it’s a brilliant idea, there’s someone else who thinks that its model might be redundant before it starts.  Why does it attract such polemics?
MG:                  I think that is not uncommon in revolutionary concepts if you look, you can find consulting reports from the ‘80s that said that the global market for cellular handsets in the year 2000 would be no more than a million units. You’ve got consulting reports from the ‘70s that the global market for personal computers by 1990 would be no more than a million units.  Now, you know, these big ideas are naturally polarising.  Some people see them as revolutionary and some people see them as stupid. That doesn’t bother me at all. I think because I have a healthy result that people have strong opinions on either side of the spectrum about them.
GP: You’re starting the rollout of your networks. You’re just about ready to go in Israel and then you’ve got Denmark and then you’ve got Australia next year and other places that follow.  Do you think it’s going to be a little bit like clean energy in the sense that one country is just going to take the lead on this and go, go, go? Be it a country in Europe or be it a China or an India or an America.  Do you have any thoughts about how that might pan out?
MG: Well, you know, there are a few different aspects to this. I think what we will prove in Israel, Denmark and Australia is that indeed by separating the battery from the car, by offering packages of kilometres with guaranteed mobility at fixed cost, that we will reach penetration levels that far exceed those of other approaches to electric cars and non oil transportation.  And I… And so, obviously that will be to the benefit of those countries.  It will also be to the benefit of the carmakers that supply the cars to us.  And I think you’re beginning to see governments and companies position themselves for this.  And right now you have three large car markets as in US, Europe and China.  The advantages that Europe has going for it is that it’s traditionally priced petrol very high with taxation that makes it very attractive to folks that think they have a solution for the hundred per cent market share of petrol.  The advantage that China has going for it is that the government has put fifteen billion dollars in a programme to lead the electrification. The question is only one of sequence here.  The economics are moving on an intractable curve and that we will see electrification take place in a disruptive way.
GP:  Do you include the US in that?  Because I guess that’s where fuel and gas is probably cheaper than elsewhere.
MG:                  Here is where I have failed miserably in my own job which was to get us the policies in the US that would put it on even playing fields with those other markets, and the reality is that we have a situation today in the US that we have a fairly paralysed political system and we have a slow growing economy. But I think there’s no question that electrification will take hold in the US as well.  Personally, I wish the US would lead and I think it can and I think there’s a strong interest nationally for that to happen. We’ve raised now $750 million from the private sector.  We have actually a legal duty, a fiduciary responsibility to get the highest return on those dollars for those investors and the way that we do that is to move into geographies that have favourable economics and favourable policies for our model.  And right now, while we do have some operations from demonstrations that are going on in North America, Europe, Israel, China and Australia are just more attractive markets.
GP:                  You’re not just trying to tip up the transport industry.  You’re also going to be playing a key role, deliberate or not, in the transformation of the energy industry simply because of the role that EVs can play I guess in the smart grids of the future and the distributed generation of the future.  Are you leading too far out on this?  Is the energy industry going to be with you and what are the possible impediments to your business model if they don’t come on board?
MG:                  What I’ve seen is the large diversity of use among utilities on electrification, but frankly I’ve also seen that the ones who are least supportive are also the ones that are the least knowledgeable and that the more the energy producers understand the storage, the versatility that having massive options of electric cars distributed across their grids has, the more positive they are.  And we’ve certainly seen that in the markets where we’re operating and I think that electric cars are renewable electricity’s best friend and I think more and more of that’s beginning to become noticed.  I’m not sure if you’re familiar with the story of Denmark where it’s very vividly the case.  Given the fact that they’ve been so successful in producing wind generated electricity, but at a certain point they had to start actually paying Germany to take wind electrons off their hands at night and they understand that by creating the conditions that permit hundreds of thousands, ultimately millions, of electric cars to be on their network, on their grid, all that wind electricity at night will get to go into those car batteries that can then be turned around and used to support the grid at peak hours rather than their dirtiest producing plants that they now use for those peak hours.
GP:                  So, you describe this technology as disruptive. Gow disruptive is it going to be and who’s it going to hurt?
MG:                  I think we will see a tipping point occur in this decade at which it’s clear to all that the trends are moving in fairly aggressive ways and once those trend lines are known to people, then you know it’s not that the cars suddenly appear, but the markets do react very quickly as we saw in 2008 when car sales fell basically by forty per cent overnight when oil was at a hundred and forty-nine dollars a barrel.  And so, the problem I see is that I think there are a lot of parties have conceded that electrification is the future, but are looking at this on a twenty or thirty horizon when I think we’re looking at a five to fifteen year horizon.
GP:                  And what’s it going to take to get the public on board.  Is there going to be a magic trick …?
MG:                  There is a real magic trick to get the public on board.  Don’t make the make them pay a premium for the car.  That is it.  And make it more convenient.  And this is frankly the biggest misconception around Better Place and I’ll make it as plain as I can; the people who are going into dealers in Israel, Denmark today to buy Renault Fluence on the Better Place plan are not paying more than they would pay for gas versions of that car.  That is not true of any other electric car.  Why?  Because other electric cars with six batteries you are paying for that battery and that battery is a big premium.  Now, that is… And plus the fact that the battery switch networks enable unlimited mobility enable us to make the promise to consumers that they can keep going as much as they want, they’ll never get stuck.  And so, that’s basically affordability and convenience, so that’s what is going to shift the market.  And I think you have such a low proportion of people that have ever driven an electric car.  You have such wide misconceptions about them that I… every person I’ve seen who’s got into the car, their expectations have been vastly exceeded, and so I don’t have any doubt that, you know, you get their attention with the competitive price and the network that permits unlimited mobility and they come to test drive it and every person that gets out of one of our cars at one of our visitor centres in Tel Aviv and Copenhagen, and next week we open one in China, everybody’s got a smile on their face; they can’t believe that car performs as it does, quiet and smoother[smoothly17:20???].
GP:                  Yeah.  What can go wrong then?  Oil prices stay low?  Or fuel efficiency in internal combustion engine cars improve dramatically?
MG:                  You know, that’s… The fuel economy improvements are no match for this.  Oil prices being stable could only result from a protracted global economic recession or worse, but like I said even in the very slow global growth we’re in today, China is still adding cars and, you know, we could be off on the timing of this by some small amount, but the way that we’re seeing these cost curves go, I think the tipping point does happen in this decade.
GP:                  Ok. And what sort of car do you drive?
MG:                  I drive actually at the moment a very unusual car.  It’s a Mini Cooper that is part of a four hundred car programme in North America, all electric, that I’ve had now for a couple of years and the BMW is swapping out later this month for a BMW Active E which is a seven hundred car programme for consumer testing of their electric cars leading to their deployment of their I Series in 2013, but I should say I also bought a Chevy Volt for my mum and so she’s driving the Volt.
GP:                  Oh.  So, you paid a premium then, huh?
MG:                  I did pay a premium for that because I’m in the small percentage of ideological consumers that is willing to pay the premium and, you know, if everybody would and could do that, then we wouldn’t need to have such an innovative model, but the reality is that there’s one or two per cent of the public that buys on ideology and can afford to pay a premium and the rest of the public really just is buying cars on value and what they’re getting for their money.  And that’s why I think our model is going to deliver to those consumers more car for the money and a better driving experience.
GP:                  Terrific.  Mike, I really enjoyed that conversation.  Thank you very much for doing it.
MG:                  My pleasure.  Thank you.