Denmark: A better place for Better Place?

The Danish government has expressed enthusiasm for Shai Agassi's electric car project, and Denmark could be an ideal testing ground.

At the end of last week, it was reported that the international liaison manager for R&D at the Chief Scientist's Office was enthused by a test ride in the prototype of Shai Agassi's electric car. This was further to the Chief Scientist's call last week to Israeli companies to participate in developing components and systems for the "electric car vision", accompanied by a promise that he would extend generous aid to them for development.

Although the collaboration that the Chief Scientist is promoting is with French car maker Renault, and in theory there is no direct connection to the rate of progress of Shai Agassi and Israel Corp.'s (TASE: ILCO) electric car project, Renault's electric project and Agassi's are nonetheless clearly closely linked, particularly when it comes to development of the technology for the charging stations that are supposed to be set up in Israel.

On its way to Denmark

The official from the Chief Scientist's Office wasn't the only one to take a test ride in the electric car prototype that day. Danish Embassy sources say that a senior delegation representing the government of Denmark was also present. The delegation was there to promote implementation of the project in Denmark.

It turns out that the contacts with Denmark began at a very early stage of the project, at the same time as, and perhaps even before, it began to get going in Israel. At the end of last year, Danish Minister of Transport and Energy Jakob Axel Nielsen was interviewed by Danish newspaper Berlingske and could hardly conceal his enthusiasm for the project. "My opinion of the project is very positive," he said, and added, "I hope that it will become a reality in Denmark by 2015."

The newspaper goes on to describe Agassi's proposed project, and the description, one must admit, sounds like a carbon copy of its Israeli counterpart. "The investors propose financing the setting up of about 500,000 charging points in parking lots, places of work, and private houses. They only request that the Danish government should grant a tax exemption for the vehicles so that they can be sold at attractive prices."

In January this year, the Danish Embassy in Israel published a very optimistic announcement on the subject. The announcement said, among other things, that " Agassi has singled out Denmark as one of the pioneer countries for the project, and the Danish government is indeed greatly interested in the ventures of ‘Project Better Place’… The Danish government is currently analyzing an array of different statutory aspects with regard to the implementation of ‘Project Better Place’ in Denmark. Hence, a final conclusion is yet to be decided upon."

It is not known how the Danes responded to their test drive in the Israeli car, which is based on the Renault Megane, but there is one clear indication that their impression was favorable. Danish sources report that the prototype will go overseas this week and will soon arrive in Denmark.

"Fair participation"

The choice of Denmark as a main target for launching the electric car is not coincidental. Denmark has several characteristics that make it stand out among European countries as an ideal trial arena for realizing the project.

The most important characteristic is very heavy taxation, among the highest in the world, on new cars. A Danish citizen who wants to buy a new car has to pay two separate car taxes compared with which even Israeli car tax seems insignificant. The first is a licensing tax, that starts at a rate of 105% on cars valued at under €8,500, and jumps to 180% on higher value cars. In practice, the tax is even higher, because it is calculated on the value of the car after VAT. VAT alone in Denmark amounts to 25%.

Apart from the high fixed tax, Denmark also levies an annual "green" tax on vehicles. This tax is calculated according to the vehicle's average fuel consumption, not its emissions. The tax starts at €70 a year for a petrol-fueled vehicle with an average fuel consumption of 20 kilometers per liter (and there are few of those on the market), and rises to €2,500 a year for a vehicle that travels five kilometers per liter or less.

Behind this tax are reasons that lie deep in Danish politics and culture, and this is not the place to examine them. However, the official reason for imposing it is "fair participation by vehicle owners in the cost of road infrastructure and its maintenance." The unofficial reason is that this tax generates revenues of more than €3 billion a year for the government. It is therefore clear that, if the Danish government grants even a partial tax exemption for the Israeli car, it will give the project a substantial push.

Green energy sources

Another important reason why Denmark has been selected as a place for launching the project is the country's outstanding activity in producing alternative, clean energy. It should be recalled that one of the principles of the electric car project is that production of the electricity for powering the cars should be transferred from conventional, polluting sources, such as power stations, to "green" energy sources.

In sun-drenched Israel the talk is of setting up a solar power plant that will provide the electricity the project requires. In Denmark, on the North Sea coast, the "green" energy source is the wind. The small country now has many wind turbine farms, each of which produces more than 100 megawatts of electricity. Denmark's long-term goal is to produce 40% of the electricity it consumes from wind-power alone.

The electric car project could even solve a problem for the Danes. Unlike solar power plants, that produce electricity for the grid only during the day, wind turbines produce electricity all night as well, when demand is very low. If the electric car batteries are charged at night, as the project promises, this will substantially improve the usage of the turbines, making wind-produced energy more worthwhile and bringing electricity costs down.

The third reason for selecting Denmark is political. The Danes' awareness of environmental matters such a recycling, energy conservation, emissions, and so forth, has always been very high, and the current Danish government is one of the most "pro-green" on the continent.

Israeli money, Danish profit

The duplication of Shai Agassi's project is a development that should be monitored in Israel. The Danes too have doubts whether switching to a green car justifies the price to be paid in having more cars on the road, for example.

However, there is another question that should be considered. The Better Place project was set up from the start as an international project by a private company that never concealed its intentions of expanding it and replicating it in other countries. The question is whether the State of Israel, through the Chief Scientist, should be the one to subsidize the cost of developing the car, the charging infrastructure, and the components, for benefits to be reaped in other countries. Should the Office of the Chief Scientist not receive, for example, royalties on exploitation of the technology overseas? Or perhaps it's simply worthwhile for us to let the Danes try it out first?

Published by Globes [online], Israel business news - www.globes.co.il - on March 20, 2008

© Copyright of Globes Publisher Itonut (1983) Ltd. 2008

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