Week of October 5

Last week Warren Buffett bought a $350 million share of China's BYD Corporation, the largest manufacturer of rechargeable battery, though scarcely a household name in the U.S.

This in itself would not be highly unusual except that BYD has announced plans to get into the automobile business, specifically the electric car and hybrid electric car business. They figure that their prowess in manufacturing low cost lithium batteries will give them the proverbial leg up in that market, and they may be right.

We have already devoted considerable attention to the war of the power sources within the automotive industry and how the century old struggle the between gasoline and electric cars has entered into a new phase after the seemingly total annihilation of electrics in the second decade of the twentieth century. True, a third competitor has entered the fray, the alternative fuel powered internal combustion engine, but that is close kin to gasoline car, and the fundamental struggle still appears to be between electricity and internal combustion. The hydrogen fuel cell car might be considered to be yet a fourth competitor, but I don't think so. At this point the promotion of hydrogen has taken on millennialist overtones, and lacks any real economic rationale.

So is Mr. Buffett on to something the rest of us don't know about? He often is, of course, but here, I believe, he is merely guessing.

Warren Buffett has proved an uncommonly astute judge of individual companies, but he is not known for predicting the emergence of new industries or fundamental changes within established ones. His basic approach to investing is not based on an explanatory theory concerning the adoption of new technology, and so he is unlikely to possess any unique insights as to the outcome of the current struggle, though of course he has the staff to monitor developments very closely across the automotive industry.

My own position is that electrics will displace conventional internal combustion automobiles only if they evolve into a fundamentally different means of personal transportation. I have mentioned dual mode automated personal transport which was successfully tested in San Diego a decade ago and which is far better suited to electric traction than to gas burners. If that becomes the new paradigm for personal transport in this century then gasoline will be heavily disadvantaged and will lose ground in core markets though it will likely persist in areas like boating, general aviation, and power tools.

Of course, current manufacturers of pure electric and hybrid electric vehicles are not thinking about anything so radical at present. Instead they're preoccupied with extending the operating range of their vehicles which means they're preoccupied with batteries and ultra-capacitors.

I have touched on both topics in some previous articles, and lately I have been conducting extensive research on ultra-capacitors because they represent the newer, less developed technology. Batteries may not be susceptible to enormous improvements in energy storage capacity, but ultra-capacitors, which have only been around for a couple of decades, might not be close to the limits of their potential performance at present.

An ultra-capacitor is a type of electrolytic capacitor, that is, the dialectric separating the electrodes is not merely an insulator but is a substance known as an electrolyte through which electrons can migrate. Thus it stores additional charge beyond what is on the electrode plates themselves.

An ultra-capacitor differs from other electrolytics in the amount of capacitance or storage area it provides for the accumulation of an electrical charge. Whereas more typical electrolytics might have a few hundred microfarads at most, an ultra-capacitor could have as much as 100 farads, or several orders of magnitude more. Manufacturers are continually trying to increase this amount by augmenting the surface area of the plates through nanofabrication techniques and by utilizing exotic electrolytes which themselves can store more charge. Unfortunately, those electrolytes which permit the highest accumulation of electrical charge tend to have severe voltage limitations, and high voltage operation is very desirable, all things being equal, because total energy storage is a function of voltage squared.

A company calling itself EESTOR located in Texas (don't bother looking for their Website because they haven't one) has been claiming for years to have developed a technology that would provide for ten fold improvements in electrical storage capacity over lithium batteries, but they've never produced a product. In theory the electrolyte they're using could enable them to meet their claims, but only over a narrow range of operating temperatures which would be difficult to maintain in an automobile. As with most ultra-capacitors, the EESTOR device would operate at low voltages.

More than a decade ago, a Russian research institute announced a new type of capacitor with a voltage rating of 40 kilovolts and a dielectric constant of 1,000. Both are enormous values and would permit the construction of compact devices with the energy content of many gallons of gasoline. I am currently attempting to determine the fate of that invention. The device was described in the Journal of the IEEE, an electrical engineering trade association.

There are some other very left field approaches for storing high values of electrical energy within a small form factor including so-called magnetic insulation and virtual anodes within a vacuum device, but little research has been devoted to developing these concepts.

My guess is that storage capacity will remain a crippling limitation of pure electric vehicles for a long time. In all probability, there are no quick fixes.