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Turning Wasted Energy Into Money; Start-Stop Deployed; Solar Shorts; Green Portfolio Update

Issue 74: December 2010

Stop-Start Being Deployed in a Million Cars

Quick, Easy Way to Increase Gas Mileage, Reduce Emissions

by Rona Fried

In October, Maxwell Technologies (Nasdaq: MXWL) announced it had begun volume deliveries of Boostcap ultracapacitors to Continental AG to be incorporated into their new Stop-Start system for diesel passenger cars. Peugeot- Citroën plans to sell about a million cars equipped with this technology over the next three years.

Why is Stop-Start important? Because it's a very inexpensive way to significantly reduce emissions and increase gas mileage in conventional vehicles. The technology comes standard in hybrids - it's now being adapted to work in all vehicles. It could be standard equipment for all new cars by 2020.

Stop-Start systems eliminate idling. When you put your foot on the brake to stop a car, the system turns the engine off. When your foot touches the accelerator, the engine starts again. This simple technology reduces gas consumption by 10% in average city/highway driving to almost 20% in congested city traffic.

Although various energy storage technologies are being developed for advanced vehicles, Stop-Start systems are widely viewed as an affordable, effective technology that's available now, and will therefore be one of the first to gain mass acceptance for all vehicles.

That's important because although advanced vehicles - hybrids, plug-ins and all-electric - will slowly gain market share, the vast majority of vehicles sold over the next 10-20 years will be conventional vehicles.

Market research firm J.D. Power and Associates projects about 5.2 million advanced vehicles will be sold in 2020, just 7.3% of the forecasted 70.9 million passenger vehicles sold worldwide that year. PRTM, another market research firm, is much more optimistic: they see hybrids grabbing a 20% share of the market by 2020, with plug-ins at 5-6% and electric vehicles at 4-5% of the total.

Stop-Start technology took up an entire day at this year's European Lead Battery Conference in Istanbul. Automakers are working on how best to integrate it into conventional cars. The engine has to be able to start and stop on demand and the battery has to support accessory loads (such as air conditioning) when the engine is turned off. The system works well when batteries are new, but quickly degrades as they age.

There are two main choices: either add a premium lead acid battery (which costs only a couple hundred dollars) along with other improvements, or install a bank of ultra-capacitor energy storage devices, which have the ability to cheaply and quickly charge and discharge energy.

Maxwell (MXWL) is the world's leading ultra-capacitor manufacturer. Its products are used in regenerative braking devices in hybrids and electric vehicles, wind turbines, and consumer devices like uninterruptible power supplies. They can also play a significant role in grid storage, where their ability to discharge rapidly could be used to smooth electricity transmission.

Under new EU standards, fleet-wide carbon emissions for passenger cars have to be reduced to an average of 130 grams per kilometer by 2015 - that's equivalent to 42 miles per gallon for gasoline-powered cars. In the United States, the fleet average fuel economy for passenger cars and light trucks combined must be 32.6 miles per gallon by 2015 and 34.1 by 2016.

While Stop-Start technology can't satisfy all the new regulatory requirements, it is the lowest hanging fruit for vehicle efficiency. Auto industry experts predict that Stop-Start will be used in 20 million cars a year by 2015. If, as planned, China mandates Stop-Start on all internal combustion vehicles, the number could be closer to 40 million cars per year.

Large-scale fleet demonstrations for competing energy storage products are expected in 2011, followed by commercial rollout in 2013 model-year vehicles. In addition to Maxwell, leading contenders in the space include lead-acid battery manufacturers like Exide Technologies (XIDE), Johnson Controls (JCI) and Enersys (ENS). They see it as a way to boost sales and margins by selling a more advanced battery. Axion Power (AXPW.OB) has completed over a year of testing with BMW, and is developing a lead-carbon battery-supercapacitor hybrid to compete with the Maxwell-Continental system for a share of the Stop-Start market.

There will be room for several variants of Stop-Start technology and for a number of successful companies. The biggest challenge will probably be to ramp up production capacity fast enough to satisfy demand.

The Green Investor Recommendation Update

We continue to recommend buying Maxwell Technologies (MXWL) for all the reasons listed here and in our initial recommendation. After strong gains in 2009, MXWL shares paused during most of 2010 and didn't deliver on our expectations. Despite healthy sales growth from its ultracapacitor business. Maxwell has struggled to achieve profitability this year and the stock has been punished for it. We believe that after the adjustments made by management the company is now poised to execute its plan. If it does, the company and its shares should reflect significantly higher multiples.

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Rona Fried, Ph.D. is CEO of SustainableBusiness.com.

 
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