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Microturbines to Go for a Test Drive

Autos: Capstone's generators will power Hyundai's electric-hybrid SUV. Lower emissions, longer range expected.


Capstone Turbine Corp. will join with Hyundai Motor Co. to develop a prototype hybrid-electric sport-utility vehicle, potentially opening a huge consumer market for the Chatsworth designer of mini-power plants.

Hyundai, South Korea's largest auto maker, said Thursday that it expects to begin testing a hybrid-electric version of its new Santa Fe SUV in the first half of next year to learn more about manufacturing low-emissions vehicles that can meet increasingly stricter pollution regulations in California, elsewhere in the U.S. and in Europe.

Under the agreement, Capstone will provide a beer-keg-size microturbine generator that will fit into the Santa Fe's engine compartment.

The generator, which can run on either propane or compressed natural gas, would recharge batteries that power the vehicle's electric motor and thus avoid one drawback of conventional EVs--the need to park and recharge for several hours. The resulting emissions would be a fraction of those of standard internal-combustion engines, the companies said.

Capstone representatives characterized the agreement as an experiment and declined to discuss whether the system would ever go into production.

"This is the first step in that process," spokesman Keith Field said. "There's potential, but we can't predict the future."

Analysts, however, said the small size and high output of Capstone's environmentally friendly generator technology should lend itself to the automotive market.

"Capstone is doing some of this with buses, but this would be the first application for something you can put in your garage," said Samuel Brothwell, an analyst with Merrill Lynch Global Securities in New York. "If you look at the size of the market for autos, it could be an enormous opportunity."

Brothwell said the use of Capstone microturbines in automobiles could provide a volume market for the company, driving down the cost of production.

Field said the Hyundai venture advances technology Capstone developed to help power electric buses. The Los Angeles Department of Transportation plans to put four buses with Capstone microturbines in service in Hollywood and Lincoln Heights this year.

"We are excited. It's quiet and clean," said Scott Briasco, manager of electric transportation for the Los Angeles Department of Water and Power, which is funding the $1-million project.

Other cities experimenting with Capstone-powered buses include Tempe, Ariz.; Tampa, Fla.; Chattanooga, Tenn.; Atlanta; and Washington.

Capstone brought its first microturbine to market in December 1998. Field described it as a "mini-jet engine," weighing about 225 pounds. It generates 30 kilowatts of power, enough to supply a small business. Capstone shipped its first 60-kilowatt version last Friday. That's large enough to power a commercial development.

So far, the biggest market for these turbines has been power companies looking to sell the generators for use as mini-power plants. Capstone sells its generator, including the controls and other equipment that allow it to plug into the electrical grid, for about $30,000.

Capstone has the capacity to manufacture 20,000 microturbines annually at its Chatsworth factory, which opened last month.

Earlier this week Madison, Wis.-based Alliant Energy Corp., which has about 2 million customers, said it will market Capstone microturbines to businesses in the Chicago metropolitan area.

"This technology is the future of energy delivery," Eliot Protsch, Alliant's executive vice president for energy delivery, said in a statement.

"The demand for stationary power like this is going to be a big opportunity," analyst Brothwell said. "Our power-generating infrastructure has largely stood still over the last eight to 10 years while the demand for power has gone up."

Brothwell said the imbalance, and the difficulty of moving surplus electrical power from one region to an energy-starved region quickly, were behind the surge in wholesale electrical rates in California this summer, which in turn led to spikes in retail rates in San Diego and south Orange County.

"But this technology would allow a business to hedge its energy costs when the price of power from the grid goes up," Brothwell said. "I bet there are a fair number of commercial customers in San Diego who would have liked to have the Capstone microturbine as a backup this summer."

Brothwell said he also foresees a large market for microturbines in developing countries that can't afford to make large investments in power generation and distribution.

Capstone is on track to have annual sales of about $20 million this year but probably won't be profitable for several years, according to analysts. It shipped 337 microturbines through the first six months of this year. That compares with 221 for all of 1999.

The demand for energy generation has made Capstone and other companies in the industry among the hottest stocks on Wall Street.

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