San Diego-based Achates Power announced on Dec. 1 that it received a contract from the U.S. Department of Energy to develop a more efficient gasoline engine.

Initial funding will be $9 million over three years.

The federal department’s Advanced Research Projects Agency–Energy awarded the deal, the largest ever awarded by ARPA-E.

Achates, based in Sorrento Valley, is working with UK-based Delphi Automotive PLC (NYSE: DLPH) and Argonne National Laboratory, an Energy Department facility in the Chicago area. The three organizations expect to spend $13 million on the program.

The partners say their engine will improve fuel efficiency by more than 50 percent compared to a downsized, turbocharged direct injection gasoline engine, while reducing the overall cost of the powertrain system.

Achates engines have opposed pistons. Two pistons share a cylinder, turning crankshafts at opposite ends of the cylinder. The three partners plan to build an opposed-piston, gasoline compression ignition engine that will be two-stroke design with no spark plugs.

The engine “will dramatically reduce petroleum consumption and CO2 emissions, while meeting current and future mandates for low criteria emissions in cost-effective, high-volume products that consumers will love driving,” said David Johnson, Achates’ CEO, in a prepared statement.

The engine will be a three-cylinder, three-liter model suitable for large passenger vehicles, pickup trucks, SUVs and minivans. It would be possible to make two- and four-cylinder engines of the same design, the San Diego business said.

Achates Power is backed by Sequoia Capital Partners, RockPort Capital Partners, Madrone Capital Partners, InterWest Partners and Triangle Peak Partners.