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James Lemke is an airplane enthusiast who owns quite a few aircraft. Among those are several single-engine planes, which he was anxious about flying without a backup engine. So he wondered, why not have a lightweight engine as a backup?

Other flying aficionados may have left it at that, but Lemke is a serial entrepreneur, a physicist who teaches at the University of California, San Diego and an inventor with more than 100 patents to his credit.

In 1998, he began to follow up on his idea, researching lightweight engines until he came across one in a textbook. The engine that caught his eye was a Junkers machine built in Munich, Germany, that no one had worked on since the 1930s.

Lemke believed that if he applied modern technology, he could make it cleaner and more efficient. By 2003, he decided the modified internal combustion engine had great commercial potential, so he sought outside help from engine experts who were impressed with his work.

The late John Walton, son of Wal-Mart (NYSE: WMT) founder Sam Walton, and Lemke knew each other because of their mutual interest in flying. Walton became interested in Lemke’s engine and wanted to invest in his new company, Achates Power.

Breakthrough internal combustion engine developed by Achates Power in San Diego. Photo courtesy Achates Power

Walton had a history in clean-tech investing, including big successes like First Solar Inc. (Nasdaq: FSLR) the maker of thin-film solar panels. He became one of Achates’ early investors, putting in $12 million. The family foundation has made subsequent investments.

Leading venture capital firms including Sequoia Capital Partners, Rockport Capital Partners, Madrone Capital Partners (affiliated with Rob Walton, Wal-Mart’s chairman), InterWest Partners and Triangle Peak Partners have led Series A and Series B, bringing Achates’ funding to $50 million.

“We’ve been very true to John and Jim’s vision of fundamentally better engines,” said David Johnson, Achates CEO. “We grew very well during the recession, because our investors and technical advisory board have been very bullish about our technology.”

Johnson was brought on board in 2008, to help decide where such an engine will be of most use. Within the $300 billion global market for internal combustion engines, Achates targets commercial vehicles such as semi-trucks, tractor-trailers and construction vehicles, and passenger vehicles.

The two-stroke, opposed-piston, compression-ignition engine that has undergone more than 1,500 hours of testing in the company’s San Diego lab is 10 percent to 15 percent more efficient and less expensive than the average four-stroke engine on the road today.

“The opposed piston is two pistons in one cylinder, through which we eliminate the cylinder head. The cylinder head is a mass of metal that absorbs a lot of heat from the combustion process; it needs a lot of water to cool it down, and so energy is wasted. Our engine has no head, less waste, less weight, so it is more efficient, less expensive and has fewer parts,” said Johnson, explaining Achates’ main advantage.

Every time the two pistons come together, they are pushed away, creating torque. In a conventional engine, the pistons get pushed away only every other time, so there’s less torque and more wasted effort. A two-stroke engine is twice as powerful as a four-stroke engine.

Achates engineers have also eliminated the valve train, which reduces frictional loss.

“One of the challenges for engine engineers is that we rarely change just one thing at a time. We’ve optimized the whole engine in the process,” Johnson said.

The company’s engineer continues to work on improving the engine’s efficiency and bringing down cost further.

With today’s gas prices, Johnson estimated that a commercial truck would need upwards of $60,000 worth of fuel in a year.

Wal-Mart, for instance, has more than 7,000 trucks and its fuel costs last year were over $400 million, he said. The chain and others like it are potential customers, although Johnson emphasized that Achates has approached Wal-Mart separately, not through its investors.

It is also in talks with engine manufacturers such as Navistar International (NYSE: NAV), where Johnson worked prior to joining Achates, and Caterpillar (NYSE: CAT) and Toyota (NYSE: TM). Collaboration focuses on product development that meets each company’s individual needs.

“A more efficient engine for less cost was quite a breakthrough, it responded to two key market needs,” Johnson said.

Aside from commercial and passenger vehicles, the technology also had broader applications. He compared it to laptops, PCs and super computers, where the size and configuration changes, but the technology is the same. Similarly, Achates’ technology can be applied to a range of vehicles, but adapted to the size and configuration of the engine.

Johnson expects to see the engine in production around 2015 to 2017. This ties in with a broad timeframe that the algae biofuel industry is aiming for, to commercialize algal fuel.

Achates recognizes the opportunities associated with alternative fuels. Johnson expects the company to be in a position to tap biofuels and for its engines to be even more green in the future.

“The beauty of our combustion engine is that it is very well suited to biofuels. It’s a very important part of our consideration. When power density is high, the best fuels for transportation are biofuels. The most efficient engines will burn alternative fuel and be part of a sustainable solution,” Johnson said.

Electric vehicles will also figure prominently in the picture. Johnson said that according to a recent study, the most aggressive scenario predicts that only about 14 percent of vehicles will be all electric, the balance will be hybrids.

“There will be a need to hybridize the fleets, for which internal combustion engines will be needed. This fits in with our take that you need range extenders and hybrids, so other than in some urban areas, that’s where our engines can help,” Johnson said.

The Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA) have proposed a new program to reduce the greenhouse gas (GHG) emissions and improve fuel-efficiency of medium and heavy duty vehicles, which make up the second largest contributors of oil consumption and GHG emissions. This will also give Achates’ target market an incentive to switch to more efficient engines.

Achates has notched several honors. It has placed consistently in the Going Green Top 100 list and was a finalist in the Department of Energy's Advanced Research Projects Agency energy competition. In 2009, BusinessWeek magazine named it one of the top 25 companies to watch in energy technology. As early as 2007, it was awarded a DARPA (Defense Advanced Research Projects Agency) contract to design a lightweight, compact unmanned aerial vehicle engine.

As far as competition is concerned, Johnson said there are many with ideas, but very few with the sophisticated technologies or capability.

So Achates considers the in-house design and development within car manufacturers as its main competition, since every car company is working to improve its engines.

In the future, the company could be acquired, but Johnson expects it will be a stand-alone original equipment manufacturer and licensee.

“We don’t see ourselves as a high-volume manufacturer. There are enough engine plants in the world, and Achates’ technology can be employed in the traditional plants with some retooling.”

Nagappan is a San Diego-based freelance writer.

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