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And GM was really sort of the question mark in our forecast,'' Malesh said.

Most of the growth is directly tied to the introduction of new vehicles,'' he said. And it will come from buyers who want hybrid versions of regular vehicles, and not

a quirky-type greenish vehicle.''

They don't want to give up their SUVs, but they want better fuel efficiency,'' he said.

The Union of Concerned Scientists, which staged Friday's hybrid rally, has endorsed the idea of a

hybrid revolution,'' but it insists that automakers need to fully employ the technology rather than relying on

weaker'' versions.

GM will announce that it's ready to create three levels of hybrids.

• One, which will be available on the Silverado and Sierra full-size trucks this year, and on full-size SUVs like the Chevrolet Suburban and Tahoe and GMC Yukon in 2007, will boost fuel efficiency by

nearly 20 percent,'' GM says.

• In 2006, GM will offer electric-motor assist plus a more fuel-efficient continuously variable transmission (CVT) on the Chevrolet Equinox, a smaller SUV that will replace the Chevrolet Tracker. GM says its fuel economy will improve

nearly 15 percent.'' The same system will go on the midsize Chevrolet Malibu sedan in 2007.

• In 2005, GM will begin producing a Saturn Vue sport-utility with a dual electric-motor system. Fuel efficiency will grow

Fired up'

I'm just very fired up about hybrids,'' she said.

The question shouldn't be,
Why should you get a hybrid?' It should be,
Why not?' -- especially as more types of vehicles are available.''

And she's obviously inspired those around her. The Prius is the unofficial

official'' car at the aquarium, which gave one to its 30 millionth visitor. And Packard's Prius in the employee parking lot is joined by a dozen others.

Packard said she's still asked about plugging in her car, something that's not required since the gas engine and reclaimed energy from braking recharges the electric battery.

There's a tremendous amount of misinformation and misunderstanding on the part of the public. People don't really understand what it's all about yet,'' she said.

Power's Malesh agrees.

One of the big impediments to hybrid technology to date is gaining awareness among consumers,'' he said. GM's announcement will be

the very thing the market needs to get people's attention. Right now, people do not understand it.''

Insight, Civic Hybrid and Prius owners are eligible for a $2,000

clean fuel'' vehicle tax deduction. The vehicles aren't eligible to drive in carpool lanes with single occupants, however, unlike pure electric cars.

The cars out there now are proving the fact that they're a viable solution,'' Packard said.

Mercury News wire services contributed to this report.

Contact Matt Nauman at mnauman@sjmercury.com or (408) 920-5701. His fax number is (408) 271-3786.

http://online.wsj.com/barrons/article/0,,SB1041635794312971913,00.html

Barron's Online

Monday, January 6, 2003

EDITORIAL COMMENTARY

By THOMAS G. DONLAN

Corrupt Bargain0

SOME CALIFORNIANS ARE BREATHING easier this year, no thanks to the California Air Resources Board. By board decree, 2003 was to be the year that 10% of all cars sold in California would be "Zero-Emission Vehicles." The people breathing easier are the car salesmen and automobile executives whose livelihoods were threatened by the state mandate.

The air resources board said it intended to "force" technological development of efficient electric automobiles that could be sold for reasonable prices. Forcing is a horticultural term for tricking plants into flowering out of season, and that's what the state was trying to do with electric vehicle technology. It had worked in the 1970s, when California set emission standards for gasoline-powered cars that were more stringent than those the federal government applied to the other 49 states: The car makers who said it was impossible to comply did in fact produce cars that met the state's demands.

Unfortunately, even the state's victory was more a testament to the technology of gasoline-powered internal combustion engines than to the power of a government ukase. Conventional cars were so overpowered that there was plenty of surplus energy available to be applied to reducing emissions.

If wishes were horsepower, California environmentalists would be riding in the cars of their dreams. Instead, they were mugged by physics. Batteries are still too heavy for electric vehicles to lug around. Gasoline in a tank stores vastly more energy in less weight and volume.

After a decade of spending billions of dollars for research and development, the auto industry's best electric cars had a driving range of 120 miles before needing a lengthy recharge. Enthusiasts claimed that was enough for most purposes, but drivers don't agree. In November, General Motors pulled the plug on the EV-1, which had attracted fewer than 1,000 California customers. Last summer, Ford ended its electrical vehicle experiment in failure also. Reflecting the relative success of the hybrid gas-electric cars produced by Toyota and Honda, the Electric Vehicle Association of the Americas last month re-named itself the Electric Drive Transportation Association.

Partially acknowledging reality, California now gives sales credits and tax subsidies for cars that it formerly despised as not Zero-Emission Vehicles. New classifications include Low-Emission Vehicles, Super- Low-Emission Vehicles, Ultra-Super-Low-Emission Vehicles and Partially-Zero-Emission Vehicles.

As good bureaucrats, the air resources board and its staff mumble that they merely have put off the zero-emission deadline while maintaining the goal of requiring electric cars. Currently the official goal is 2% sales of Zero-Emission Vehicles by 2005, and even that target soon may be reduced to 1%. And the target is illusory anyway, since auto makers have sold or given away enough electric golf carts under the rubric Neighborhood Electric Vehicle, or NEV, to meet the air board's requirements until 2007.

The frustrating thing about the California electric car story is how unnecessary it was. While the California state government expended energy and money on forcing technology that wasn't ready to bloom, the sovereign people of the state were adding millions of conventional automobiles to a fleet that now numbers more than 16 million.

That trend has helped clean the air. New cars are much cleaner than old ones. Getting the worst-polluting clunkers off the road was and still is the cheapest, most efficient strategy for cleaning the air. A state sorely in need of revenues could put heavier fees on its older cars.

It's not always true that wherever the country is going, California will get there first. But other states also are flirting foolishly with the idea of forcing electric vehicle technology with mandates and tax credits. The market is a better judge of progress. It said electric vehicles aren't ready, and the government should not ignore the message.

Editorial Page Editor Thomas G. Donlan receives e-mail at tg.donlan@barrons.com1.

By Chris Ellis

The advertisement shows a silver, late model 700-series BMW sedan reflected in a pool of water. The caption of the ad reads...

"This new BMW derives its fuel from water. Or, to be precise, hydrogen which comes from water. As the hydrogen burns it produces no harmful emissions, but enough power to deliver 0 to 60 mph in just 6.7 seconds. Thus ensuring that the ultimate driving experience remains totally undiluted."

In the fine print, it also says, "The hydrogen powered engine will be available in future BMW models."

Unlike many other carmakers who are focused on using fuel cells to someday power their vehicles, Germany's BMW thinks a hydrogen-burning internal combustion engine makes far more sense. It is nearly as clean as a fuel cell engine and costs little more than today's automobile engine.

So, if we can come up with a way to produce the hydrogen, we could be driving affordable, non-polluting, non-petroleum-powered cars in very near future. The question then largely becomes an economic one of making the hydrogen. But before I address that issue, permit me to disabuse people of the notion that practical automotive fuel cells are just around the corner.

In the SAE's web pages on fuel cells, at http://www.sae.org/automag/features/fuelcells/veh1.htm you will see the following:

Klaus-Dieter Vöehringer, member of the company's Board of Management with responsibility for research and technology, predicted the fuel cell will be introduced into vehicles in several stages. "In 2002, DaimlerChrysler will deliver the first city buses with fuel cells, followed in 2004 by the first passenger cars," he said. Up to that time, the vehicles from the first production phase will be using liquid or gaseous hydrogen as a fuel. However, in his view, "these fuels are unlikely to see widespread use because of the high cost of the infrastructure. Nevertheless, we'll be operating test fleets in several regions of the world to gain experience with daily use of fuel cells.

Vöehringer anticipates the breakthrough will come with the mass introduction of the methanol-driven fuel-cell car, which will allow the driver to "fill up" just like today and drive 480-600 km (300-375 mi) on a single tank.

So the formal DaimlerChrysler position, partially endorsed by the SAE, is that the early generations of production FCVs will be fuelled with methanol, using on-board reformers to deliver the hydrogen required by the fuel cells. In order for this to work from a gas station perspective, this has to be the shared position of most, if not all, the major manufacturer's of FCVs.

Later in the same SAE article you will find:

The Jeep Commander 2 likewise operates on a fuel cell fueled by hydrogen generated from methanol in a reformer. Peak power output is supplemented by a battery. The SUV demonstrates that the use of fuel cells is by no means limited to compact vehicles. "Commander 2, which has two Ballard Mark 700 fuel-cell stacks, shows that the technology can work in a much heavier vehicle," said Mohrdieck.

The Jeep's hybrid-electric powertrain combines the fuel-cell stack with dual front and rear ac-induction electric motors that provide full-time, four-wheel drive. A 90-kW nickel/metal-hydride battery pack is included to provide a power assist boost for acceleration and towing heavy payloads, faster fuel-cell warm-up, and regenerative brakes that capture energy normally lost upon stopping.

Mohrdieck noted that the battery contributes 300 V of current for these purposes for only 18 s at a time. Commander 2, which can go from 0 to 97 km/h (0 to 60 mph) in 12 s, produces near-zero tailpipe emissions and gets 24 mpg (gasoline equivalent) in combined-cycle driving tests.

To compensate for the additional weight and cost of the fuel cell and battery system, Jeep designers incorporated DaimlerChrysler's lightweight injection-molded thermoplastic polymer body technology. Because of its low-mass body, the Commander 2 scales 2590 kg (5715 lb) - slightly more than typical full-size SUVs. This includes more than 1100 kg (2500 lb) for the hybrid-electric fuel-cell powertrain, which is 500 kg (1100 lb) more than a standard IC engine. I am sure you have already noted the following interesting points.

The Jeep Commander 2 runs on methanol, producing 'near-zero' emissions.

It gets the equivalent of 24 mpg.

The powertrain alone weighs over a ton.

If we are considering real volume-production vehicles capable of carrying the initial high cost of the solution outlined above, then it has to be a SUV or something like a big Merc, assuming the powertrain costs around $10,000. Given the weight, it probably has to be a SUV. Now halve everything: 45 kW battery, 48 mpg, half a ton of powertrain, costing $5,000. Stuff this lot into an A-class and try to sell it.

In Europe it will be seen as overweight, underpowered, uneconomical versus a diesel A-class and ridiculously expensive, if not subsidized. Almost no one will put any value on the 'near-zero-emission' capability because the tax bands reward low CO2, not low emissions. A methanol-fuelled fuel cell A-class may actually end up producing more CO2 than a diesel hybrid A-class, and being taxed accordingly!

Second observation: the American public is in love with SUVs, and I can't see that changing because there's also a big market for them in Europe, despite our much higher fuel prices and the lousy aerodynamics of most SUVs, even more important in Europe because of our higher cruising speeds.

Emotional pressure may convince a few good folk to downsize, but the real prize is to make SUVs much more economical. So DaimlerChrysler are on the right track with their big SUVs, but the methanol and fuel cell solution is not going to get far down it.

Let's work back from the future. A rough reality check shows that moving to an all-electric transport system, whether the electricity is temporarily stored in batteries or as hydrogen, would require the US to double its generating capacity. Of course America should invest in solar, wind and wave power, but they can only nibble at the problem. There are only two contenders capable of meeting that level of demand. The first is natural gas, which is bound to be a runner, and the second is nuclear fusion. (Check out www.fusion.org.uk/st/powerplant.html, particularly the paper on fusion power station design)

I expect Europe will lead with fusion power, because it's even more dependent on imported energy than America, and because France has a simple replacement scenario for its many fission reactors once fusion becomes economic. That won't even need selling to the French electorate! A commitment to invest heavily by France will stimulate the rest of industrial Europe to follow suit, in order to remain fully competitive. Japan won't be far behind, for all the usual reasons.

The interesting question is what the US will do, and when. I certainly don't know, and I get the impression Washington doesn't have a coherent position on fusion yet, despite the President's interest and understanding.

The problem that DaimlerChrysler and all the other major players appreciate is that the much-vaunted 'hydrogen economy' doesn't really compute economically or environmentally for most countries until fusion power begins to deploy. Why would you bother to turn natural gas into hydrogen when you can deliver natural gas to most gas stations (OK, this time you guys probably called it right, they'll all eventually become real gas stations!) over existing gas pipelines, or better yet, use the latest Gas-To-Liquid (GTL) techniques to produce DME or GTL diesel?

Expect GTL to be sold as 'SuperDiesel' - it really is. Colourless and odourless, it's not diesel as we know it, but nicer than gasoline, leave alone 'old' diesel. One important advantage from an oil company perspective is that 'SuperDiesel' requires almost no investment at the customer end of their infrastructure, unlike most other options. Check out BP, Shell, etc., on this, or http://www.gasandoil.com/goc/company/cns21228.htm I believe that they all see natural gas-to-diesel (already being sold by Shell to the public in Thailand) as the most promising offering among several they will begin to deploy as we hit the downward slope of gasoline production from oil. Not many Americans realize that North America consumes roughly 40% of the world's production of gasoline, far higher than the 25% of total energy consumed. You guys have work to do!

Considering the above, over the next forty years there will be no significant shortages of relatively conventional liquid fuels, barring flare-ups in the Middle East. However, prices at the pumps will rise worldwide, dramatically in the US relative to Europe, because Europe will use its 'fuel tax buffer' to shield its citizens from the immediate impact of the inevitable rise in the cost of fuel, which can only hit Americans directly. Simply put, if global oil costs double, American gas prices will almost double, but the price of petrol in the UK should go up less than 20% even if the British government does nothing. Whose electorate is going to get more excited?

Coming back from the future, the battle to limit exhaust emissions is almost over for passenger cars. SULEVs are already on our streets, in both conventional and hybrid form. FCVs with reformers and SULEVs together form a new category, Negative Emission Vehicles [NgEV], which has already caught the attention of CARB.

On a 'bad air day' in LA, NgEVs suck in the emissions from other vehicles, and then exhaust cleaner air than most Los Angelinos are breathing, hence they are Negative Emission (at the point of use, and when it really counts) Vehicles. So-called ZEVs are not Zero Emission Vehicles; they are Zero Emission (at the point of use) Vehicles.

From the parochial perspective of the Los Angeles Basin, one can be cavalier about the level of emissions resulting from electricity generation. From Washington, looking at the national averages for sulfur and CO2 output, a SULEV probably looks more benign than, say, an electric RAV4. The bottom line is that the 'ZEV or nothing' position now looks a little odd, to say the least.

In Europe, the 'diesel-versus-petrol' battle rages, and it's essentially about minimizing running costs and maximizing residual values. In many countries, governments have tilted the battlefield in favour of diesel by charging less tax per gallon. However, consider this. 60% of all S-class Mercedes sold in the UK this year have diesel engines, despite the fact that the British government taxes diesel slightly higher than petrol (to reflect diesel's higher carbon content). And in France over 60% of ALL cars sold this year will be diesels.

Now, without being too offensive, the ONLY reason anyone buys a diesel is because they are cheaper to run. They are smellier, dirtier, noisier, slower, heavier and more expensive to make than their petrol equivalents. But they go much further per gallon, and that is enough, despite all the negatives, to convince second-hand buyers to pay significantly more for the diesel version than its functionally superior petrol-powered equivalent.

Consequently, you would imagine that, if any market could accept and cost-justify BEVs in volume, Europe could. However, one problem to consider is that most European cars are parked in the street overnight. How do you recharge them without putting a cable illegally across a footpath, this side of a massive public investment in infrastructure?

In Japan, journeys are usually short and annual mileages are relatively low, though petrol is quite expensive. But Honda has stated it's selling four times as many hybrid Civics in the US as it is shifting in Japan. Clearly, fuel consumption is not a major issue for the average Japanese driver. The fastidious Japanese don't like diesel (nor do I!), but I expect them to go for 'SuperDiesel' in a big way. Japan ought to be the one major market which should be able to shrug off the BEV's range problem, usually cited as the main hurdle preventing 'mass battrification'. Yet it's not happening, at least not yet. I wonder why?

I am right with Alec Brooks' analysis in "Fuel Cell Disruptor" on the importance of Lithium Ion batteries, and not just because they're yet another great British invention, which I will patriotically refer to as Lions in the rest of the text! (The master patents are held by AEA Technologies, once part of the British Atomic Energy Authority, hence the initials.

Sony et al have paid them a fortune in royalties) Alec Brooks has identified the main characteristics which favour Lions; I would just like to emphasize his point that the cumulative development effort focused on Lions in many countries and across a range of industries, including computing and telecommunications, should ensure real progress in specific energy, cost and cycle life, all of real value to BEVs.

Let me draw these threads together, and try to leave behind the PR deceits and the wishful thinking. Let's also move into the real world of the small number of global companies which will decide what will happen next, rather than fantasize about what governments should do if only they knew what to do.

Hybrids are selling well, and Toyota has declared it's starting to make money. However, the crunch has yet to come, when we have large numbers of 3+ year old Priuses out there and Toyota finds out what the battery life statistics really are, and what liabilities it is actually carrying. Toyota did the risk/reward analysis on this years ago, checked its bank balance, swallowed hard, and went for it, to the admiration of all those standing on the touch line. It can now be confident it's won, but I'm not sure it knows yet how much it's all cost. Given the close links between Toyota and Ford on hybrids, it may be that the delay in the launch of the hybrid Escape is down to 'battery fright'.

So what's Toyota's encore? If everything worked properly, Toyota would develop a hybrid successor to the big Lexus LS430 sedan, and focus it on the European market. Despite the success of Lexus in the US, it hasn't happened in Europe. However, a diesel hybrid Lexus could have a real chance of carving lumps out of BMW and Mercedes on their home turf. But it won't happen, because the technology used by Toyota isn't robust enough yet to take the sort of thumping dished out by the typical European luxury car driver. Her drive cycle is a lot more demanding than Cameron Diaz's, pottering down to Rodeo Drive in her Prius!

Speaking of the devil, will BMW do anything? Nothing much, apart from continuing to run their current cynical advertising campaign, which could leave a naive reader with the impression that hydrogen powered cars are just around the corner, so we can all relax about the environment, and forget about the particulates pouring out of our diesel 'Beemers' as we pin the pedal to the metal, because our next 'Beemer' will produce nothing but pure water. It has just occurred to me that BMW may not have dared run this advert in the States! If so, let me know and I will send you a copy.

If hybrids are about cutting the fuel consumption of conventionally powered vehicles, then they are essentially the next step beyond diesels. The good news is that the noisy, shuddering diesel engine can be smaller and lighter and is therefore much easier to encapsulate and insulate. Europeans have been willing to pay more for diesels, so they should be willing to pay even more for cars that operate as if they have petrol engines but return fuel consumption figures better than any conventional diesel.

Put bluntly, if it won't fly in Europe, it probably won't fly anywhere. On the other hand, what may not make sense in terms of savings in Japan and the US may well make it in Europe. The major manufacturers have long memories. It will have occurred to them that we may be looking at a re-run of the 'Great American Diesel Debacle' of the 70's. Then, following the first oil shocks, a fashion wave favouring diesels swept across America, drawing in the likes of Cadillac on the coat-tails of Mercedes. Following some reliability problems, it quickly drained away, for lack of any sustaining cost justification. Could hybrids be at the start of a similar cycle in the US?

But Europe was different for diesels, and could be different again for hybrids. If we can solve the 'temporary storage problem', and we believe we have with PowerBeam (My first plug for our technology. Such restraint!), then a plausible scenario is that the European penetration of hybrid cars could reach 60% within ten years, while the US (and Japanese) penetration will be less than 20%, mainly confined to large SUVs and high-performance vehicles. If the Middle East explodes, these numbers are upwardly mobile.

If I tell you that PowerBeam promises a wheel-to-wheel efficiency of more than 65% for regenerative braking at urban speeds, and remind you that battery-based systems typically return no better than 30% in the city, you will be able to imagine the sort of mpg figures our simulations are indicating. But PowerBeam can also help a vehicle the size of an S-class Mercedes fitted with a little 1.8 litre engine reach 60 mph from rest in less than 6 seconds; you should now be reaching for the phone and your credit card!

But hold on. I'm afraid we are still not ready to 'open the kimono', but when we are, which is soon, I promise you'll get to peep first, and your readers second.

If I believe a PowerBeam-equipped Explorer-sized SUV could deliver at least 40 mpg in the city, almost however aggressively it is driven (remember the 65% regen), then certain other beliefs follow.

This side of nuclear fusion deploying (around 2020 in the US?), fuel cell cars make no real sense outside France. An Explorer fitted with a PowerBeam and a diesel engine will probably consume only slightly more 'SuperDiesel' than an Explorer fitted with a PowerBeam, a reformer and a fuel cell engine. The former is rather less expensive to make than the latter, and could be in pilot production by 2005.

PowerBeam-equipped hybrids will scale up and down, to cover Minis to Maybachs, and any size of truck or bus (see my SAE'99 paper). From a cost justification perspective, the bigger and more expensive, the better.

Consequently, small PowerBeam-equipped hybrid cars will be niche, focused on performance. PowerBeam-equipped BEVs are also a possibility in this segment; as an example, imagine an open Mini with a 150 kW PowerBeam backed by 20 kWh of Lions, with a price tag around $25,000, including taxes. That raises the bar for fuel cell vehicles like NECARar 6(?). If you can recharge your BEMINI in your garage at overnight rates, why would you want a NECAR that has to visit the nearest methanol station (20 miles away) every other week? When the 4wd BEMINI can do 0 to 60 in 6 seconds, won't the 12 seconds of the NECAR feel limp wristed?

Alec, I can't see any clothes, either. Maybe some will turn up around 2020. Maybe. Strange - France is shaped like a fig leaf. Vive l'Empereur!

Chris Ellis is chairman of the PowerBeam Company and a professional engineer in the United Kingdom. Click here for his interview with EVWorld
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