Better Place, the auto startup that wants to put you into an electric car, might ultimately get into the energy business, too.

Because of its unusual business model, Better Place may be in a position some day to buy power from utilities and wind farms at night when it's cheap and then sell it during peak periods, according to Jason Wolf, vice president of North America for the company, who explained the model during a conference held by Agrion Business Network in Palo Alto on Wednesday.

This approach would effectively allow the car company to function as an independent power provider.

The possibility of selling energy -- and it is indeed a big 'if' -- largely revolves around the fact that Better Place will own the batteries in the cars on its network. Consumers will buy (or lease) their cars, but get batteries and the power to run them through a subscription contract through Better Place.  

Centralized battery ownership and management could potentially simplify significantly the car-to-utility power transaction. Utilities wouldn't have to negotiate deals with thousands or millions of consumers. They would just have to sign a single performance contract, including penalties and bonuses, with a middleman. Conversely, customers don't have to track the price of power and conduct their own arbitrage trades.

An aggregator "can make that calculation" in their stead, said Wolf.

The swing between high and low power prices can be somewhat significant. In Texas, wind farm owners currently pay companies to take power generated at night. Peak power, meanwhile, can cost 35 cents a kilowatt hour or more in California. Utilities will also pay independent power providers fees to guarantee capacity, added Brett Williams, a transportation and sustainability researcher UC Berkeley.

In a sense, this would turn car batteries into an energy storage service-similar to how Beacon Power sells time on its flywheels to utilities as an energy storage service. (Side note: because it offers a power service, Beacon is registered as a utility in New York.)

Consumers would also not have to worry about the accelerated degradation of their batteries due to repeated charging and discharging to feed the grid, as they wouldn't own the battery. At the same time, it could potentially make electric cars more economical if the benefits of selling power back to the grid trickle down to the consumer in the form of lower prices. Right now, under conventional vehicle-to-grid scenarios, most of the benefit goes to the utility.

"We need a system that reduces the cost of vehicle fuel without any user interaction," added Joby Lafky, senior director of business development at GridPoint. Lafky said he recently saw an in-car panel that lets consumers set buy/sell prices for power. "Consumers will not tolerate anything like that level of information."

Are there hoops and hurdles that need to be overcome? Absolutely. First, only a few car manufacturers have warmed to the idea of putting leased batteries from third-party providers in their cars. Many worry it will homogenize car design. Battery makers love the idea -- EnerDel CEO Charles Gassenheimer told us recently that some form of bifurcated ownership for electric cars and batteries is inevitable -- but even Nissan said it won't try battery leasing in the U.S. just yet. Warranties will also have to be refashioned.

Users, meanwhile, will have to become accustomed to plugging in their cars whenever they stop so that the cars could potentially feed power into the grid. In turn, the infrastructure to plug them in would need to be built from scratch; right now, it barely exists.

Policies will have to change. The city of Newark, California allows individuals and/or organizations to sell power from a car battery to the grid, according to AC Propulsion CEO Tom Gage, but this isn't a policy you find in a lot of jurisdictions.

And most importantly, utilities would have to get comfortable with the idea of buying power from millions of car batteries that will be plugged in and out by individual drivers at random times. Traditional demand response is far simpler: EnerNoc and other demand response providers literally take control of your air conditioner during peak power events. Better Place won't be able to pry the keys out of your hands and tell you to pick up the kids at school after 6 p.m..

Several megawatts' worth of car batteries would likely have to become available before a utility would be convinced that a statistically stable asset for storing (and drawing) electricity exists at any given time in cars, and even then an excess buffer would have to exist -- and that would likely require hundreds of thousands of cars at a minimum. Utilities might even require a power provider to aggregate the electricity from cars into some sort of central substation before delivering it to a utility, which could upend the economics for the power provider.

Still, Wolf added that working with companies that can centrally manage charging can be cheaper for utilities in the long run. A utility in Israel conducted simulations on the impact of a large influx of electric cars on the grid. If charging is uncontrolled, the utility estimated that it might require $4 billion in infrastructure upgrades to accommodate it. If charging were partially controlled through time-of-use schemes and other programs, the upgrades are reduced to $2 billion.

But if charging were controlled by a third-party provider with control over the charging network, the needed upgrade investments drop to $400 million.

Once a centrally managed charging station is in place, a key part of the foundation for selling power to the grid from cars is laid.