The Ford Focus EV is due in 2011.

With oil prices reaching record levels for the year—and potentially heading higher—the prospects for electricity-powered cars is also on the rise. Barclays Capital said, “The groundwork for a sustainable move into higher price ranges has been laid.” Deutsche Bank said prices could surge to $100 a barrel in the next two quarters if the US dollar continues to weaken—with relatively little effect on a global economic recovery. Rising oil prices alone are not enough to ensure the future of electric cars—but there are clear signs of a massive transition to plug-in hybrids and electric cars.

The industry to produce lithium ion batteries—they key component of electric and plug-in hybrid cars—is ready to boom. In a report released on Wednesday, Pike Research projects that lithium ion batteries will make up more than 20 percent of the global $4.1 billion energy storage sector within the next decade. The Mercedes S400 hybrid will be the first mainstream production vehicle to use a lithium battery, when it’s introduced later this year. The next generation of plug-in hybrids and electric cars will all utilize lithium ion batteries, which can provide more power and energy storage in a smaller lighter weight package. “While lithium ion was once limited to consumer electronics devices, it is quickly becoming the battery of choice for electric vehicle manufacturers,” said Pike Research analyst David Link.

Sanyo, the Japanese electronics company, announced Wednesday a major push to mass-produce lithium ion cells for plug-in hybrid vehicles starting in 2011. According to the Wall Street Journal, Sanyo plans to produce 300,000 to 400,000 batteries per month for use in vehicles that can be recharged at home. The company will also produce battery systems, including chargers, in the US, Europe and China after 2012. Sanyo is the subject of a takeover bid by electronics giant Panasonic, which jointly produces batteries with Toyota, the dominant player in today’s hybrid market. By 2015, Sanyo’s plan is to produce 10 million lithium ion batteries per month for hybrids and plug-in hybrids.

Battery production for plug-in cars currently is almost exclusively based in Asia—but US firms are trying to break that stranglehold. Mass.-based battery maker A123 Systems—which raised $380 million in an initial public offering in Sept. and received a $249.1 million grant from the Department of Energy in August—said yesterday that it’s negotiating an additional $235 million loan from the energy department to expand US operations. “It’s not done, but it’s in discussion,’’ said A123 CEO David Vieau.

Electric Transportation for the Masses

These levels of investment are predicated on rapid adoption of plug-in cars, but obstacles remain—primarily cost. Nancy Gioia, Ford’s newly appointed director of electrification, said yesterday that Ford wants its hybrids, plug-in hybrids, and electric cars to be more than a niche. “It’s about affordable transportation for the masses,” she said at a presentation of the Ford Focus EV and Ford Escape Plug-in Hybrid to media and government officials. HybridCars.com had a chance to drive the vehicles. We were impressed by the advanced level of development of the prototypes which are two years away from production. The viability of the technology is no longer in question, but cost is another matter. “Electric transportation is still expensive,” Gioia said. “We cannot overpromise and underdeliver and hype this. Because what could happen is you damage the reputation of the technology.”

Then there’s the expense of adding recharging infrastructure. Bloomberg reported today that California’s push to lead US sales of electric cars might result in higher power rates for consumers. California’s Public Utilities Commission is reviewing the effect of electric cars this month. Power companies have to install new transformers and meters to handle greater demand and prevent blackouts when plug-in cars are charged at outlets. That will cost billions of dollars and utility rates will rise to cover the costs, according to analysts. Southern California Edison estimates that by 2020, as many as 1.6 million cars recharged by the grid may be in use in its 50,000-square-mile coverage area, about the size of Alabama.

Unstoppable Transition

The excruciating economics of plug-in cars is unlikely to stop the technology’s momentum. Industry and political leaders believe the transition from gas-powered vehicles to cars that charge up at home is a means to create new clean tech jobs, rejuvenate the auto industry, and address environmental and energy security issues. “We stand on the threshold of a real revolution in the propulsion of our vehicles,” Ford Executive Chairman Bill Ford Jr. said during a speech at The Business of Plugging In, a conference held in Detroit this week. Henrik Fisker, CEO of Fisker Automotive, which makes the Fisker Karma plug-in hybrid, said, “This is the biggest shift in the car industry probably since we went from the horse to the gasoline engine.”

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“If the typical driver is driving up into their driveway at the end of the day, and hasn’t depleted the battery and they’re driving up with stored energy that they didn’t use, they haven’t gotten the full value of their investment for the day.”

Greg Frenette
Ford manager of battery electric vehicle applications

When President Obama visited Southern California Edison’s electric vehicle test facility in March, he used the Ford Escape Plug-in Hybrid as the main prop for the photo op. The president spoke in soaring tones about America’s energy challenges, green jobs, and the cars of tomorrow—but the expression on his face in the PR photo was disbelief if not outright disapproval.

While Ford’s marketing folks might have preferred one of Obama’s winning smiles, his grimace better reflects Ford’s rigorous and skeptical approach to making sure the Escape Plug-in Hybrid is truly ready to hit showrooms in 2012. In February, Sue Cischke, Ford’s group vice president for environment and safety, said, “Plug-in hybrids hold great promise, but do still face significant obstacles to commercialization.”

It’s All About the Battery

Ford is claiming that the plug-in hybrid version of the Escape, a fully capable small SUV, can travel 30 to 35 miles using little or no gas—if driven in town and if the batteries are charged for six to eight hours using common household current. After those 30 or so miles, the vehicle reverts to acting like a conventional Escape Hybrid—which happens to be the most fuel-efficient SUV currently on American roads.

The key to achieving those goals is the Escape Plug-in’s battery pack. “It’s all about the battery, its design, and its integration into the vehicle,” Greg Frenette, the lead engineer in Ford’s Escape Plug-in testing program, told HybridCars.com. “Its economics are absolutely critical, and you have to have the right battery source for the vehicle.” Ford has a five-year supply agreement with the Johnson Controls-Saft, the US-French battery supplier led by Mary Ann Wright, the former Ford engineer behind the original Escape Hybrid.

In other words, don’t make the batteries too big because the battery pack is the single most expensive component in a plug-in car. Higher cost is the Achilles’ heel of plug-in cars. If Ford can keep down the purchase price, deliver all-electric transportation for the lion’s share of driving, and offer it in a highly functional small SUV package, it could have a winner on its hands.

Come Home Empty

The Escape Hybrid differs from other upcoming plug-in hybrids and electric cars in two significant ways: It uses a smaller 10 kilowatt hour (kWh) lithium ion battery pack and it can blend electricity and gasoline as required by the driver’s needs. The Chevy Volt, Nissan Leaf, and Ford Focus EV—which use 16 kWh, 24 kWh and 23 kWh batteries respectively—use only electricity to power the wheels.

“When we looked at sizing the batteries, our goal was to get as much out of that battery as we could without carrying around a lot of energy that we wouldn’t be able to use,” said Frenette. “If the typical driver is driving up into their driveway at the end of the day, and hasn’t depleted the battery and they’re driving up with stored energy that they didn’t use, they haven’t gotten the full value of their investment for the day.”

General Motors is taking a nearly identical same approach with its planned small SUV plug-in hybrid—which was originally planned as Saturn, but will probably be released with Chevrolet branding. “The idea is you’re going to plug in at night. You’re going to get the electricity off the grid and then you’re going to deplete it in about the first 20 miles,” Larry Nitz, GM executive director of hybrid powertrain engineering, told CNet. “Why 20 miles? Because we want you to come home empty. We want you to use it all every time you go out.”

Unlike the Chevy Volt, the Ford Escape Plug-in (and GM’s future plug-in SUV) will be able to blend gas and electricity as required. “At the end of the day, we came to the conclusion that the blended approach gave us the optimal design from a battery size, package, investment, and customer utility standpoint,” Frenette said.

More Testing

By the time the Ford Escape Plug-in Hybrid hits showrooms in 2012, it will have been put through hundreds of thousands of miles of real world testing over a five-year period. About 20 test versions are currently being tested in utility company fleets in California, New York, Ohio, North Carolina, Alabama, Georgia, Massachusetts, Michigan, and Quebec, Canada. About 130 more will be produced for testing, thanks to a $30 million US Department of Energy grant.

In August, Scott Burgess, columnist at Detroit News, got behind the wheel of one of the test vehicles. “This model feels much more ready than any electric vehicle I’ve tested,” he wrote. “Quick acceleration, seamless gas engine start and stop, nice braking feel, and no giant red emergency shut off button on the dash.” Yet, Ford continues to test and evaluate the vehicle to make sure the batteries can stand the tests of durability, performance, longevity, and harsh weather.

Ford was the first American company to put in a hybrid on the market. It was the first company to offer a hybrid SUV. If it can deliver a cost-competitive and trustworthy plug-in hybrid SUV, it might finally put a smile on Obama’s face.

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