Nissan (NSANY) is betting the lithium-ion battery will power electric cars of the future.

Nissan demonstrated an electric vehicle in Japan on Wednesday. The company plans to sell electric cars in Japan and the United States in 2010, worldwide by 2012.

Nissan hasn't announced a price for its planned electric vehicle. The unanswered question: Can the U.S. electrical grid handle the extra load if millions of drivers recharge their car batteries at the same time?

The rechargeable lithium-ion battery is used in consumer electronics and offers a good energy-to-weight ratio. But capacity deterioration is noticeable after about a year - whether it's in use or not. Some lithium-ion batteries fail after 2 or 3 years. Nissan's battery weighs about 660 pounds.

Automakers are trying to develop electric cars in response to soaring oil prices.

While Toyota (TM) and Honda (HMC) already offer hybrid gas-electric cars, Nissan hopes to jump ahead with an entirely electric vehicle. The Toyota Prius uses a nickel-hydride battery. Nissan now buys Toyota's hybrid system and says it will develop its own by 2010.

General Motors (GM) and Ford (F) are also active in the field.

The race is on to develop a reliable, long-lasting battery to power electric cars.

For years, nickel-cadmium batteries were the standard, but lithium-ion, commercialized by Sony (SNE) in the early 1990s, offers twice the "energy density" and is now the most promising battery for use in electric cars. Lithium-ion requires little maintenance, but requires a protection circuit to maintain safe operation by limiting peak voltage during charge and preventing the cell voltage from dropping too low on discharge.

Manufacturers are constantly improving lithium-ion technology. It's a promising technology that may one day take a bite out of oil imports.

For more on the cars of the future, check out Hoofy and Boo's always astute report.