What is combustion engine?

Here’s some sobering news out of the raucous fourth of July weekend: considering battery prices and $4.50 per gallon gasoline, it’ll take a little under 6 years for a hybrid car to pay off in fuel savings, and 8 years for an electric car, according to this report in the Wall Street Journal. At that rate of battery innovation, and if gas prices don’t climb, then plug-in cars will remain largely financially not viable for most buyers in the U.S. for years to come.

That’s not good news for electric car makers, but could actually be a driver for companies building new, more efficient, internal combustion engine technology. Last week I interviewed a startup called Grail Engine Technologies, which was a recent finalist in the North-Central Cleantech Open. Grail Engine Technologies has been developing an efficient two-stroke engine that the company says uses less fuel but is more powerful than larger engines and could be sold commercially in about two to five years (see video below).

Other companies that I’ve covered that are developing more efficient engines include Pinnacle Engines, which makes a four-stroke engine that it says can deliver 30 to 50 percent better fuel economy, and could be commercialized by 2013. Another is Achates Power, which is building a closed piston, 2-stroke engine that gets 10 to 15 percent better fuel economy than state of the art diesel engines that exist today. Then there’s EcoMotors that is building a diesel engine with stackable modules where one of the engine modules can be shut off when it isn’t needed. Transonic Combustion is yet another, which is creating what’s called a “supercritical fuel injection system” for internal combustion engines that minimizes heat waste. (Here’s 7 startups building green car tech for a pre-electric world).

Venture capitalists are funding these types of companies. Pinnacle has raised $13.5 million from NEA, Bessemer Venture Partners and Infield Capital. Achates Power counts Sequoia Capital, Rockport Capital Partners and Triangle Peak Partners as backers, EcoMotor’s has received funding from Bill Gates and Khosla Ventures, and Transonic Combustion also counts Khosla Ventures as an investor.

Moving from the prototype and development stage into mass commercialization and partnering with big auto makers will be the difficult hurdle for these startups. Auto makers move notoriously slowly (as slow as utilities and telcos) and won’t easily bet on risky startups. Licensing technology to manufacturers, which Grail Engine Technologies plans to do, will be one of the more capital efficient ways to reach the market.

More efficient internal combustion tech could be boosted by policy that raises the average miles per gallon requirements in the U.S. The Obama administration has proposed raising the average MPG to 56.2 miles per gallon, which is nearly double the current MPG level. And combine more efficient engine tech with more sustainable biofuels, and you’ve got a non-plug-in, but economical, green car option.