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This paper proposes a new energy storage system (ESS) design, including both batteries and ultracapacitors (UCs) in hybrid electric vehicle (HEV) and electric vehicle applications. The conventional designs require a DC-DC converter to interface the UC unit. Herein, the UC can be directly switched across the motor drive DC link during the peak power demands. The resulting wide voltage variation due to UC power transfer is addressed by the simple modulator that is introduced in this paper, so that the motor drive performance is not disrupted. Based on this new methodology, this paper further introduces two ESS schemes with different topologies, namely 1) UC rating and 2) energy flow control. They are applicable to both lightly and heavily hybridized HEVs. Both schemes have the benefits of high efficiency (without a DC-DC link) and low cost. The simulation and experimental results validate the new methodology.