A novel lithium-ion battery developed by A123 Systems stores more than twice as much energy as nickel-metal hydride batteries (used in today’s hybrid cars), while delivering the bursts of power necessary for high performance.

A123’s batteries could finally make lithium-ion technology practical for the auto industry. Instead of cobalt oxide, they use an electrode material made from nanoparticles of lithium iron phosphate modified with trace metals. The resulting batteries are unlikely to catch fire, even if crushed in an accident. They are also much hardier than conventional lithium-ion batteries: A123 predicts that they will last longer than the typical lifetime of a car.

The first cars powered by A123 technology could be rolling off assembly lines in 2010.