Deficits and Energy

After reading several articles about the administration's proposed 2011 fiscal-year budget, I decided to look through the figures myself. My primary interest was in finding indications of what might lie in store for energy-related taxes and incentives. However, once I noticed how the projected deficits accumulate and examined the assumptions behind them, it struck me that the larger concern for energy and everything else is whether this budget represents a reasonable and sustainable picture of our future national finances. The expected 10-year deficit for the 2009-2018 period appears to have grown by $1.5 trillion relative to last year's budget. And that's after counting roughly $2 T in newly-proposed spending reductions and tax increases, including higher taxes on the energy industry. Against that backdrop the extra few billion dollars for renewables and other favored energy technologies nearly get lost in the rounding.

As a veteran strategic planner, I started by examining the economic assumptions for the budget. While everyone hopes for a strong rebound that would boost tax revenues by moving millions of the un- and under-employed back onto the tax rolls, it seems overly optimistic to assume that on top of an expected 2.7% growth rate in real GDP for this year, real GDP growth would then average 4% per year from 2011-2015 (calendar years.) The last time we had a five-year growth spurt like that was in the late 1990s--thanks to the Tech Bubble--and prior to that in the late 1980s. Yet despite such strong projected growth and the addition of roughly $2 T in "savings" and new taxes, the Treasury would still need to borrow an additional $14 T over the next decade. Even less realistically, perhaps, given such robust growth and massive borrowing, the budget also assumes that consumer-price inflation will not rise above 2.1% for the next decade, while nominal interest rates go up only gradually, never averaging more than 5.3% for 10-year Treasuries.

All this suggests that the current budget might be merely a placeholder awaiting the recommendations of the proposed deficit-reduction commission, while generating a set of figures that just manages to keep the total federal debt level--Table S.14, not the same as the "debt held by the public" shown in summary table S-1--below around 106% of GDP. Of course, this hinges on achieving those higher tax revenues, some from growth and some from higher taxes, including the termination of the Bush tax cuts for "upper-income" Americans. Even if the Congress passed all the required tax legislation, which is not inconceivable since for the biggest portion they'd be voting for a tax cut for everyone except "upper-income" taxpayers, the chances of things turning out even this well seem low. If growth doesn't reach the projected levels and stay there for years, tax revenues will fall short, deficits will grow, and at some point interest rates will rise, requiring even bigger deficits to cover the cost of debt service that under this budget exceeds $800 billion a year by 2020.

Then there are the tax increases, starting with energy. The big difference vs. last year is the absence of $646 billion from cap & trade. Even if cap & trade is eventually enacted, it now seems likely that most of its proceeds would be rebated to taxpayers or spent on new energy programs, so it doesn't look like a way to close the budget gap. The proposed budget has roughly $3.6 billion per year in increased revenue from eliminating what the oil industry regards as appropriate tax benefits and the administration calls tax loopholes. Either way the budget would increase the cost of producing oil and gas in the US by around $0.60 per barrel of oil equivalent (BOE) after tax. While that won't break the industry, it also won't make US exploration and production any more attractive or competitive. In case you're wondering why we should care about that in light of our new emphasis on green energy, it turns out that the entire energy contribution of the record 10,000 MW of wind turbines installed in the US last year equates to about 100,000 BOE per day, the equivalent of one good-sized Gulf of Mexico oil platform or roughly 0.2% of our total energy consumption. We need more renewables and more conventional energy.

The budget also includes roughly three-quarters of a billion over 10 years in new fees on "non-producing oil and gas leases." Grounded in the mistaken notion of "idle leases," this was ill-advised last year and remains so, not just because oil companies don't bid on leases to take them off the market and keep them idle--they already pay rentals on any leases that aren't producing, which revert to the government after 10 years--but because adding these fees will merely reduce the up-front bonuses companies would be willing to bid to get them in the first place. As a result, the net revenue from this item ought to be zero.

Of course in terms of total revenue all of this pales in comparison to what the administration expects to collect from upper-income Americans, who seem unlikely to get any more sympathy than the oil companies. (Ironically this segment probably includes the bulk of the potential early buyers for the advanced technology vehicles that the government is lending or granting carmakers billions to produce.) The budget includes about $700 billion of additional revenue over 10 years from reversion to the pre-2001 tax rates for this group, along with some less obvious increases involving phaseouts of itemized deductions and exemptions and the treatment of deductions for those in the new 39.6% federal bracket as though they were incurred in the 28% tax bracket. Together these features would impose effective marginal tax rates much higher than that notional 40% on the folks at the bottom of the new bracket, creating a heck of a disincentive on earning a little more once you're near that threshold. But aside from making additional work or investment unrewarding for those unlucky enough to qualify narrowly for this bracket, this approach increases our collective reliance on this group to fund our government. These folks were already paying 86.3% of the federal income tax before these increases, and that share would go up under this budget. I wouldn't call that either reform or a sound basis for responsible democracy.

What we're left with, then, is a federal budget that even under a rosy set of assumptions expands the cumulative deficit and total US indebtedness into a range that greatly multiplies the large-scale uncertainties we face, while making minimal cuts to spending and increasing taxes only on unpopular corporations and upper-income Americans. Unfortunately, this scenario doesn't look conducive to generating the enormous private investments in new energy technology and infrastructure that will be necessary and that the government can't afford to make, particularly as mounting debt constrains its freedom of action. We seem to be stuck in a zone in which the only real solutions are unpopular, while most of the ideas that are popular wouldn't be real solutions.

Read More

Advantage China?

A spate of articles on China over the weekend, including one in the New York Times entitled, "China Leading Global Race to Make Clean Energy" got me thinking about our reaction to such reports. The Times article included some important insights about the role of relative scale and growth rates in fostering the emergence of global wind and solar power competitors from China. From a wider perspective, however, I worry that we're beginning to apply the same kind of mental inflation of competitor attributes that made "Japan, Inc." seem such an overwhelming juggernaut in the late 1970s and most of the 1980s, when it appeared that Japan would dominate every important industry and own every scrap of signature US real estate, starting with Rockefeller Center and Pebble Beach.

In the last decade or so I've watched attitudes toward China evolve from what I used to call "China Big"--an unprecedented opportunity for global companies due to the size of its emerging consumer and financial markets--to something like "China Smarter", which compares that country's growth and the policies that have sustained it to those that helped guide the mature US and European economies down the path of unsustainable asset bubbles. During this interval Chinese renewable energy firms have grown from low-cost suppliers of parts and raw materials to established EU and US equipment manufacturers, to become integrated competitors in their own right, capable of undercutting the German solar power industry in its home market--to choose just one example.

As the Times points out, China gains a big edge in renewable energy because its entire power sector must grow so rapidly to support economic growth that is expected to average 8% this year, after a decade of double-digit growth interrupted only by last year's dip to 6% or so. That means that while renewables are still more expensive than the coal power plants that have dominated the Chinese market, they don't have to compete head-to-head with them; there's enough growth for all. Contrast that to a US power market that has shrunk by an astonishing 6% since 2007, instead of continuing to grow at its formerly-dependable 1-2% per year pace. The size of China's domestic expansion and the urgency of keeping it going, together with the increasing sophistication of its low-cost manufacturing base, make it nearly inevitable that China would become a serious competitor in an industry for which the biggest factor governing market penetration--other than the degree of regulatory and subsidy support they receive--is making renewables more cost-competitive with traditional energy sources. The more that depends on experience-curve effects rather than technology breakthroughs, the more this competition will favor China, for now. Throw in concerns about access to the rare earths and metals required by much of this technology, and China's long-term advantage in renewables looks even bigger.

I don't want to seem blasé about the challenge this represents, but I also think we should keep it in perspective, as we often failed to do concerning Japan in the 1980s, when its keiretsu companies seemed 10 feet tall and business bestsellers touted Japanese management techniques and warned that Japan was on the verge of overtaking the US in the global economy. Again, consider renewable energy. In 2008 the value of all wind turbines installed globally was on the order of $70 billion and for grid-connected solar power hardware around $20 billion, out of global renewable energy investments of $120 billion. That puts global wind and solar equipment sales at roughly the level of US aerospace exports for 2008, and about half the size of the total US aerospace market. That's big enough to want to retain a meaningful share of the market, but not so big that the entire economy depends on it. Or does it?

The Times article included the worrying suggestion that the US might someday be as dependent on imported Chinese renewable energy gear as it currently is on imported oil from the Middle East--never mind that the latter made up just a fifth of net US oil imports and 12% of total US oil supplies in 2008. Yet even if that analogy were correct, there's a huge difference in the economic and security implications of these two positions. We understand from experience that even a partial suspension of US oil imports would create an immediate price spike and send a shock throughout the economy. It's hard to see how the impact of even a complete embargo on sales of wind and solar equipment from China to the US could ever approach that. Although curtailed renewable energy equipment imports might disrupt the activities of companies installing them and spoil the returns of those parties financing them, existing facilities would keep turning out power. Once you've imported a wind turbine or solar module and set it up, you own it and its output until it wears out. These risks simply don't equate in the manner the Times asserts. Moreover, they are naturally limited by the significant practical challenges faced by intermittent and cyclical power generation technologies. Just read the DOE's analysis of a 20% wind power scenario to see what's necessary to achieve even that threshold.

Unfortunately, concerns about China's advances in renewable energy carry extra weight, because they align with a larger pattern of China envy exemplified by the talk of a "Beijing Consensus" that Tom Friedman apparently encountered at the World Economic Forum in Davos. China's "Confucian-Communist-Capitalist" model certainly offers speed and clarity of purpose that our own system has matched only at times of immediate national crisis. However, it's worth recalling that in the 1930s the Soviet and Italian models had their admirers here, too, for their ability to get things done, compared to the messiness of a capitalist democracy. However discredited the US economy may look after a couple of bad years, I'll take that messiness, as long as we don't manage to kill the innovative spirit--and the incentives that drive it--that enabled us to adapt the best of Japan's ideas while continuing on a trajectory that eclipsed Japan's success over the last two decades, even when you factor in the Great Recession. I'm more worried about navigating the geopolitical challenges that China's rise will create over the next few decades, and ensuring that they don't end in the kind of confrontation that resulted from Germany's rise a century ago.

Read More

Evolution of Car Manufacturers

Manufacturers Popularity and Decline

There were over 300 companies building electric cars at the turn of the 20th century. At that time the United States had over 30,000 electric cars on the road. The Electric Vehicle Association of America (EVAA) was founded by Boston Edison in 1909. Electric cars were clean and quiet, and did not require manual starting by physically cranking the motor by hand. The biggest demographic customer base for these cars was women. Even Henry Ford's wife drove an electric car.

In 1913 Cadillac invented the electric starter; this was a huge advance, truly a milestone in automotive technology for internal combustion cars.  The internal combustion assembly lines of Henry Ford, active since 1908, caused a further decline in the use of electric cars. Ford's assembly line made cars inexpensive and it helped make them more uniform.  Parts were not custom made for each vehicle, this made repairs and replacements easier and more economic. At the time, electrics were still popular for some non-road applications, such as service vehicles like carts and forklifts.

Infrastructure

With more cars of all types being produced the transportation infrastructure began to improve dramatically. We began building more paved roads. This also made internal combustion cars more desirable because of their greater range. Even Thomas Edison preferred gasoline to electric. As gasoline vehicles became more popular we began building more service and support for them.  Garages and gas stations began to appear in more locations, making it easier to own and operate a gas vehicle.

Today's Hybrids and Electrics

Hybrid vehicles became popular at the turn of the 21st century. Fuel prices reached record levels, quickly going from two dollars to three dollars, and eventually to over four dollars per gallon. One of the first vehicles to reach critical success in the consumer marketplace was the hybrid Toyota Prius. This vehicle is affordable, efficient and advanced, its hybrid technology blurring the lines between the performance of electric and internal combustion vehicles.  Hybrids' have two drive trains that work with each other to provide the work to drive the vehicle.  Development of the Hybrid has produced new technology which combines the drive trains at a price people are willing to pay.  A side benefit of their development has been to show that electric technology works effectively.  Some Hybrid owners have done conversions allowing for their vehicles to be charged by directly plugging in, these are known as plug-in-hybrid-electric-vehicles (PHEV).

The history of electric cars and trucks is filled with both facts and politics. Arguably, the best electric vehicles (EVs) are the one produced by the major auto manufacturers.  The major manufacturers produced both "ground-up", or original EVs, and conversions of existing vehicles.  Most of these vehicles are no longer in existence due to the auto makers' claims that there is not enough consumer demand.  Economics have come into question at various times, as the major vehicle makers have a vested stake in their existing internal combustion engine (ICE) technology.

  Smaller manufacturers have attempted to build electric cars and trucks with varying degrees of success.  Some of the vehicles produced by these companies look similar to the internal combustion cars and trucks we drive, and others appear much more exotic.  Size is important in order to maximize range, so some vehicles are extremely light, almost like bicycles.  Others have been built with three wheels to qualify for motor vehicle licensing in the motorcycle category.  Cars have been produced with direct drive motors, chain drive, belt drive, hub motors.  

Several smaller "boutique", or specialty manufacturers still convert vehicles today. The degree of their quality and performance varies dramatically.  Some companies offer parts that are kitted into standardized assemblies, others simply provide general instructions and ideas, often with a loose recipe of parts and where to find them.

Many hobbyists are drawn to conversions because of the design and creativity necessary to convert one existing design into another.  Because of this freedom, many strange and unique features have come from individual projects.  This experimentation has included charging trailers that are towed behind the with a gas generator (the first "hybrids"); regenerative braking that puts energy back into the battery pack by temporarily making the motor into a charger; even exploring with solar or motion generators attached to the EV.

  The moderate or limited success of these early inventors has both helped and hurt the EV industry.  The best outcome has been that they have proven the concept.  EVs are possible, the technology is here and can be assembled by almost anyone.  The negative side is that some of the early vehicles produced were unappealing to consumers.  The main buyers of these concept cars were early adopters who were willing to try out new technology. Many people believe that a car or truck is not really viable unless it is made by a major car manufacturer.

Your project is the combination of a "major manufacturer" and a "boutique" shop.  The S-10 was manufactured by General Motors, and the conversion kit was made by Electric Auto Shop.  Putting them together into the electric drive truck will use another boutique shop, you and your school.

 Today's Fuel Cell Vehicles

Using fuel cells in vehicles may be new technology, but fuel cells were introduced over 100 years ago.  In this technology, fuel material is converted into electricity.  The fuel material can be a stream of hydrogen gas.  Like a lead acid battery, there is action between the cathode and anode which produces work to the wheels to drive the vehicle.  One drawback is that the fuel cell vehicle is expensive and needs a lot of space for the fuel cell to complete its conversion process. 

Read More

Tesla Motors

Tesla Motors files for IPO, seeking $100 million


LOS ANGELES (MarketWatch) -- High-end electric-car company Tesla Motors filed for an initial public offering Friday, seeking $100 million in the public-financing arena as conventional auto makers are reeling from anemic sales and product recalls.


Palo Alto, Calif.-based Tesla filed documents with the U.S. Securities and Exchange Commission, but did not indicate in the filing when those shares would be sold on the public markets, nor what the initial price would be. Company executives could not be immediately reached for comment.


If successful, the IPO could help usher in a new era for the auto industry, which is steadily moving toward cleaner-burning engines.


Toyota's recall debacle

Japanese auto-maker Toyota may have to recall 8 million vehicles world-wide over safety fears that some analysts blame on cost-cutting measures.

The IPO is expected to be one of the most high-profile offerings in some time, and is the first by a U.S. automaker since Ford Motor Co. (entered the public markets in 1956.)

Whether Tesla can take advantage and shift public tastes more toward zero-emission cars is unclear. But the timing of the IPO could prove to be shrewd.

"We believe incumbent automobile manufacturers are at a crossroads and face significant industry-wide challenges," Tesla said in its filing, adding that "the legacy investments made by incumbent automobile manufacturers in manufacturing and technology related to the internal combustion engine have to date inhibited rapid innovation in alternative-fuel powertrain technologies."


While Ford has been prospering of late, rivals General Motors and Chrysler have been suffering from downtrodden sales, and were taken over by the federal government last year. Meanwhile, top foreign producer Toyota Motor Corp.  is having to recall millions of its automobiles around the globe due to a problem with sticking accelerator pedals.

The Tesla Model S.

Tesla first started selling its $100,000 all-electric sports car, the Roadster, in 2008 and followed that up last year with the Roadster 2. The company claims in its IPO filing that the car has a range of 236 miles on a single charge, and says it has sold 937 of the vehicles in 18 countries.

It is designing a sedan designed for family use, the Model S, which would run for $49,900 after a $7,500 federal tax credit, the company's IPO said. The sedan would have a range of 160 to 300 miles on a single charge. In addition, Tesla is negotiating with Daimler AG  to provide its electric powertrain and battery technology for Daimler's Smart fortwo car. One thousand Tesla battery packs and chargers are being used in a trial with Smart fortwo cars in five European cities.

Tesla said it has taken out a $465 million long-term loan with the Energy Department under its advanced-vehicles manufacturing program to build a facility that will manufacture the Model S. The company added that it has been given up to $31 million under similar California state programs.

In the filing, Tesla indicated its revenue will decrease substantially before the Model S is rolled out -- expected to be sometime in 2012. That is because Tesla will cease selling its roadsters in 2011 and won't resume production on a new model until at least 2013.

Read More

The SOTU and Energy

Given the central focus of this year's State of the Union Address on the economy and jobs, I wasn't surprised to hear the President highlight "clean energy jobs"--a phrase that seems to have replaced the formerly ubiquitous "green jobs"--though I was relieved that he didn't hang the whole weight of his administration's jobs focus on them. I was even more pleased at the apparent evolution and broadening of his perspective on energy, compared to his first address to a joint session of Congress last February, when oil was only brought up in the context of its imports, and nuclear power wasn't mentioned once. By contrast, last night the President spoke of the need for expanding nuclear power and "making tough decisions about opening new offshore areas for oil and gas development." If he is serious about the latter course, he must reinforce that message with the agencies involved.

It's just as well that the green jobs refrain has become more muted, since as I've noted before, the main employment impact of energy isn't from the people who are employed producing and distributing it, as I formerly was, but from its cost and availability for the other 92% or so of the economy not engaged in some aspect of the energy business. Simply put, if we want the economy to grow at a healthy pace and create lots of new jobs, then it's more important that energy be as affordable as possible, than that we employ as many Americans as possible in the energy industry. That means we must not only increase our production of new renewable energy, which while growing rapidly contributes just 5% of our total supply, but also those sources that still account for 95% of our energy use.

If President Obama is willing to make "tough decisions" on oil and gas--presumably to open up access to them--then it is unfortunate that as he was proposing this, his Department of the Interior was engaged in a hay-throwing contest with the American Petroleum Institute over the oil & gas leasing results for 2009, which brought in $6 billion less than in 2008, just for offshore. Whatever explains this anemic performance, the record of the last year strongly suggests that this administration is a much more reluctant participant in this activity than its predecessor. Although that may please some constituencies, it hardly advances the cause of delivering more domestic energy supplies from these sources. And for Interior to cite a 14% increase in oil production last year in defense of its current practices makes me wonder how well its new management really understands the processes involved, since the time required for permitting and construction makes it extremely unlikely that the increase is attributable to leases awarded since January '09.

In order to promote the affordable energy needed for growing the economy and creating jobs, the President should also rein in efforts to entangle the most important energy development of the last decade, natural gas produced from shale and other unconventional resources, in new regulations surrounding a decades-old drilling practice that in essence involves injecting water into the subsurface, along with chemicals quite similar to those that drillers are seeking to extract from there. Promoting domestic energy will also require taking a much more pragmatic approach to climate legislation than that represented by the 1400 page monstrosity of Waxman-Markey that he praised last night, and avoiding the temptation to turn the EPA loose to regulate greenhouse gas emissions from facilities consuming the equivalent of as little as 150 barrels per day of oil, or roughly one tank truck a day.

If the President has truly begun to embrace an "all of the above" energy strategy, that would be very good news for the country. We need more energy from our abundant domestic sources--including oil, natural gas, nuclear power and renewables--to get the economy growing at a pace sufficient to generate millions of new jobs. Unfortunately, I can't help recalling that only a few months ago a top official in the Treasury Department offered Congress his view that the US was overproducing oil and gas. The onus is now on the administration to demonstrate that the energy commitments President Obama made last night will be carried through.

Read More

Toyota Electric

Toyota to Build All-Electric Car by 2012

Toyota promises to have a compact "Urban Commuter" car that runs entirely on electricity for sale by 2012. The automaker will also speed up the rollout of plug-in electric Prius models powered by lithium-ion batteries, and build a Lexus hybrid.

Toyota, the leader in hybrid car sales, plans to have a Battery Power compact car called the FT-EV on the market by 2012 – a lightweight four seat, model on its gasoline-powered IQ, that will have an all-electric range of 50 miles.

Toyota's move toward an all-electric car follows those by companies like Nissan, Mitsubishi, Think and several others aiming for the commuter market, where the shorter ranges of battery-powered vehicles are seen as less of a drawback.

As for its hybrid plans, Toyota said it will begin delivering Prius hybrids that can be plugged in to recharge their batteries in 2009, slightly earlier than a previously announced 2010 rollout date. About 500 of the plug-in hybrids will be used for market and engineering analysis by lease fleet customers.

Those plug-in Priuses will be powered by lithium-ion batteries built at a plant owned by Toyota and Panasonic EV Energy Co., the company announced. Current Prius models use nickel-metal hydride batteries.

Toyota showed off test models of the FT-EV and new versions of the hybrid third-generation Toyota Prius and Lexus HS250h at the North American International Auto Show in Detroit this weekend. Startups Tesla Motors and Fisker Automotive, as well as financially troubled automaker Chrysler, are introducing all-electric sports cars at the show.

The push for more fuel-efficient vehicles comes amid a dire economic climate, with sales of new cars plummeting and American automakers General Motors and Chrysler tapping up to $17.4 billion in federal bailout funds to avoid bankruptcy.

General Motors plans to have its plug-in hybrid Chevy Volt on sale in 2010. Ford said it plans to be building an all-electric commercial van by 2010, an all-electric passenger car by 2011, and plug-in hybrid vehicles by 2012.

The economic downturn and falling oil prices have hurt sales of hybrids along with broader auto sales. Toyota's hybrid car sales in the United States fell 53 percent in November from a year ago, and the company expects to post its first operating loss in 70 years for the fiscal year ending in March.

But Toyota's push toward electric and plug-in hybrid cars is part of the company's recognition that, despite currently falling oil and gasoline prices, "the inevitability of peak oil," or the coming peak and decline of production from the world's oil fields, will force automakers to make more fuel-efficient cars. Other automakers have also reported steeply declining sales. The poor economic climate has led seven automakers to scale down or cut their presence at the auto show, including Nissan, Mitsubishi, Rolls-Royce and Land Rover.

Read More

Best Hybrid

Test Drive: 2010 Ford Fusion is best gas-electric hybrid yet

OK, let's just get it out there: The 2010 Ford Fusion hybrid is the best gasoline-electric hybrid yet.
What makes it best is a top-drawer blend of an already very good midsize sedan with the industry's smoothest, best-integrated gas-electric power system. It's so well-done that you have to look to the $107,000 Lexus LS 600h hybrid to come close.


Fusion's $28,000 starting price is more or less in reach, the driving feel is good, and the interior has a premium look and feel.

There are three facets to consider in evaluating a gasoline-electric hybrid: the underlying vehicle itself, the hybrid system and the mileage.

Assuming the preproduction Fusion hybrid test car was representative — Ford says it was — the Fusion's scores in those three categories are good, great and adequate, but potentially, very good.

The Toyota Prius crowd will protest. Prius is lower-priced, has about the same room inside, has a handy hatchback configuration, gets better mileage — and most of those attributes could improve when the 2010 Prius goes on sale in a few months — so how could Fusion be the best hybrid?

Simple. Fusion drives better. A car is, after all, a driving machine. Brownie points for saving somewhat more fuel or offering a cargo-friendly hatchback, but driving feel is most important.

And there, Fusion is without equal among hybrids.

Here's a look:

•The car. A slick machine, regardless of power-plant. Smooth looks. Good manners. Adequate space. Comfortable accommodations. Above-average ambience.

Ford launched Fusion as a gasoline-only car in 2005 as a 2006 model.

It's getting a mid-cycle update for 2010, including a hybrid version for the first time, which will begin arriving at dealers mid-March.

The hood has a wide, demi-dome bulge, and the grille and rump are tweaked a bit.

The grille now looks as if it was done that way on purpose.

A commendable change: The turning circle is 2 feet narrower. No more back-and-forth getting into or out of a tight parking spot at the shopping mall. The change makes the car feel more nimble overall, not just when docking in a narrow slot.

•Hybrid system. The basic four-cylinder gasoline engine is a 2.5-liter, up from a 2.3-liter in previous Fusions. A little more oomph is the welcome result. The aural signature could be better — it comes down on the coarse side when spurred hard — but isn't a deal-breaker. The electric motor delivers more crank than you get from the gas engines in most small cars.

And the miracle is how Ford blends the two. There was no — none, nada, zip — vibration or shimmying in the test car when the gasoline kicked in to help the electric. No other hybrid — not even that $107,000 Lexus — can make that claim 100% of the time.

Fusion's main rivals, Camry and Nissan Altima hybrids, shake a lot when their gasoline engines join the party, Altima especially.

And no, it's not worth accepting the lack of refinement as a price for saving fuel. It'll make you bitter and crazy after a while, wincing in advance knowing that shudder is due any second.

One Ford trick: using the engine's electronic controls to halt the gasoline engine just at the point in the crankshaft rotation where a cylinder is ready to fire again.

There was a distant shudder when the Fusion's gasoline engine restarted after stopping at a red light, as all hybrids do to save fuel. But it was milder than in any other hybrid tested, so minor as to be inconsequential.

The other great thing about the Fusion hybrid is information delivery. You can pick how much hybrid-related data you want on the instrument panel. Regardless of how much you ask for, Fusion delivers it informatively, no scolding or overwhelming you, as other hybrids do.

Yes, there's the "atta way" pictograph of leaves growing into a wreath if you drive just so. But you can shut that off.

• Mileage. Mediocre for a hybrid in the test, but the mileage numbers were continuing to climb even as the test ended. And the car registered 40-plus miles per gallon in a couple of short trips that usually return crummy, not outstanding, mileage.

Best guess: Moderate, but not mileage-obsessed, drivers could get 35 mpg or so in suburban settings. Not the 41 government rating, but impressive for a 3,720-pound midsizer.

Fusion's city mileage rating is better than Camry's 33 mpg, but does it get more in real life? Probably depends more on the driver than the car.

Even if the Fusion gets lower real-world results, it's still much smoother and a whole lot nicer to drive.

More about the 2010 Ford Fusion hybrid

What? Gasoline-electric hybrid version of midsize, four-door, front-drive Fusion that's been updated for 2010 model year. Ford's Mercury brand sells the nearly identical Milan.

When? Hybrid and gasoline versions begin arriving at dealers in March.

Where? Made at Hermosillo, Mexico.

Why? Pirate some sales from Toyota's Camry hybrid. And burnish Ford's "green" credentials.

How much? Starts at $27,995 ($3,295 more than most similar gas model). With all factory options: $32,435. Midlevel test car: $29,590 (no leather or navigation system). Gasoline model starts at $19,995.

How many? About 20,000 a year, including a few Milans; more if Mikey likes it.

How powerful? Modestly — punch not being the key issue in a hybrid: 2.5-liter gasoline engine rated 156 horsepower at 6,000 rpm, 136 pounds-feet of torque at 2,250 rpm. Electric motor: 106 hp at 6,500 rpm, 166 lbs.-ft. the moment it begins to turn (an appealing attribute of electric motors). Ford says net combined hp is 191, but declines (like most hybrid makers) to specify net combined torque.

Continuously variable automatic transmission blends power from the gas, electric powerplants.

How fancy? Lots standard, including expected bags, belts, stability and traction controls and power accessories, plus the unexpected: Free six-month satellite radio service (Sirius), 110-volt outlet, six-CD stereo (instead of the typical single setup), dual-zone climate control, auto on-off headlights, auto-dimming mirror, backup alarm. In other words, you actually could abide the base Fusion hybrid.

How big? On the small end of the midsize scale. Fractionally bigger outside than Toyota Camry hybrid, slightly smaller inside, but has a bigger trunk.

Fusion hybrid is 190.6 inches long, 72.2 in. wide, 56.9 in. tall on a 107.4-in. wheelbase.

Passenger space is listed as 99.8 cubic feet, trunk as 11.8 cu. ft. Weight listed as 3,720 lbs. Turning diameter is 37.5 ft.

How thirsty? Rated 41 miles per gallon in town, 36 on the highway, 39 in combined driving.

Test car trip computer showed 27.2 mpg (but was continuing to climb when test period ended) in 300 miles of suburban driving. Registered a remarkable 41.4 mpg in one 5.1-mile suburban trip, 44 mpg in a 3.1-mile hop, driven normally, no nursing.

Tank holds 17 gallons. Regular (87 octane) gasoline is specified.

Overall:  Best hybrid.

Read More