October 18, 2007
Vehicular natural gas use exceeded 200 million gasoline-gallon-equivalents (GGE) in 2005 and will likely surpass 225 million GGE (or 280 million therms) by year-end 2007, according to a new report prepared for the U.S. Department of Energy (DOE) by the Georgia-based Clean Vehicle Education Foundation (CVEF). The two-part report, which tracks natural gas vehicle (NGV) inventories and fuel use over the past forty years, reviews how economics, technology, government policy and utility activity affect the market’s development. Most important, the report sheds light on what works and why, and makes recommendations to help NGV industry participants and policymakers allocate limited resources to activities that will have the most impact.
“A combination of factors has created much more
consumer and fleet operator interest in NGVs,” says CVEF President Doug Horne.
“The public debate about reducing our dependence on foreign oil is one. Concern
over climate change (NGVs produce less greenhouse gases) is another. But the
major driver is improved economics. NGVs can save customers money.”
Growing Competition for Oil Fuels Price Increases at Pump
“It shouldn’t be a surprise to anyone that we have a oil dependence
problem,” says Horne. “What is less known is just how severe the problem is. The
‘approaching’ train wreck is already here.” According to DOE, the U.S.
represents about 5 percent of the world’s population but consumes 25 percent of
the world’s oil. The transportation sector accounts for slightly more than
two-thirds of U.S. oil consumption, which long ago exceeded domestic production,
forcing increased reliance on imports. Since 1985, new oil discoveries worldwide
haven’t kept pace with growing demand. Competition for a dwindling resource has
pushed up crude oil prices to levels thought unimaginable just several years
ago. The problem is becoming more acute as the economies of China and other
Asian countries heat up. The effect at the gasoline and diesel pump is rippling
through the U.S. economy. For consumers, the price increases are aggravating
but, for fleet operators, the consequences are devastating. Meanwhile the gap
between the price of natural gas and oil continues to grow. “Historically, the
price of a barrel of oil was about six times that of a thousand cubic feet of
gas, “ says Andrew Littlefair, president and CEO of Clean Energy and the
chairman of NGVAmerica. “Today, we’re seeing 11-to-1 or even 12-to-1.”
New Emissions Requirements Reduce Gap Between Diesel and NGV Ownership Costs
The increase in fuel costs is occurring at a time when many fleet operators
are already coping with the impact of EPA’s phase-in of stricter heavy-duty
engine emissions requirements, which began in late 2002, then ratcheted up in
2007. They are due to tighten again in 2010. To meet requirements thus far,
diesel engine manufacturers have had to resort to using complex engine control
systems and expensive, maintenance-intensive exhaust after-treatment
technologies that reduce fuel economy and performance. This has driven up the
purchase cost of diesel vehicles, and increased their operating and maintenance
costs. They’re still evaluating NOx reduction strategies for 2010; all are
complicated and expensive. Natural gas-powered heavy-duty engines, on the other
hand, have consistently met or exceeded the emissions benchmarks ahead of
schedule with improved performance. “The cost of compliance is pushing diesel
truck prices and operating costs through the roof,” says Horne. “NGVs have far
lower operating cost. Fleet operators are coming around to the fact that, based
on life-cycle cost of ownership, NGVs are the better buy.”
Federal Tax Credits for Vehicles, Stations and Fuel Give Definitive Edge to
NGVs
Another big factor behind improving economics of – and recent surge in
interest in -- NGVs is the federal income tax credits for vehicles and stations,
which were included in the Energy Policy Act (EPAct) of 2005, and the federal
motor fuels excise tax credit, which was included in the Transportation Act of
2005 (See “Summary of New Federal NGV Tax Incentives” sidebar). Richard
Kolodziej, President of NGVAmerica, the organization that spearheaded NGV
industry efforts to get the credits through Congress, agrees. He says the
combined effect of these tax credits is shorter payback of the incremental price
difference and significantly improved life-cycle savings. “NGVs have always had
environmental and ‘American fuel’ advantages over gasoline and diesel vehicles,
but selling the economics was a bit tougher because of the relatively long-term
payback,” says Kolodziej. “With the new tax credits, we can make a strong and
convincing economic case.”
NGV Market Comprises Mix of Vehicles, Niche Applications and Stakeholders
According to the CVEF report, steady gains in the transit sector have driven
growth in natural gas fuel use since 1990, with transit buses now accounting for
over two-thirds of yearly vehicular natural gas sales. For the past several
years, much of the industry’s focus, especially that of the independent natural
gas station developers, has been on transit and other high fuel use heavy-duty
vehicle (HDV) applications. NGV use in the airport, refuse and short-haul
freight/delivery sectors is rising, and will factor heavily in future market
growth, the report says. Another indication of market health is HDV chassis
manufacturers’ investment in NGV platforms. Three leading transit bus
manufacturers build CNG- and/or LNG-powered units, which now account for one of
five transit buses on order. Most major refuse truck suppliers offer a
factory-installed natural gas option, as do several street sweeper
manufacturers. In addition, EPA- and CARB-certified engines and engine
conversion-retrofit systems are available from Emission Solutions, Cummins
Westport, Baytech Corporation and BAF Technologies for a variety of medium- and
heavy-duty shuttles and work trucks.
While present and future growth in natural gas throughput primarily is attributed to high fuel use medium- and heavy-duty buses and trucks, light-duty vehicles (LDV) still outnumber them by a factor of nearly three-to-one, according to the report. “Light-duty vehicles have played – and will continue to play -- an important role in overall development of the market,” says Horne. Some have high fuel use, such as the more than 1,000 taxis and door-to-door shuttles operating out of nearly 30 airports across the country. Each of these consumes as much as 3,800 GGE (4,743 therms) of natural gas each year. “It’s not just about fuel use, though” says Horne, noting that thousands of “highly visible” sedans, vans and pick-up trucks used by municipal governments and utility companies “convey a message of leading-by-example.” Available LDVs include American Honda’s Civic GX, which is used by a variety of fleets across the U.S. and marketed to consumers in several states, and EPA- and CARB-certified conversion-retrofit systems from Baytech Corporation and BAF Technologies for GM and Ford sedans, vans and pick-ups.
The CVEF report estimates approximately 1,100 natural
gas fueling stations are in service in the U.S. The majority of these are still
owned and operated by natural gas companies, but development and operation of
retail stations by independents is growing significantly. The report recommends
a set-aside of government grants for the addition of “outside-the-fence” public
access fueling capability at large fleet sites - for example, adjacent to the
CNG fleet yard of a transit agency or municipal public works department. “This
takes advantage of large station construction and operational economics to
expand public fueling infrastructure,’ says Horne.
The report also calls for gas utilities to feature NGVs more in their utility
fleets and to rejuvenate their marketing activities in cooperation with
equipment and service suppliers and clean-air/transportation advocate-allies.
Kolodziej says he has recently heard from several utilities that want to
re-engage. “We’re presenting a compelling case for NGVs at the national level,”
says Kolodziej, citing NGVAmerica’s public outreach at seminars, expositions,
and articles in trade magazines and consumer press. “As more utilities realize
the potential for NGVs, we’re ready to make our resources available to them for
use at the local level.”
Courtesy of NGV Global, www.ngvglobal.com.