Hybrid cars have great potential to help achieve America's goal of energy conservation. The so—called hybrid car is a passenger vehicle with a standard gasoline engine, which is supplemented by an electric motor. Similar to a Diesel—electric locomotive, the gasoline engine runs at its most efficient level to produce electricity, which powers the electric motor, while also charging storage batteries. When acceleration or other strong power is not required (as in cruising on a highway), the electric motor draws on the battery, and the gasoline motor shuts down, thereby saving gasoline. When maximum power is required, the gasoline engine and the electric motor act together to power the wheels.

These cars can attain 40 mpg or better. Yet there are critics. Some say consumers will balk at paying a premium to purchase fuel—efficient transportation. From Detroit, we hear some voices saying that making hybrid cars is not good business, because these cars are not the final solution. Hydrogen fuel—cell cars are considered to be the long—term answer, so why spend investment dollars on hybrids?

What we now see in the marketplace is that Ford, Toyota, and Honda are trying to make this work, engineering cost reductions in the manufacturing process of these complex machines. GM, Chrysler and Nissan, on the other hand, are not investing because they consider hybrids to be 'bad business,' and they have decided to wait for hydrogen—powered fuel cells available in approximately a decade. By extension, these same companies must believe that gasoline prices will stay near current levels and interest rates will not go up.

Europe, where Diesel engines command a large share of the market, is less interested in hybrid drive cars. American consumers have resisted Diesel—powered passenger cars in the main, although Mercedes and others have served a niche market for years.

To test the economics of driving one of these cars, it is easy to calculate the savings, using published numbers for average levels of driving. Assume that you are fairly typical, so your car now averages 17 miles per gallon (mpg). You pay $1.75 per gallon at the pump, and you drive 1000 miles per month, or 12,000 miles per year. Your gasoline bill alone will be $102.95 /month. Now, if you trade—in for a hybrid, if you can get 40 mpg, then you save $59.19 / month. If we take the worst case scenario and assume you must pay a premium of $3000 for your new hybrid, the extra financing cost of $3000 for five (5) years at 6% interest is $58.00/ month. Your new hybrid at 40 mpg is a breakeven deal for you at current gasoline price levels. You will save an extra $9.00 per month for every 25 cent per gallon increase in gasoline price.

Toyota plans to launce the new Lexus RX330 hybrid, which boasts 60 mpg in the city and 48 mpg on the highway. This luxury SUV/car will accelerate 0 to 60 mph in 10 seconds. Of course, the gasoline savings are even more impressive at 60 mpg and rising gasoline costs.

Bill Ford suggested in a recent interview in Business Week that the U.S. government should provide a subsidy to Americans to encourage the purchase of hybrid cars. Even a comparatively modest per vehicle tax subsidy would do much to encourage hybrids, given that the economics are already roughly at the breakeven level for average drivers. I  am expecting that a new energy policy will provide a range of subsidies to encourage investment in technologies aimed at protecting our environment, reducing energy consumption, and our dependence on oil imports. As I have just shown, the new cars will be breakeven for the average consumer at the current price of $1.75 at the pump, even if no subsidy or tax break is available.

I have a real problem with automobile manufacturers telling us that investment in hybrid cars is unwarranted because hydrogen fueled cars are the real objective, some 10 years away. First of all, hydrogen cars are not the real objective. The objective is to provide affordable transportation that reduces our reliance on fossil fuels and protects our environment. Secondly, the technology replacement process will ultimately identify a number of alternative technologies along the way. The hybrids are considered an interim solution that can be produced right now, and produce measurable energy savings without introducing any risky business or technological gambles. We may eventually find something better than the hydrogen fuel cell. Never underestimate the potential of R&D.

Even the opponents of the hybrid cars admit that the so—called hydrogen fueled cars are ten years away from reality. To say that new investment in hybrid cars is not justified now is simply an excuse to do nothing. It seems pretty clear to most observers that hybrid cars are a simple bridge solution, which allows consumers to save money and reduce energy—related pollution, while development proceeds on more efficient technologies in terms of environmental impact. So, consumers can now invest in a new energy efficient car and their investment will be protected for at least ten years. So, where is the problem? The problem might be that sales of the traditional gas—guzzlers would be impacted. The other problem might be that a long period of high gasoline prices might leave these folks holding the bag while Bill Ford laughs all the way to the bank.

A Plan of Action
We need an energy policy to jump—start the process of investing in smart technologies which reduce our dependence on oil imports and protect our environment from harmful pollutants. However, to achieve our goals, we also need an Energy Plan to move things along at a measured pace. This plan would convert policy into objectives, strategies, goals and action plans. In particular, the proposed Energy Plan would feature a technology planning function that would focus on the key technologies that are required to reach our long—term objectives. The technology plan would identify and track the specific solutions that are available today, the ideas that need more development and prospective technologies that require new research.

A second part of the Energy Plan would sponsor projects to prototype the best ideas, to develop practical implementation plans, measure results and estimate economic impacts. Finally, we need a function to articulate and communicate our achievements and progress. This function would provide stewardship and an unbiased voice that informs consumers, developers and manufacturers in an organized and timely fashion.

This is the kind of planning process used in big business, and I believe we need the same in our Department of Energy (DOE). As long as the government makes ample use of market mechanisms, and stays away from picking winners and losers, letting results speak for themselves in the marketplace, such a policy could usefully accelerate technological progress, and help us confront our strategic energy challenges.

I see hybrid cars that yield good gas mileage an excellent short—term step. It is highly likely that Congress will award new owners of these cars some kind of tax break that at least partially pays for the premium on the new car. More importantly, it is very unlikely that we are looking at low gasoline prices over the medium to long—term, so new hybrid owners will save even more money on gasoline.

Henry Ford would be proud.

Dan Berard is our energy correspondent