Pondering Natural Gas?

Is it time to start thinking about converting your fleet? With diesel prices still over $4/gallon in many markets and natural gas selling at a BTU equivalent of below $2.25/gallon, it is time to take a serious look at the promise of natural gas as a heavy truck fuel. There are already more than 13 million vehicles taking advantage of this fuel worldwide. How long will it be before we see large numbers of natural gas fueled heavy trucks?

Environmental
It won’t happen for environmental reasons. Despite the environmental claims of its promoters, natural gas engines operate about as cleanly as modern diesel engines. The natural gas engines’ advantages in CO2, particulates, and NOx are offset by its emission of the powerful greenhouse gas methane.

Price
It will eventually happen for fuel price reasons. When natural gas prices are low and diesel prices are high, natural gas can be quite attractive, particularly for local operations. Right now, the advantage is about $.11/mile. It will be much more by the end of the decade. However, be careful of many contemporary benefit calculations. They tend to overstate fuel cost savings by comparing partial natural gas costs to full diesel costs, failing to account for the superior fuel economy of diesel combustion, or failing to use the proper BTU equivalency comparisons.

Where
It won’t happen in many segments because natural gas has the significant drawback of lower energy density. The most common current offering, compressed natural gas (CNG), has a fifth of the energy of an equivalent volume of diesel fuel, while liquefied natural gas (LNG) has less than half the energy of an equivalent volume of diesel. This drawback either limits the range of natural gas operations or requires the installation of large, expensive extra fuel tanks.

When those costs are factored in, CNG-powered trucks are not cost-effective for OTR operation, and LNG-powered trucks earn a modest $.06/ mile advantage. Both technologies earn attractive savings in local operation where large fuel capacity is not required.

While we expect these advantages to increase by the end of this decade, in the short run the breakeven point is close enough that natural gas has an advantage only when diesel prices are low.

Facilities
Because of the cost of concentrating natural gas for vehicle use, refueling facilities are relatively expensive and are, as yet, scarce. There are sufficient public CNG facilities to support local operations in some urban areas. There are very few LNG facilities.

Today the overwhelming majority of heavy truck natural gas operations are local, anchored to a proprietary source of CNG.

Outlook
Less than 0.3% of heavy trucks use natural gas currently. Should, however, the price of natural gas continue to increase its spread from diesel fuel, volumes will steadily increase, reaching as high as 10% by the end of the decade.

In sum, natural gas will become an important option for many heavy freight truckers. It is not, however, a compelling option in 2012 due to low diesel prices. Fleets with a good long-run fit for this technology should consider small-scale purchases over the next several years to test the concept and gain experience.

To learn more about this important topic, purchase your copy of Noël Perry’s monthly newsletter where he has published a complete review of natural gas use in heavy duty trucks. You can order a copy at http://www.ftrassociates.com/tfnewsletter
(Note: your subscription will get you access to Noël’s complete library of in-depth research on heavy freight matters.)