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All Electric Cars – The Impact of the Little Guys

by John Voltz
Recently, I made a small diversion from my walk to the office in San Francisco and took a ride in a Wheego. The Wheego was being showcased at Justin Herman Plaza right across from the Ferry Building not far from my office in the heart of the city’s Financial District. The Wheego is a brand new all-electric car from an interesting manufacturer in Georgia. Locally, the Wheego is sold at Ellis Brooks Auto Center. This intrigued me. Ellis Brooks is a venerable car name in San Francisco, having been around for 40+ years. I still remember their radio jingle from my childhood, “See Ellis Brooks today for your Chevrolet, corner of Bush and Van Ness . . .” The Ellis Brooks dealership now sells pre-owned cars and is no longer associated with GM. It has just begun selling the Wheego. Before I took my test drive, I had a chance to talk to Ellis Brooks’ grandson, John Brooks, about why they decided to sign up with Wheego. He seemed comfortable with the manufacturer in large part because the car was assembled from components made by manufacturers already in volume production of vehicles.
So how was the ride? Pretty good. It was quite roomy with a nice, quiet ride and a firm feel of the road. Allowing for the fact that it is a small two-seater coupe, it had the feel of real a car – not a golf cart or an experiment.
Now I should back up for a minute and explain that I have long been a skeptic that there will be significant adoption of all-electric vehicles any time soon. But this car changed my mind a bit.
My skepticism about this has been based on looking at the passenger car market and thinking about what it takes to succeed in that market. Then I compared the passenger car market to other potential electric vehicle markets.
Passenger cars have been the province of integrated high volume manufacturing, low margins, very high quality expectations (especially fit, finish and amenities), and very high service and support expectations. In short, the barriers to entry for this market seem quite daunting, especially when compared to the delivery truck market or the ATV market. These markets have significantly lower volumes, less integrated manufacturing (many manufacturers are essentially final assemblers), much lower quality expectations on fit, finish and amenities, and lower service and support expectations.
There are some low-volume passenger car manufacturers, but all make vehicles aimed at high priced specially markets, not low to mid priced daily drivers. There is another big difference between the passenger car market and the delivery truck market – what delivery truck buyers want fits really well with what electric vehicles do best:

  • predictable low to medium mileage daily duty cycle
  • low noise
  • excellent torque
  • low total cost of ownership
With an electric delivery truck, you don’t need to worry that you’ll ever need to drive from San Francisco to L.A. to visit your sick aunt. In fact, for commercial trucks, limited range can be a plus – there’s no way for trucks to wander very far. With passenger cars, limited range is a big reason not to buy.
Given this, I have felt for some time that we wouldn’t see significant adoption of all-electric vehicles until we started seeing real traction in markets like delivery trucks. I expected passenger cars (and delivery trucks too to some degree) would likely first go hybrid, then shift the hybrid balance to more electric (e.g. using fuel to run a generator to extend the electric range), and then later shift to all electric. These successive market advances would be linked to gaining manufacturing scale, cost down of batteries and other components critical to all-electric vehicles (though batteries is the big one).
My Wheego ride today and my chat with the dealer changed my view. Here was an all-electric car, at a regular car dealer, with a high but regular car price, from a car manufacturer that nearly appeared out of thin air. You see Wheego as a manufacturer is just a final assembler. From my initial quick look, Wheego came on the scene as a passenger car player in 2007 or so, backed by the former founder of MindSpring. Before then, it was exclusively an electric golf cart manufacturer. So it’s really been an eye blink in automotive time scale (2007 to 2010) to see cars turning up at dealerships. Granted, the model at dealers today and the one that I test drove is just a medium speed vehicle (MSV) with a top speed of 35 MPH and not for highway usage (more on that later). But this was still impressive to me.
Wheego gets the car bodies from a big manufacturer in China (a body that is currently used for gas drive cars in other international markets). It gets its motors from a Wisconsin electric motor manufacturer and its motor controller from Curtis Instruments who makes controllers for forklifts. Maybe the truck style manufacturing could work for passenger cars after all.
In addition, I began to think about the current passenger car market for all-electrics. There probably is a significant market for all-electric vehicles, even in the current economy, and even if they aren’t strictly ‘economic’ on a dollar per mile basis compared to gas or hybrid cars. Think about how much the early EV1 cost in its day[1], and how people still rave about it years and years later. In my revised view, I think there will be a small but significant true believer market in the U.S. for all-electric cars. Yes, the big boys are coming – Nissan with the Leaf, Chevy with the Volt, Ford with the Focus EV, but not for a year, maybe two, maybe more. In the mean time, the true believer market will be served by the likes of Wheego, Think, Smart, and others. Even after Nissan, Chevy, Ford and other big car companies arrive in the market, the early entrants may have continued success. Plus they may have customers and EV infrastructure that car manufacturers with non-existent, dormant, or failing EV programs may look to acquire. There is no substitute for firsthand customer knowledge.
The Wheego I drove was a medium speed vehicle (MSV) with a max speed 35 MPH and a real world range of 40 miles. The highway speed version is on the way – due to arrive this summer. It is currently undergoing NTHSA cash testing. It will have a top speed of 65 MPH and a range of 100 miles. The high speed vehicle (HSV) Wheego will not be a lot different than the MSV. Differences include: lithium ion batteries, airbags, and some additional structure supports to the body.
I now see the all-electric car market developing from two converging paths – the true believer all-electric passenger car market and the more economically driven all-electric truck and fleet vehicle markets. The true believer market will drive visibility and customer expectations, and provide valuable real world feedback about what electric car consumers care about and will pay for. While the truck and fleet markets will help dive down cost, I expect both will speed the adoption all-electric cars to a significant portion of the passenger car market.
So for you true believers out there, price before incentives for the MSV Wheego is ~$19K (and it’s eligible for a 10% Federal tax credit) putting the MSV price around $17K before any state or local incentives. Prices for the HSV have not yet been announced, but the target price is in the $30K range (and it will be eligible for a $7500 federal tax credit) putting the net cost of the HSV before state and local incentives in the roughly in the mid $20K range.


[1] The EV1 had a nominal low price of $34K or ~$48K in today’s dollars though it was never sold only leased. Reportedly production costs were $80+K per vehicle at the time. Initial lease costs were $640/month or $900/month in today’s dollars. Later this dropped to $350/month or $ 500/mo in today’s dollars with many different incentives layered on.

FedEx’s Absolutely, Positively, Cleaner Fleet

By John Addison (3/4/08). When something must absolutely, positively, arrive the next day, people increasingly turn to FedEx. Shipped is everything from million dollar loan documents to birthday presents. FedEx is also integral to the just-in-time supply chain that allows businesses to grow, even as they shrink inventory. FedEx generates over $35 billion annually.

FedEx uses 48,000 vehicles global to deliver our goods. Fed Ex probably utilizes another 30,000 vehicles at its airport operations. At the heart of FedEx operations is a hub-spoke private fleet of jets. Fed Ex has made Memphis, Tennessee, the busiest freight airport in the world.

I valued talking with FedEx Chief Engineer of Hybrid & Alt-Fuel Fleet, Sam Snyder, after he presented at the WestStart Clean Heavy-Duty Vehicle Conference. He discussed a number of areas of fuel savings. The volume and weight of an average package is now less. People are shipping more iPods; less big stereos. This allows FedEx to expand its deployment of Sprinter Vans, and reduce its need for the larger 16,000 pound (GVWR) vans. Sam Snyder stated that FedEx uses, “The right truck for the right route, saving millions of gallons of fuel.”

With oil topping $100 per barrel, FedEx is evaluating alt-fuel, and electric vehicles while continuing its investment in hybrids. FedEx hybrids have accumulated more than 2,000,000 miles in revenue service.95 diesel hybrids are in service globally, primarily in the U.S; 77 more hybrids will be added in 2008. The hybrids are an excellent investment with a 42% improvement in fuel economy. FedEx Hybrids

FedEx is making a bigger investment in hybrids than its major competitor UPS. UPS Clean Fleet

An indicator of the future is the 48 FedEx E700 Eaton hybrids in New York. In Milan, ten Iveco, a Fiat Group company, diesel hybrids will be used in a van similar in size to the Sprinter; a Bosch electric motor and Johnson Controls batteries are used. Green Car Congress

In May 2008, 20 Azure gasoline parallel hybrids (Ford E450 chassis and Utilimaster body) will be placed in service in LA and Sacramento. WestStart is managing this program.

Also being hybridized are the traditional FedEx 16,000 pound vans with a cargo capacity of approximately 670 cubic feet. Eaton’s hybrid electric system has been placed in the standard white FedEx Express W700 delivery truck, which utilizes a Freightliner chassis and an Utilimaster body, and designated E700.

FedEx would like to move towards more fuel-efficient 4-cylinder diesel hybrids, but it may not see an EPA certification until 2010 or later. Until then, FedEx may forge ahead with the less fuel-efficient 6-cylinder diesels. EPA continues to certify based on engine emissions, rather than more efficient hybrid duty cycle.

Hybrids are just one way that FedEx is becoming less oil dependent. Currently, FedEx Freight is actively testing hydrogen fuel cell forklifts, hybrid electric Class 7 trucks, and alternative fuels.

FedEx Express and FedEx Freight are members of the U.S. Environmental Protection Agency’s SmartWay Transport Partnership with fuel efficiency strategies such as:

* Instituting policies and technologies to reduce or prevent vehicle idling
* Locating FedEx facilities in order to eliminate idling from overnight trips
* Installation of tractor/trailer/van aerodynamic packages
* Use of advanced, low-friction synthetic oils and lubricants
* Introducing automatic tire inflation devices to increase fuel economy
* Introducing wide-based tires to increase fuel economy through reduced road friction

As one of the world’s largest private air carriers, FedEx is a major user of oil-refined jet fuel and a major emitter of greenhouse gases. To improve its carbon footprint, FedEx Express is replacing the B727 model aircrafts in its fleet with the Boeing 757 model. It has 20% greater payload capacity, but it also uses 36 percent less fuel. FedEx Express also plans to acquire Boeing 777 model aircraft, with a greater payload capacity, and 18% reduction in fuel use.

FedEx also saves annually over 5.5 million gallons of aviation fuel by using in-gate aircraft auxiliary power units, eliminating more than one hour of fuel usage per flight throughout the fleet.

FedEx is also taking a leading role in using renewable energy at its facilities. At the FedEx hub in Oakland, California, 80% of the facility’s electricity and is provided by a 904 kilowatt Sharp solar rooftop system that over its 25-year life cycle this plant will offset 10,800 tons of carbon dioxide – the equivalent of removing 2,100 cars from the road. Another 550kW will be added at its Fontana and Whittier facilities.

FedEx Kinko’s, Inc. purchases renewable energy at more than 520 branches in 26 states, for an estimated 69 million kWh per year. FedEx Kinko’s, Inc. is procuring its power from a wide variety of sources, including wind, geothermal, landfill gas, solar, and small hydro.

This year, Fed Ex was recognized as #6 on FORTUNE’s list of the World’s Most Admired Companies and #7 on FORTUNE’s list of America’s Most Admired Companies. For the seventh consecutive year, Fed Ex has been part of this prestigious list. Fed Ex’s leadership in clean transportation helps keep it at the top.

John Addison publishes the Clean Fleet Report and speaks at cleantech conferences.

Heavy-Duty Vehicle Trends for 2008

By John Addison (2/8/08). Most oil consumption and greenhouse gas emissions from transportation are not from passenger vehicles; they are from the heavy-duty vehicles, ships, and planes that move all our goods, serve public transit, and provide the infrastructure that keeps cities running. Heavy-duty operators have often been years ahead of passenger vehicle owners in using advanced technology to do more with less fuel.

Hybrids. Wal-Mart operates 7,000 trucks that in 2005 drove 872 million miles to make 900,000 deliveries to its 6,600 stores. Wal-Mart has set a goal of doubling the fuel efficiency of its new heavy-duty trucks from 6.5 to 13 miles per gallon by 2015. 26 billion pounds less of carbon dioxide would be emitted over 15 years as a result. Demand for oil is also reduced with over one billion less gallons of diesel required over that 15 year period.

Wal-Mart is defying the conventional wisdom that hybrid technology is of little help for large trucks that already have efficient diesel engines. Wal-Mart delivers goods from regional warehouses on an optimized route to its stores. Routes often involve heavy stop-go city driving. With hybrid technology, every touch of the brakes causes energy to be captured. Where trucks previously idled with engines running, hybrids can run all auxiliary power with the engine off, using large battery stacks for the electricity.

Wal-Mart has more than 100 hybrid light-duty vehicles. Now Wal-Mart sees bigger potential savings in heavy-duty Class 8 trucks. Wal-Mart plans to replace Peterbilt 386 big-rigs with hybrid versions of the same truck by 2009. Wal-Mart Clean Fleet Report

Plug-in Hybrids. PG&E is one of 14 utilities in the nation participating in the pilot truck program, sponsored by WestStart‘s Hybrid Truck Users Forum (HTUF), a hybrid commercialization project bringing together truck fleet users, truck makers, technology companies, and the U.S. military, to field-test utility trucks with an integrated hybrid power-train solution.

This new Class 6/7 hybrid truck is built by International incorporating the Eaton (ETN) hybrid drive system with a 44kW electric motor. Eaton has produced more than 220 drive systems for medium and heavy hybrid-powered vehicles. Vehicle configurations include package delivery vans, medium-duty delivery trucks, beverage haulers, city buses and utility repair trucks – each of which has generated significant fuel economy gains and emission reductions. Fleet customers for Eaton hybrid power have included FedEx Express, UPS, Coca-Cola Enterprises, The Pepsi Bottling Group, and the 14 public utility fleets into which were placed 24 hybrid-powered repair trucks.

Idle-off. In many heavy-duty fleets, engines idle 40% of the time at stops for many auxiliary needs including air conditioning, heating, running electronics inside the cab and more. These auxiliary functions can now be powered with the batteries in hybrid powertrains, with auxiliary power units such as fuel cells, and with truck-stop electrification. Heavy-vehicles can now be programmed to automatically idle-off after a prescribed amount of stop time, such as California’s five-minute law. Idle-off is possible by GPS location, such as specific bus stops. Wal-Mart alone estimates savings of $25 million with idle-off and APUs for its 7,000 trucks. Transit operators save millions of gallons of fuel and keep passengers happy with electronic air conditioning without diesel fumes.

Natural Gas. There are about five million natural gas vehicles in operation globally. These vehicles consume 238 million gasoline gallon equivalents. That amount has doubled in only five years. CNG vehicles are popular in fleets that carry lots of people: buses, shuttles and taxis. Natural gas fleets are likely to double again in the next five years. Los Angeles County Metropolitan Transportation Authority (LAMTA) serves over ten million people with the nation’s largest natural gas fleet, comprised of over 2,000 CNG buses. A growing number of riders enjoy higher-speed service with LAMTA’s bus rapid transit.

To help clear Southern California air, the Ports of Los Angeles and Long Beach established a $1.6 billion Clean Truck Superfund to purchase 5,300 alt-fuel trucks by 2010 out of a total fleet of 16,800 Class 8 trucks. All are likely to be Westport LNG systems installed in Kenworth T800 trucks.

Hydrogen Fuel Cells. Many passenger cars have the potential to meet all driver needs by plugging in for a nightly recharge of batteries in electric vehicles. Buses running 16 hours daily and climbing 12% grades can also be electric, but most need the added electricity provided by hydrogen fuel cells. Over 3,000,000 people have ridden these vehicles in Europe and the U.S.

Energy Security. The Army’s NAC is pursuing hybrid truck technology to significantly reduce the Army’s fuel consumption and logistics needs, to provide field-generation of power and to provide quiet, stealth operations. The U.S. Army has a fleet of over 246,000 vehicles with a goal to reduce fuel consumption by 75% by 2010.

Green Supply Chains. ConAgra has contracted with Nova Biosource Fuels to convert food processing waste into biofuel, greatly helping with waste regulations. This provides Nova Biosource Fuels with a low-cost feedstock for high-quality biodiesel. ConAgra has guaranteed the purchase of 130 million gallons per year. California-based State Logistics, has grown its business by providing more-sustainable shipping options for companies like Clif Bar. Prologis will only build USGBC LEED certified distribution centers.

On February 20, fleet managers, vehicle technology leaders, government leaders, other experts and stakeholders will gather in San Diego to discuss their success in all of these areas at the Clean Heavy-Duty Vehicle Conference 2008.

“Clean Heavy Duty Vehicle 2008 highlights the vehicles and fuels that will actually cut our greenhouse gases and reduce our dependence on oil,” said John Boesel, President and CEO of WestStart-CALSTART, a leader in spurring green tech in transportation. “The conference brings together the key business and political leaders helping bridge the technological and financial gaps to bring clean transportation solutions to market.”

Stay tuned for more exciting progress in 2008.

John Addison publishes the Clean Fleet Report.

PG&E’s Clean Fleet and Visionary Future

By John Addison (8/21/07). Years ago, you only had one choice for your telephone service – AT&T. Now you have a variety of choices from landline, wireless, cable, and Internet providers. Years ago, gasoline was your only fuel choice. Now you have a number of fuel and electric choices. In the future, your favorite provider may be your electric and gas utility.

PG&E – Pacific Gas and Electric – (NYSE: PCG) provides electricity and natural gas to over 5 million customers in California. With revenues exceeding $12 billion, PG&E has an opportunity to increase its services as we continue the shift from vehicles with gasoline engines to vehicles using electric propulsion and alternate fuels.

When I met with a number of PG&E managers, Sven Thesen traveled from his Palo Alto home via bicycle and train, leaving his personal plug-in hybrid at home. Another traveled from his Alameda home via bicycle and ferry. Others used low-emission CNG and hybrid vehicles. The people managing PG&E’s clean transportation programs practice what they preach.

This article looks how PG&E runs a clean fleet, new programs for customers, and the exciting future potential of vehicle-to-grid (V2G).

Largest CNG Fleet in USA

As part of its larger environmental leadership strategy, PG&E owns and operates a clean fuel fleet of hybrid-electric and fuel cell vehicles, and more than 1,300 natural gas vehicles — the largest of its kind in the United States. PG&E’s clean fuel fleet consists of service and crew trucks, meter reader vehicles and pool cars that run either entirely on compressed natural gas or have bi-fuel capabilities. PG&E also has the largest fleet of Honda (HMC) Civic GX CNG cars.

Over the last 15 years, PG&E’s clean fuel fleet has displaced more than 3.4 million gallons of gasoline and diesel, and helped to avoid 6,000 tons of carbon dioxide from entering the atmosphere.

For any utility, Class 6/7 service trucks often need to idle their large diesel engines for hours in order to run heavy lifts and other equipment. As new lines are installed, customers complain of the vehicle noise keeping them awake at night. The maintenance crew is often forced to stop and start the engine so that they can shout between the ground person and the one in the air. The hybrid truck is especially valuable in neighborhoods with noise restriction laws.

Last week, I reviewed PG&E’s new hybrid service truck which already had over 6,000 miles of operation. Efrain Ornelas demonstrated the heavy lift and other accessories operating electrically with the engine off. In service, the vehicle is reducing diesel fuel use a dramatic 55% through regenerative braking on road, and engine-off electric operation during stationary work. The vehicle even included both 110 and 208V outlets for power tools.

At $3.00 per gallon for fuel, the potential savings ranges from $4,500 to $5,500 a year per vehicle. Each hybrid truck reduces greenhouse gas emissions an estimated two tons per year.

In addition to the dramatic diesel fuel savings, PG&E further reduces petroleum use and emissions by using B20 biodiesel. PG&E is increasing using B20 biodiesel with its entire diesel fleet.

“Hybrid-electric trucks are promising because of their potential to significantly reduce the use of petroleum-based fuel and help keep California’s air clean,” said Jill Egbert, manager, clean air transportation, PG&E. “We hope our involvement will lead to the accelerated development and mainstream acceptance of hybrids in our industry.”

PG&E is one of 14 utilities in the nation participating in the pilot truck program, sponsored by WestStart’s Hybrid Truck Users Forum (HTUF), a hybrid commercialization project bringing together truck fleet users, truck makers, technology companies, and the U.S. military, to field-test utility trucks with an integrated hybrid power-train solution.

This new Class 6/7 hybrid truck is built by International incorporating the Eaton (ETN) hybrid drive system with a 44kW electric motor. Eaton has produced more than 220 drive systems for medium and heavy hybrid-powered vehicles. Vehicle configurations include package delivery vans, medium-duty delivery trucks, beverage haulers, city buses and utility repair trucks – each of which has generated significant fuel economy gains and emission reductions.

PG&E sees a similar opportunity to save with its Class 5 trouble trucks. For this truck, PG&E partnered with the Electric Power Research Institute and other utilities to conduct a plug-in hybrid pilot project for a Ford F550 Super Duty Field Response Truck. PG&E currently has 350 Field Response Trucks on the road.

Cleaner Electricity

Some people are concerned that a shift to electric and plug-in hybrid vehicles will not reduce global warming. These people point to coal power plants producing electricity that goes into the vehicles. Because electric drive systems are typically 300% more efficient than gasoline engines, major emission reductions are achieved even from coal generated electricity.

PG&E provides much greater benefit, because it is eliminating coal power from its power mix. As a customer, my latest PG&E bill showed a reduction of coal from 38 to 2% of the power mix. In 2007, energy from RPS-eligible renewables is increasing to 12% of the delivered power mix, from 5% in 2005. Natural gas is 43%, nuclear 23%, and large hydroelectric is 17%.

By 2010, 20% of PG&E delivered electricity will be from clean renewable energy. A big part of the increase will be 553 MW of concentrating solar power (CSP) from a new Solel project. When fully operational in 2011, the Mojave Solar Park plant will cover up to 6,000 acres, or nine square miles in the Mojave Desert. The project will rely on 1.2 million mirrors and 317 miles of vacuum tubing to capture the desert sun’s heat. It will be the largest CSP project in the world.

PG&E is also expanding its use of wind, geothermal, large solar PV, and biomass energy.

Natural Gas and Hydrogen Stations

PG&E owns and operates 34 compressed natural gas (CNG) fueling stations, for its own fleet and more than 200 commercial and private fleets. This includes transit districts, private refuse haulers, school districts, municipalities, air/seaports, and other miscellaneous operators including taxi, package delivery, military, and private fleets. PG&E Clean Air Transportation Program

In addition, construction of a hydrogen fueling station in San Carlos, California is scheduled to begin. GTI will serve as a partner on the project, providing a mobile hydrogen unit (MHU) that uses GTI’s patented reformer technology. This self-contained unit will produce hydrogen from natural gas.

PG&E makes daily use of three Mercedes hydrogen fuel cell (F-Cell) vehicles. A variety of PG&E employees drive the vehicles including, fleet mechanics, inspectors, service planning representatives, project managers and officers.

Vehicle-to-Grid

A compelling idea for the future is to charge electric vehicles at night when electricity is cheap, and then buy the electricity from vehicles during peak hours. Some electric vehicles store enough electricity to power 50 homes. Sven Thesen at PG&E demonstrated spinning the meter backwards with their plug-in hybrid Prius with V2G. The Prius included a 9kWh plug-in kit from EnergyCS using Li-Ion batteries. A Sonny Boy power inverter, common in solar power installations, was used.

Today, utilities are powering vehicles with electricity, natural gas and hydrogen. In a few years, electric vehicles will also power homes with vehicle-to-home (V2H). Large batteries and fuel cells provide many times the electricity demand of a home. In a few more years, smart grids and intelligent power management will allow peak electricity demands to be met by utilities buying power from vehicles with vehicle-to-grid (V2G). U.C. Davis and PG&E have demonstrated V2H and V2G already.

With smart grid technology, customers could simply plug-in their vehicles to 110 volt outlets. At idle low-cost hours the vehicle would be timed to recharge. At peak hours, customers could agree to let the utility buy electricity at premium rates. In the future, expensive and polluting stand-by peaking generators could be eliminated with smart grid technology and V2G.

Leading the way to clean electricity and cleaner transportation are corporations like PG&E. In their own fleet they are proving that alt-fuels and electric drive systems can save money and emissions. As the technologies are proven, PG&E gives customers new ways to secure clean fuels and electric power.

John Addison publishes the Clean Fleet Report. Permission is granted to reproduce this article.

Westport – The Greening of Big Trucks

One of the companies I have followed for some time is Westport Innovations, Inc., (TSX:WPT) out of Vancouver. The technology and product suite allows large diesel trucks to run standard diesels on a 95% natural gas mix, enabling fuel switching as well as significantly improved NOx and PM, as well as CO2 emissions. The company’s rapid expansions date from a late 1990s joint venture with Cummins (NYSE:CMI), and Westport has led this market sector since then.

I had the opportunity at the recent Greenvest 2007 Conference I chaired in San Francisco to hear the talk of my friend Dr. Mike Gallagher, President & COO of Westport, and asked him to share a few thoughts for Cleantech Blog based on his conference presentation.

A few quick quotes from their website on the technology (you’ll see why I like it so much):

“Westport™ HPDI (High Pressure Direct Injection) natural gas engines on the road are producing approximately 50% less nitrogen oxides (NOx), 80% less particulate matter (PM), and 20-25% less carbon dioxide (CO2) emissions than equivalent diesel engines.” – These are the regular diesels running on 95% natural gas.

Westport has also been developing a Compressed Natural Gas Direct Ignition technology that basically similarly enables a straight natural gas engine to run direct injection like a diesel. The benefits include:

“- near-zero emissions of particulate matter
– 20% less greenhouse gas emissions (mainly carbon dioxide) than equivalent diesel engines
– 25% increased fuel efficiency over current spark-ignited natural gas engines”

Mike, before we go into your thoughts on Westport, let me lay out some of your background in energy engineering. Mike was previously Senior Vice-President, Americas, for Fluor Corp, and held executive officer positions with the Bechtel Group in San Francisco and London-based Kvaerner Group. He also has PhD from Stanford in Mechanical-Nuclear Engineering. So Mike, thanks for the time today.

Mike, I know Westport makes products to run diesel engines on natural gas – how exactly does this work?

Westport’s LNG System for Heavy-Duty trucks uses a small amount of diesel pilot fuel for robust ignition and then allows the truck engine – we’ve based our technology on the Cummins ISX diesel engine platform – to operate using approximately 95% natural gas for high duty cycle applications. The combustion approach uses a high pressure direction injection of natural gas into the diesel combustion chamber.

Can you tell us about the greenhouse gas impact of your products? That’s such a hot topic these days.

Emissions regulations are the norm now, particularly in California where we are actively pursuing opportunities for the use of our heavy-duty product. The Westport LNG system truck produces 15-20% less greenhouse gas emissions, compared to an equivalent diesel engine.

Our joint venture company, Cummins Westport Inc., offers mid-range products for medium-duty truck and bus applications. CWI’s advanced ISL G engine produces 7-13% less greenhouse gas than the equivalent diesel.

As you just alluded to, and for those who haven’t followed the company, Westport has a major joint venture with engine company Cummins. How does this arrangement work and what’s in it for Westport?

Cummins Westport Inc., or CWI as we call it, is a 50:50 joint venture between Westport and Cummins Inc. The JV company is headquartered right here in Vancouver with us, it has a dedicated management team and a dedicated Board of directors.

Profits (and losses) are shared equally by the two parent companies. CWI Cummins Westport Inc., a joint venture of Cummins Inc. (NYSE:CMI) and Westport Innovations Inc. (TSX:WPT), manufactures and sells the world’s widest range of low-emissions alternative fuel engines for commercial transportation applications such as trucks and buses. Cummins is a global power leader in engines, electrical power generation systems and related technologies. Westport Innovations is the leading developer of technologies that allow engines to operate on clean-burning fuels such as natural gas, hydrogen, and hydrogen-enriched natural gas (HCNG).

Revenues grew approximately 40% from 2006 to 2007, to $60 million Canadian, what were the major drivers – and is that growth expected to continue? Where should investors expect the growth from?

The 39% increase in annual revenues was driven by increased CWI engine shipments (up 50%) and the delivery of our first Westport LNG systems for heavy-duty trucks. Product sales growth which we measure in Canadian dollars was actually offset by a 5% decrease in the US dollar exchange rate. In US dollar terms, revenue growth was 44%. Growth for the next couple of years is expected both from CWI global sales growth around the launch of its new ISL G, and from sales of Westport’s new LNG systems for heavy duty trucks.

And the company turned a profit for, I believe, the first quarter ever in this last quarter. Does this mean Westport has turned the corner? The company has a fairly large retained deficit – and I know investors have been looking for profits to begin erasing it.

We are pleased about this last quarter’s results for sure. We have a solid history with CWI and a new HD product now and the markets are responding. The profitability for this recent quarter was driven by a number of fortuitous events that occurred during the quarter on a one time basis. So we will continue to push for improved profitability on a recurring basis.

Perseus, one of your major shareholders (who has had two seats on the board) recently sold a large amount ($50 million worth) of shares. What was the story there? Didn’t Perseus loan money to the company just last year? Should existing or prospective investors be worried?

No, certainly no cause for worry, quite the reverse actually. In fact, the sale erased planned interest payments by Westport to Perseus which is a positive for us, and Perseus elected to capitalize on a a very attractive financial opportunity available to them based on our significant share price increase in recent months.

The stock price has tripled in the last year – what were the drivers and are you worried the run up was too steep?

It’s always hard to know exactly what is going on out there in the marketplace, but we think the market has responded primarily to two things: our CWI business is demonstrating strong and growing profitability, and our heavy duty LNG truck business has launched with some early sales and big opportunities at the Port of LA and others.

We think we are now being valued more broadly for our expertise, we are meeting expectations, and the regulatory system is catching up with our technologies, opening the door for more sales. CWI has an engine offering available now that is certified to 2010 emissions standards – that’s 3 years ahead of schedule! And Westport is positioned to provide LNG systems in trucks in California now, where they have approved a five year Clean Air Action Plan at the Ports of Los Angeles and Long Beach to replace up to 5,300 older diesel trucks with LNG trucks in five years.

Do you have any plans to list on Nasdaq in the future to make it easier for US investors to buy in?

We are always looking at listing alternatives and have expanded our communications with US institutions and investors. But we don’t have any immediate plans to do a US listing.

You personally came to Westport from big corporate engineering – what had attracted you to the company?

That’s true, I had spent 25 years and grew into senior executive positions with the pre-eminent engineering and project management companies in the world- well known names like the Bechtel Group and the Fluor Corporation. Within those companies though I had dedicated a fair piece of my career to development of alternative energy technologies- particularly alternatives to oil- and to environmental cleanup technologies. And to the entrepreneurial creation and growth of new businesses. And of course I had my Stanford and MIT engineering and technology roots to draw from. So when the Westport opportunity came along almost five years ago, I felt it was a great way to take everything I had learned and apply it to a fast-growing technology company. A place where I could work with some of the brightest young talent around to transform Westport from an R&D company to a full commercial company, making a serious contribution to solving some of the world’s oil, energy, and environmental challenges.

If you had to give an investor three reasons to like Westport – what would you pick?

Real and growing sales, short term commercialization opportunities, and a technology right in the wheelhouse of current world needs around oil, energy, environment, and climate change.

For more information, you can visit the Westport website.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog, a Contributing Author for Inside Greentech, and a Contributing Editor to Alt Energy Stocks.