The Ward’s 10 Best Engines competition has recognized outstanding powertrain development for 16 years. This month, Ward’s examines the design philosophy behind the Toyota Prius’ latest hybrid-electric powertrain.

Everyone knows Toyota Motor Corp.’s first Prius was no picnic to drive. But the Echo subcompact-based hybrid-electric vehicle did deliver very good fuel economy. That was the point.

The second-generation U.S. Prius – on an all-new dedicated compact platform – was a lot better in every way. Hardly a sport sedan, it could at least get out of its own way and save a bunch of gas in the process.

Who knew there still was much more and better to come? Maybe Toyota would boost the performance a bit next time, critics speculated, but at the expense of fuel efficiency. Or perhaps the other way around.

Few thought Toyota’s hybrid wizards could make significant gains in both efficiency and performance, and do it in a bigger, roomier and better car. But they did.

The ’10 Prius 1.8L gasoline engine spins out a still-modest 98 hp and 105 lb. ft. (142 Nm) of torque, and its electric motor peaks at 80 hp for a combined system output of 134 hp, according to Toyota. (The peaks are not cumulative because both can’t operate at peak simultaneously.)

By comparison, the ’09 Prius 1.5L 4-cyl. was teamed with a lower-power electric motor for a combined 110 hp.

The new Prius’ increase in power is reflected in its improved acceleration. It hits 60 mph (97 km/h) in 9.8 seconds vs. 10.6 seconds for the previous model. Despite its improved acceleration, fuel economy is a fairly stunning 51/48 mpg (4.6-4.9 L/100 km) city/highway.

Toyota engineers say the ’10 Gen III Prius’ eye-opening fuel efficiency is a total vehicle effort. It’s not just the engine, or even the Synergy Drive hybrid powertrain.

That said, a lot of credit goes to the 1.8L DOHC I-4, according to Dan Yerace, Toyota North America senior principal powertrain design engineer. Key differences between it and more conventional versions of the same engine, found in the current Toyota Corolla and Scion xD, are its use of the high-efficiency Atkinson cycle and total lack of accessory belts.

The Atkinson cycle basically involves the intake valve closing very late during the compression stroke.

“Because of the late intake valve closing,” Yerace explains, “the compression stroke doesn’t start taking effect until the valve closes, and it allows a longer expansion stroke on the other side. You have an asymmetric cycle that enables this engine to run at a higher compression ratio of 13:1.

“Because the intake valve stays open longer, you’re allowing charge from the engine to go back up into the intake manifold. This doesn’t let it make very good power but does allow it to run much more efficiently.

“That is why most gas/electric hybrid system engines use it, and also the reason why this engine has variable valve timing only on the intake side, where other Toyota engines have both intake and exhaust VVT.”

Also, with the intake valve closing so late, a higher throttle opening is required to make an equivalent amount of torque compared with a conventional engine. That higher throttle opening reduces the pumping work at a part-throttle condition, which also improves efficiency.

And this may be the global auto industry’s only totally beltless engine. “The oil pump is gear-driven,” Yerace says, “but beyond that everything is electric. Engineers really tried to eliminate all parasitics.”

It was a challenge to get an electric water pump with the (flow rate) capability and the low-energy requirement they were looking for, Yerace says. So one major task for the team was mapping out what was required for the cooling system under all different conditions.

It was tuned to have sufficient capacity to cool the engine, yet avoid overkill.

Another significant improvement over the previous engine is much lower friction. Cooled exhaust gas recirculation is yet another upgrade that allows very good performance at higher loads and higher engine speeds.

“The heat exchanger that the exhaust gas is going into is water cooled, which reduces its temperature before it goes back into the cylinders. This reduces combustion temperatures and helps reduce spark knock at high loads, which also enables us to run that high 13:1 compression ratio. It also helps us from having to do fuel enrichment, so we can run stoichiometric, much leaner than we could before.”

For a look at the rest of the ’10 Synergy Drive system, we asked Advanced Powertrain Program Manager Justin Ward what was new and different. “From a propulsion point of view,” he says, “one big difference is the gear reduction.

“We bumped the voltage up from 500 volts to 650 and were able to use a much higher-speed traction motor, which optimizes efficiency in its operating zones,” Ward says. “You lose some low-end torque with that higher speed, but you gain it back with the gear reduction, and you get some loss-reducing advantages in the system.”

“We also improved thermal management of the battery pack, so we can get a little more out of it.” Another significant difference is the “power-split” electric continuously variable transmission’s direct gear-to-gear interface, which replaces the previous unit’s chain drive. “That helps on many levels, including noise and durability.”

And there still is room for further efficiency improvements down the road. “One thing (the engine team) will try to do is expand the minimum fuel consumption areas of the (fuel) map even more,” Yerace says. “That was one of the really big differences between the previous engine and this one.”

However, adding direct injection is not on the immediate to-do list.

“Because of the way DI works, I’m not sure it is complimentary with the Atkinson cycle,” he says. “Typically, to get the most out of DI, you have some kind of earlier injection strategy. But when you’re pushing some of your intake charge back out, I don’t think the benefit is there.”

“Power electronics are huge,” Ward kicks in. “We made a tremendous effort on power electronics and were able to make a massive improvement this time, but we still have a way to go. There is also still a lot of opportunity on the traction motor side.”

The key, both agree, is to continue meeting customer expectations. “The performance of the previous generation probably satisfied most but not all,” Ward concedes.

“But with the current generation, hybrids have become low-compromise vehicles. And we’ll see more improvement as powertrain engineers continue their development. Our goal is to get the powertrain more and more efficient, as well as smaller and more cost-effective to manufacture.”

Toyota’s previous-generation Prius models earned Ward’s 10 Best Engines awards in 2001 and 2004, and the latest generation carries home a trophy for 2010. It’s tough to bet against still more awards in the future for this pioneering and consistently customer-pleasing HEV powertrain.