As exemplified by a Monday New York Times column touting the natural gas gold rush in shale, alternative fuel transportation applications are one of two outlets for the supply bonanza. They include compressed natural gas (CNG) and liquefied natural gas (LNG), which are both increasingly attractive to fleet and heavy-duty vehicle markets.
Unlike the other benefiting energy sector — electric generation — natural gas as a transportation fuel has its critics who are raising their level of skepticism. They say the costs may be too high and the payback periods too long for fleet operators. And in some areas, such as Southern California, air quality concerns are being raised.
“As gas reserves have ballooned, so has the potential to help solve decades-old policy conundrums, starting with an addiction to foreign oil,” Christopher Swann wrote in a commentary entitled, “Time to Tap the Bounty of U.S. Natural Gas.”
Swann is bullish on natural gas as a vehicle fuel, urging Congress to back a proposal from former U.S. Senate Majority Leader Harry Reid (D-NV) to promote natural gas-powered heavy-duty vehicles. Taxpayers, according to the Times commentator, should welcome subsidizing the alternative fuel because of the lower prices that rising sales will bring. Fleet operators can quickly recover the cost of more expensive vehicles with greatly lower fuel and maintenance bills, he argued.
However, a recent analysis in Canada by that nation’s natural gas giant, Encana, indicated that natural gas-powered vehicles don’t pencil out without major subsidies. Critics in the natural gas transportation sector on the U.S. side of the border argue that the analysis is only valid in Canada. It doesn’t apply to the national U.S. natural gas fuel market, according to a major U.S.-based clean transportation fuel company.
“We believe a $20,000-$40,000 tax credit is likely required to lower the payback period to less than three years to incentivize a more rapid adoption of NGVs [natural gas vehicles],” said the Encana report. “Furthermore, NGV fueling infrastructure likely also requires tax incentives to lower the investment payback period to less than five years (higher than vehicle payback due to longer asset life).”
A knowledgeable source in the U.S. NGV sector said “most applications” of natural gas vehicle fueling require subsidies if the payback period needs to be less than two years. That is why some major companies are focusing on high-mileage, high fuel-consuming applications where a quicker customer payback can be achieved in today’s environment, the source said.
Paybacks for CNG-powered vehicles vary with the type of vehicle, built-in storage or range capability, and how the vehicles are built. Therefore, refuse trucks and transit buses with 270- and 540-mile ranges, respectively, that are built at one location with the engine and fuel systems installed by the same original equipment manufacturer have paybacks in about one year, the source said. Delivery and regional trucks — either CNG or LNG — in which the engines and fueling systems are installed separately have two- to three-year paybacks.
The numbers will change significantly with more volume of the CNG and LNG vehicle in use. There are no technological silver bullets on the horizon, the source said.
In San Diego County, air pollution regulators have raised concerns about CNG derived from LNG sources with higher heat values as increasing air emissions levels from NGVs operating in the county, but state authorities and the local utility, San Diego Gas and Electric Co., dismiss this concern and are part of a consortium accumulating up-to-date measurements. In the meantime, advances in the CNG engine technology also make existing requirements for inert gases in the CNG unnecessary.
State air regulators are in the process of changing the requirements, which would lower some of the concerns about increased pollution because the inerts typically include nitrogen and carbon dioxide.
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