Time Magazine on 500-MPG Plug-In Hybrids
Jun 7, 2005 (From the CalCars-News archive)

http://www.time.com/time/insidebiz/article/0,9171,1069470,00.html

Time Bonus Section July 2005: Inside Business

Monday, Jun. 06, 2005
Breaking That Dirty Oil Habit
AN UNLIKELY ALLIANCE OF HAWKS, DOVES AND GREENS HAS A PLAN TO HELP AMERICA
GUZZLE LESS GAS. COULD IT WORK?

By UNMESH KHER
--With reporting by Marc Hequet/ St. Paul, Kristin Kloberdanz/Hopkinsville
and Jeffrey Ressner/ Los Angeles

A Republican loyalist and canny political strategist, C. Boyden Gray has
been quite busy lately. The former White House counsel to the first
President Bush heads up the Committee for Justice, an advocacy group that
has worked closely with the White House to push Bush 2's most controversial
judicial nominees through the Senate. John Podesta has been busy too. The
former chief of staff to President Bill Clinton who today leads the liberal
Center for American Progress has worked hard to foil Gray. Yet even as the
two party generals square off in a battle that has roiled the Senate, they
manage to find common cause: energy policy. "Boyden and I agree on
virtually nothing," says Podesta, "but we do agree on this: the security of
the country depends on a whole new generation of vehicles and fuels."

What does alternative energy have to do with national security? Gray and
Podesta are part of an unlikely alliance of neoconservatives, farmers and
union and environmental leaders who want to wean the U.S. of its oil
habit--some for purely green reasons (to stave off global warming), but
others for the sake of cutting U.S. dependence on the volatile Middle East.
And they have some radical ideas about how to do it. "We live in a world in
which a terrorist attack in the Middle East could push oil well over $100 a
barrel and send the world economy into a tailspin," says former CIA
Director James Woolsey, now a vice president at consulting firm Booz Allen
Hamilton. One organization he belongs to, the Energy Future Coalition, shot
off a letter last month to Pete Domenici, chairman of the Senate Committee
on Energy and Natural Resources, calling for a federal investment in
alternative fuels and advanced automobile technology. But it's another arm
of this movement, the Set America Free alliance (which also counts Woolsey
among its members), that has identified a Holy Grail of sorts. Co-founded
by Frank Gaffney, the neoconservative chief of the Center for Security
Policy, the group is touting the idea of a car that gets 500 m.p.g. of
gasoline.

As oil prices have soared in recent years, there has been increasing
attention on renewable-energy sources such as wind and solar power. But
even if those sources are expanded, they would not change the U.S.'s
fundamental dependence on foreign oil and its derivative, gasoline, to
which our car-obsessed culture is addicted. Unless we could plug in our
cars and charge them off the electrical grid instead of filling them up at
the pump, all those options would leave us as hooked on gas as ever. And
while pure electric-car technology has been around for years, it is plagued
by a crucial problem: a lack of range.

Gaffney and his cohorts have envisioned a clever solution: a hybrid car
that combines gas-free plug-in technology with the boost of
made-in-the-U.S., ethanol-based fuel to give it range. The plug-in hybrid
could run for short distances on batteries charged by the same grid that
powers our home appliances. On longer drives, it would use a fuel mix of
80% ethanol--alcohol, in the U.S. made mainly from corn--and 20% gas. Given
that half the cars on the road travel fewer than 20 miles a day, such
hybrids would travel mostly on grid-charged battery power. The rest of the
time, those plug-in hybrids would run primarily on alcohol, not imported gas.

A 500-m.p.g.-of-gas car may sound like a pie-in-the-sky dream. But in fact,
it is technologically possible. Green-car enthusiasts in California are
experimenting with innovative plug-in technology, while DaimlerChrysler
will soon be testing its own plug-in van. And ethanol has long been used as
a fuel. Indeed, Domenici's committee last month adopted a measure in the
energy bill requiring gasoline refiners to increase the ethanol they use
each year to 8 billion gal. by 2012, up from 5 billion gal. mandated by the
House.

That's bound to raise hackles. Ethanol has always been controversial (see
box). Most car companies, meanwhile, have little interest in any electric
vehicles beyond the standard hybrid because they consider them too costly
and limited in range for American tastes. "I don't think [electric cars]
will ever be a significant percentage of the vehicles out there," says Sam
Shelton of the Georgia Institute of Technology, citing such obstacles.

It would be too easy, though, to dismiss the 500-m.p.g. movement as all
hype and hope. After all, not long ago, hybrids like the Toyota Prius
sounded like a laughable idea. These days they are being snapped up by
consumers more than willing to pay a premium. So before this pipe dream is
summarily cast aside, it's worth exploring. Could it be that the motley
coalition of tree huggers and hawks is on to something?

PITCHING PLUG-INS

MEET GREG HANSSEN, A PARTNER IN A SMALL BATTERY-prototype testing firm in
California called EnergyCS. Hanssen was approached last year by Felix
Kramer for help in building a dashboard monitor for a Prius that he and
CalCars, his group of plug-in advocates, had converted into a crude
plug-in. (The original Prius' batteries charge up when the car brakes.)
Hanssen was inspired. He enlisted the support of another privately held
firm, Clean-Tech, to devise a more sophisticated version of the plug-in
Prius. Hanssen recently showed off his prototype at the 2005 Tour de Sol, a
green-car race in Saratoga Springs, N.Y., where it didn't win but did
deliver a fuel economy of 102 m.p.g. over a 150-mile course. The cost of
charging the batteries? A buck.

EnergyCS and Clean-Tech have launched a start-up called E-Drive Systems,
which plans to sell by next year kits to convert the Prius into a plug-in
(though the modifications will void the warranty). At speeds below 35
m.p.h., Hanssen's Prius sails along on its 18 lithium batteries for up to
30 miles at a go--well within the range envisioned by Gaffney. The
conversion cost isn't cheap: $15,000, which Hanssen hopes to cut to around
$10,000. "It won't pay for itself in gas savings," Hanssen admits, "but
neither does the Prius. People will do this for other, philosophical and
environmental reasons."

Toyota isn't exactly jumping on the bandwagon. "Customers," says Ed
LaRocque, Toyota's national manager of advanced technology, "are not
telling us plug-in hybrids are something they'd like to see at no cost, let
alone what we estimate would be an additional $15,000." Other car
companies, including Ford and General Motors, seem to feel the same way.
But DaimlerChrysler sees the field differently. It has spent millions to
modify a handful of gas and diesel-powered Mercedes Sprinter vans into
plug-ins, which will be tested as early as this fall by commercial partners
in the U.S., such as utilities. Chrysler says the vans can run 20 miles on
batteries charged both via the socket and, like the Prius, by braking. Cost
will matter, says Rolf Bartke, head of the Mercedes-Benz van division. "In
the end it should be viable and economic for our customers." Bartke says
the aim is to bring the battery cost down below $10,000 within four years.

Several U.S. utilities are supporting the technology. Plug-in cars would
open a new market for electricity at night, when utilities have excess
capacity. In fact, the Electric Power Research Institute in Palo Alto,
Calif., helped build the plug-in Sprinter. Ed Kjaer, director of electric
transportation at Southern California Edison, argues that plug-ins
represent a natural evolution of hybrid technology, which today essentially
burns gas to generate electricity. "The more hybrids are sold," he says,
"the stronger the business case will become for the electric vehicle."

ETHANOL DREAMS

DAVID WIMPY, 49, CULTIVATES 800 ACRES OF CORN AND OTHER crops in Kentucky's
hilly Amish country. As a member of the 2,300-strong Hopkinsville Elevator
Cooperative, he is also part owner of the hottest new thing to hit town,
Commonwealth Agri-Energy, an ethanol plant that started up a year ago in a
stream-fed rock quarry a mile south of his land. The cooperative has a 94%
stake in the $32 million plant, which has made an estimated $40 million in
sales over the past year from ethanol and its by-products. Plant manager
Mick Henderson says he expects that investors will get returns better than
13%. "Ethanol is a win-win for consumers, farmers and for the country,"
says Wimpy.

If electricity provides half of the 500-m.p.g. dream, ethanol provides the
other: an alternative to gas. Hopkinsville's ethanol experience is hardly
unique. Since 2001, 26 plants have been built in the U.S., bringing the
total to 87, as political support for the fuel has grown. Roughly 40% of
the plants are owned by farmers, although a single corporation, Archer
Daniels Midland, retains a 25% share of the market.

Today's ethanol boom has nothing to do with Gaffney & Co.'s extreme
solution, but if ethanol use were to evolve into the mainstream, it would
multiply the plug-in's gas savings. Gaffney's group calculates that if by
2025 all cars are hybrids, half of them plug-ins and all of them running on
an 80% ethanol blend, U.S. gas imports could drop from the projected 20
million bbl. a day to 8 million bbl. But today it is not national security
that drives ethanol demand so much as environmental regulation. Refiners
buy ethanol because it helps gasoline burn more cleanly--and it is one of
two additives the government requires polluted cities to use to cut down on
certain tailpipe emissions. Because the traditional additive, a toxic
substance called MTBE, tends to pollute groundwater, many states are opting
for ethanol.

But there are huge debates about ethanol's economic viability. The Federal
Government provides a 51¢ tax exemption to gasoline refiners for every
gallon of ethanol used, to keep the product competitive. (Conservative
activist Gray points out that the oil industry has long enjoyed far larger
tax breaks.) And now, Senate mandate aside, Illinois Senator Barack Obama
has slipped an amendment into the energy bill providing a $30,000 tax
credit to encourage gas stations to pump "E85," an 85% blend of ethanol and
gas used by so-called flexible-fuel vehicles. There are already 4 million
such cars on U.S. roads. The Set America Free plan calls for just such
incentives.

Debate has long raged over whether ethanol takes more energy to make than
it delivers--something called the energy balance. Most experts now agree
that from cornfield to factory vat, the amount of energy expended in making
the fuel accounts for about 80% of the energy in it. But refiners say
ethanol is still an inefficient option. Because it tends to separate from
gas in pipelines, it has to be trucked to terminals and blended there by
specially modified machines. That increases costs. "There is a question
about the real cost of this product," says Robert Slaughter, president of
the National Petrochemical & Refiners Association. "How many
federal-assistance programs do you need to make it work?"

In fact, the real answer to such cost issues is bioethanol, which is the
same stuff as ethanol but is made from wood or plant wastes like
cornstalks. One of the few oil companies to back bioethanol is Shell. It
invested in a pilot plant run by a small Canadian biotechnology firm named
Iogen, which put itself on the map by shipping the first commercial batch
of ethanol made from straw last year. Iogen CEO Brian Foody says he expects
to break ground on a 50 million-gal.-a-year plant next year. The
hawk-and-dove coalitions want bioethanol to fuel future cars. It's loved as
much by fiscal conservatives for turning waste into treasure as it is by
environmentalists for its overwhelmingly positive energy balance. A
bioethanol industry would even help deplete the global-warming gas carbon
dioxide from the atmosphere, notes Woolsey. And corn ethanol can't be
produced in sufficient quantities to dent oil imports: roughly 4 billion
gal. will be made this year. Vehicles in the U.S. consume that much gas in
just 11 days.

Whatever the future of the electric car and bioethanol, the notion that
America must end its oil habit is gaining currency in Washington. George W.
Bush, the former Texan oilman, has begun talking up corn ethanol and clean
diesel and has endorsed a $4,000 tax credit for purchases of hybrid cars.
That has not gone unnoticed by energy's new coalition of convenience, even
if the President hasn't yet mentioned plug-in hybrids or bioethanol. "We
drive to high-tech jobs today in cars built with 100-year-old technology,
using 100 million-year-old fuel," says Podesta. "We can do better than
that." Maybe 500 m.p.g. isn't so crazy after all.

CAPTION: Mick Henderson, left, with Kentucky farmers, is producing the fuel
that could help the 500-m.p.g. car become a reality