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NGV Infrastructure, Vehicle Costs Still Barrier

Higher natural gas prices, even three or four times above current low levels, shouldn't hinder the switch by transportation fleets to compressed natural gas (CNG) and liquefied natural gas (LNG), an executive said last week. However, higher natural gas production doesn't guarantee that natural gas vehicle (NGV) infrastructure is a given, and the high cost of vehicles continues to be a deterrent, according to a new report.

Clean Energy Fuels Corp. CEO Andrew Littlefair explained last week that for every $1 increase in wholesale gasoline prices, CNG or LNG used in vehicles would increase about 12 cents on a gasoline-equivalent basis.

"The good news is that there is an awful lot of room between the price of the natural gas for whatever it is at the nozzle tip [less than $2/gallon] and the price of gasoline," Littlefair said. "We really don't see natural gas prices going up significantly from where they are, and we still have a couple of dollars of growth in gas prices we can absorb and still maintain an advantage over gasoline. The spread is so big that it provides a lot of flexibility for us."

However, the company doesn't have all of the NGV-powered engines it needs. "Back in 2008, we had to go out a buy the first 100 new engines and convince Kenworth to put them in their trucks and put them on the road. Besides a couple of test trucks, they didn't have any natural gas vehicles. So we have come a long way from there. But now even having every [original equipment manufacturer] in the world announce new products, after all that, we still don't have all the engines we need.

"So we are kind of waiting for engine products [largest new long-haul tractor-trailer product due in 2013]." It's a combination of timing the infrastructure and the right engine products to come online at the right time, and Littlefair thinks the key elements are all coming together at the right time.

Littlefair predicted that the company's national "Natural Gas Highway" will be a reality by the end of this year, with long-haul truck fueling stations "coast-to-coast and border-to-border," and said Clean Energy is on track "to double our construction volume [of fueling stations] by the end of this year," from 2011. "Our pipeline in the first quarter included 545 deals in various stages of allocation, qualification and negotiation, and that total does not include the more than 100 Natural Gas Highway projects."

In Pennsylvania, however, a study by the Allegheny Conference on Community Development, a nonprofit organization, warned Pennsylvania stakeholders that barriers remain for accelerating the use of natural gas in transportation, in part because of public fueling needs and high vehicle costs. Noting that natural gas should remain lower priced than gasoline or diesel, "Encouraging Natural Gas Vehicles in Pennsylvania" concluded that gas as a transportation fuel is another opportunity for the state, driven by Marcellus Shale growth. "At sufficient scale, natural gas vehicles could help reduce the nation's reliance on imported oil."

While there could be an economic payback for local communities, a lack of sufficient fueling infrastructure remains as key bottleneck. "There are vehicle fleets that could be economically viable candidates for CNG conversion, but the fleets are too small to support having their own fueling facility," the report said. Both public and private fleets are part of the ultimate solution, but the report also points to the need for a public access requirement being attached to any government financing assistance for building new NGV fueling stations in the future.

"It could accelerate the adoption of NGVs," said the authors, who weighed differences in public fleets due to widely varying driving patterns and fuel consumption. "Because of increased upfront investment, converting to NGVs can place a financial strain on a public agency, even when the conversion makes economic sense in the long run."

The examination cited Natural Gas Vehicles for America as estimating a current national total of about 1,000 NGV refueling stations. In contrast, there are more than 160,000 retail gasoline stations in the United States. A side issue is the lack of concentration of stations and suppliers, the Allegheny report noted. According to data from Natural Gas Vehicles for America and the U.S. Department of Energy, there are in fact 992 NGV refueling stations in the U.S. that are currently in service. However, only 451 of those are available to the public, with 135 in California, leaving only 316 public stations spread throughout the rest of the country.

California has the most publicly available NGV stations in absolute terms, but the state ranks fourth when adjusting for the number of publicly available stations in terms of population. Utah ranks first on this metric, with one publicly available station per 74,700 residents. Oklahoma is close behind, at one station per 76,558, while Wyoming ranks third at one per 140,907. All three states also are large natural gas producers, but states that produce more gas do not necessarily have more NGV stations available to the public. Texas and Pennsylvania both sport a public NGV station per population ratio that is below the national median figure.

"A single convenient fueling station providing affordable natural gas will not be sufficient to persuade vehicle owners to make the switch. They will need to be assured of adequate backup facilities where they can be fueled if the primary facility is broken or otherwise unavailable and of sufficient flexibility of supply so they are not completely dependent on a monopoly provider."

Meanwhile, California officials last week approved about $100 million in annual state funds to support developing more alternative and renewable fuel vehicle technologies. Natural gas as a transportation fuel would benefit directly and indirectly for up to nearly one-third of the allotment. The California Energy Commission (CEC) distributed $12 million for NGVs, while propane received $2 million, and another $6 million was granted for demonstration of medium and heavy duty advanced vehicle technology. The latter involves mostly NGVs.

In addition, a portion of $11.5 million is spread through four other categories to help NGV development -- $3 million to advanced fueling infrastructure, half of which is designated for natural gas; $2.5 million for work force development/training; $3 million for regional alternative fuel readiness/planning; and $3 million for collaborative work in existing and new alternative fuel technology centers.

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