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Does the Market Select Solutions?

At present different technical solutions and systems alternatives are developed in parallel and they are used in parallel. There is a strong belief in the market mechanism and that the market will prove which alternative is the best and most efficient and weed out the less promising ones. But is this really the case?

In the case of e-mobility there are different solutions that are developed in many areas. The different plugs that are used by different car manufacturers that develop a need to build different networks of charging posts is one example. Another is the different alternatives that exist in heavy transportation, where there are projects that develop electric road systems and some vehicle manufacturers participate in those and some develop trucks that are fitted with battery packs for short- to medium distance transportation.

In theory these alternatives will only exist for a short period of time at the beginning of a development and the market forces gradually and cost effectively weed out the bad ideas and promote the best alternatives. In reality, it is not that smooth. Markets do not work as efficiently at early stages of development of new technologies, concepts, and principles as they do later in the process and market driven development is often too slow at early stages.

Historically, governments have taken the role of driving and financing development through early stages and they have in many cases created programmes and large-scale projects that have developed national or local systems and driven forward standardisation. Examples are ICT, telephony, railways, water- and sewage-systems, power, aviation, space technologies, particle accelerators etc. In the case of the automotive development this was sped up significantly when countries started to motorize armies and large numbers of identical vehicles had to be produced with the effects that costs were reduced, reliability improved, and maintenance had to be simplified.

In the case of e-mobility, the development is at an early stage and there is an increasing number of car models on the market. Still, the share of electric and hybrid cars is only 0.5 per cent of all cars in global fleets. Countries have not experienced the systems-related challenges of the transformation, when the expansion of e-mobility will require large investments in power grids and connectivity, as all electric vehicles need to communicate with grid operators to optimize charging.

At the present early stages, it is expected that the market will drive forward the expansion of e-mobility and weed out the less promising solutions, but this is unlikely to happen in the short-term. Instead the existence of several alternatives may keep buyers from buying cars and trucks, as they wait for the market to tell them which alternative will be the most successful. In the area of heavy transportation it is likely that there will be a need for electric road systems to reduce the need for large batteries, but some sales of trucks with substantial built-in batteries may give governments the impression that there will not be a need for electric roads and decisions may be pushed forward in many countries.

As two examples of large-scale failures, the company Better Place may be mentioned as a company that filed for bankruptcy in 2013, losing 850 million dollars of investors’ money. The company launched systems with battery switching stations across Denmark and Israel, its two pilot markets. In France, the scheme Autolib was launched in Paris and other cities. In Paris the company made more than 2000 electric cars available in a large-scale car-sharing service, which ended in 2018 after 7 years of operation. The company had installed 4000 charging posts around the city.

In the case of video recorders in the 1980’s it was not a huge problem that there were three different systems on the market, because families who wanted to buy recorders did not risk losing large amounts of money by choosing Betamax, an alternative that failed in the competition. Logistics companies who are faced with the alternatives of investing heavily in electric trucks or await the expansion of electric road systems play with very high stakes. Taking the wrong decisions, if implemented on a large scale in companies, may be catastrophic. In the case of electric cars some customers may not be certain if the system that will succeed over the long term may be electric cars or hydrogen fuel cells, which may keep some customers from investing and helping to drive the transformation forward.

In these and other cases development may be delayed, and important steps may not be taken because of an uncertainty about alternatives. In most earlier technology developments governments have played the role of system integrators and they have made important decisions about standards and it is doubtful if the market will be able to make such decisions in the various developments related to e-mobility.

/Mats Larsson

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