Can three cents be transformed into billions of dollars?

That's the big question when it comes to Better Place, the well-funded start-up that wants to put people into electric cars. Driving a gas car costs about 12 cents a mile when gas costs $3 a gallon, says Jason Wolf, vice president the company's North American division.

Electricity, on the other hand, costs about 3 cents a mile: a kilowatt hour costs around 12 cents and a car can go around 4 miles on a kilowatt hour. A battery for an electric car, meanwhile, will cost around 6 cents a mile over a 200,000 mile lifetime.

Since Better Place says it will supply the electricity and batteries to consumers, the company has a margin of 3 cents per mile (12 cents minus 9) before potential customers complain about the higher cost of going electric. Granted, 3 cents doesn't sound like much: I harvest more loose change than that every time I do laundry. And Better Place proposes building thousands of charging stations, hundreds of battery swapping stations, and devising software so these cars won't crash the grid when charging.

But look at it from another perspective. There are around 200 million drivers and 254 million vehicles in the U.S. and insurance companies say the average person drives 12,000 miles a year. That comes to 2.4 trillion miles, or $72 billion of potential three-cent transactions per year. Even one percent of that would probably placate investors. And in Europe and Asia, higher gas prices boost that 3 cent margin to 9 or 12 cents. Additional revenue can come from selling semi-depleted batteries to utilities, which isn't part of the above calculations.

And with the battery separated from the car, the down payment and resistance toward going electric goes way down.

"When you buy a Toyota, you don't buy eight years of gasoline," Wolf said. "You take out the battery and now you have a much, much cheaper car."

Big math problems like that, along with their inherent uncertainties, make Better Place one of the more intriguing companies in greentech today, or in any market, for that matter. In a short period of time, the company has joined the ranks of Google, Apple, Microsoft and Tesla Motors as a subject of endless debate and speculation. How did they raise over $700 million? How much have they spent? Will car dealers and manufacturers work with them?

I've criticized the company's strategy in the past. Now, after talking to Wolf, I have to admit that the plan actually makes more sense.  But the recent discussion also crystallized what appear to be five big hurdles the company will have to overcome.

Here is how the service works. Consumers will buy electric cars, but not the battery. Better Place will build charging networks and then charge consumers subscription fees that cover the cost of the car's battery, the electricity to run them, and ancillary services like smart charging software and charging station maps. (The company figures 2.1 charging stations per car, by the way.) Since the battery accounts for about one-third of the cost of an electric car, the sticker price will be far lower than competing cars sold with batteries.

Along the way, it will also offer discount entertainment packages, insurance and other services.

Competitors such as Coulomb Technologies will offer subscriptions too, but they won't include the battery. In other words, a more expensive car, but a less elaborate subscription -- and it works with any electric car.

So what are the Better Place hurdles?

1. Fear, Uncertainly and Doubt. The ol' Nixonion Trilogy is perhaps the largest looming barrier. It's just plain weird to buy a car but lease the most expensive component.  Nissan recently announced it would initially not try battery rental strategy in the U.S. with the Leaf, due to negative response to the concept in customer surveys.

This is America, after all. We hate renting. Graduating from renting an apartment to buying a home has become enshrined as hallmark of adulthood. And if there's one thing we hate more than renting, it's sharing stuff with strangers. Who had this battery before me? Is that smoke coming from the hood? The first time someone gets in a bad accident or the car conks, watch them blame it on some stranger's battery.

Getting consumers comfortable with this will take extensive marketing and hand-holding. And they will have legitimate questions. How will this impact the resale price of the car? What if Better Place goes out of business? Is this like getting a car from Hertz? You might pay more money and feel cheap at the same time.

The weirdness of it all is one more reason Better Place may succeed in Israel first. In Israel, large companies give cars to employees as sort of a fringe benefit. Thus, the drivers won't have to worry about who-owns-what questions.

2. It's the Dorian Gray-Mobile. Swapping, as it takes place over time, is the brilliant nugget buried in the business plan. Consumers don't have to worry about their battery degrading. In fact, their cars will stay younger longer because Better Place will circulate newer, longer-lasting batteries into the fleet.

But for Better Place, the benefits are even greater because batteries will decline in price over time. Several months ago, lithium-ion batteries sold for around $900 a kilowatt hour, according to various estimates. Now lithium batteries sell for $500 a kilowatt hour, said Wolf, and the Department of Energy is funding research to drop it to $250 a kilowatt hour. (Others put the price at closer to $900 now.) Moore's Law will similarly whack the cost of the electrical components surrounding the cells in the battery pack.

Declining prices, of course, mean increased margins. At $250 a kilowatt hour, Better Place's battery expenses drop to 3 cents a mile and the gross margin doubles to 6 cents. The company can then add to its margins by selling the semi-depleted battery packs to utilities for grid balancing.  

Overall, this is a huge plus for everyone, but one that could go wrong in word-of-mouth. Consumers might see this as buying a car with a perpetual stream of payments. Never ending fees explain why many detest cable companies: your monthly rates is going up, but now you get the Bowhunter Network and Hungarian Life in HD.

Slogans could help: "The Only Car that Gets Better with Age." "It's a Timeless Classic. Really," etc. If the company can stroke the ego of upper-middle-class consumers and convince them they are getting a superior deal to those clods that insist on owning batteries, perceptions may turn. But if Better Place doesn't surrender some margin on its savings, the program could smell like a trap.

3. Hostility from Car Makers. The battery is one-third of the price of an electric car. That means car manufacturers only get to sell two-thirds of a car, leaving them and their dealers less wiggle room for haggling and making a profit. That should really warm car makers up to this. Car manufacturers -- on the whole, a conservative lot -- also worry about safety, warranties and design homogenization.

"The battery defines the architecture of the car. It only makes sense if you have the same type of battery for every car," Ulrich Hackenberg, a member of VW's board told me last year. "I can't imagine all of the OEMs are building their cars around this type of battery."

Volkswagen and Ford do not have battery swap plans on the road map, while General Motors and Fisker have hybrids that make swapping unnecessary. Tesla will have one version of the Model S with a swappable battery. So far, it's not a rousing start.

On the other hand, fleet sales of these things are drawing customers, which car makers won't want to miss out on.

"In Israel and Denmark, we announced with Renault that we are buying 100,000 switchable cars," Wolf said. "That is larger than all of the noise in the U.S."

4. Your Dryer. Most people don't realize this, but they already have an electric car charging station. It's the 240 volt outlet their clothes dryer is plugged into. Technically, you will need to install a charger for safety reasons, but it's essentially the same outlet.

Do you really need subscriptions from Better Place or Coulomb? Your first electric call will likely be a commuter car, plowing less than 40 miles a day, so the need for public chargers remains small. Both companies readily admit most consumers will charge their cars at home. If you drive 12,000 miles a year like the average American, your electricity costs come to $360 a year, or $36 a month. And if you charge at off-peak hours like the utilities will urge you to, the monthly costs drop to $24. Costco offers free electricity in some cars and one can imagine office buildings doing the same.

"When 90 percent of the cars are electric, do you think the majority of charge spots will be free?" he asked. Maybe not, but those subscription services better be mighty cheap.

5. It's Not a Cellular Network. Better Place often analogizes the service to the cell phone industry. In the early days, cell phone equipment was expensive: the only guy that could afford them was Michael Douglas with that shoe phone in Wall Street. Now, phones go worldwide and the infrastructure costs have dropped.

Better Place drivers will be able to charge on other networks, so the company won't have to build as many charging stations as you might think. Plus, the number of charging stations isn't extreme, which means Better Place only has to keep about 12 batteries at each switch station.

"A switching station can support 3,000 cars," Wolf said. "A gas station supports 60 cars. There are 1,200 gas stations in the Bay Area. You won't need that many charge stations...With a 100 switch stations in the Bay Area, you can support hundreds of thousands of users."

"Smart phones are switchable cars," he added later.

Still, the prices of cell phone equipment and Better Place equipment aren't remotely in the same league. A cell phone costs less than $20 to make and Verizon charges customers $30 to $100 a month to use them. Antennas continue to plummet in price, they largely get planted on marginal land that has no other economic use and everyone owns a phone. When a phone breaks, you get a new one. These factors are far different with cars. 100,000 drivers means $4.8 million worth of charging stations, $210 million worth of swapping stations and $1.2 billion worth of $12,000 batteries.

Cell phones give you freedom to take calls and get emails away from your desk.

Then again, with a leased battery, electronics are someone else's problem. That's freedom by another name.

So it could work.