Lakedude, Michelle V is a very knowlegeable Prius owner that I have read for a couple of years on the Prius-2G yahoo group, as well as other forums. She wrote this, in response to how the Prius heats the passenger cabin:
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I think the small electric PTC heaters are also on the 2004 Prius, like they were on the classic Prius (in countries that need the "cold weather package," like the US and Canada) They provide a little bit of heat when you first start your car.
The Prius uses the conventional way of heating the passengers - using "waste" heat from the gasoline engine. So, if it's colder out than your thermostat setting, the engine will run more often to keep you provided with heat. The engine will still cycle off every now and then, but if the coolant starts getting cold and you're stopped at a long traffic light, the engine will come back on just to provide you with heat. (Note that the Energy Monitor will not show you the engine as being "on" as it is not providing power to either the wheels or the electric motor/batteries)
The 2004 Prius in the US, not sure about other countries, has a small "thermos"-like storage tank for storing engine coolant, so that the engine doesn't take so long to warm up (and provide heat).
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-- Michelle Vadeboncoeur,
mrv@kluge.net
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So .. I should amend my earlier statement that the heating energy is from the battery, and say instead that the smaller fraction of heating is electric, and the majority by way of heat produced by the ICE. To Shiloh's question though -- if forced (by way of climate control settings), the ICE will operate in order to provide heat, even if motive power is not needed, e.g. coasting downhill. So long as the battery is not full, the engine work will be conserved to a large extent.
Mechanisms aside for a moment, I reiterate my experience that the car warms up quickly in the winter, despite an initial 10 minutes of downhill driving.