HOUSTON — Though natural gas is abundant in the U.S., whether it can serve as a financially viable transportation fuel is a difficult question to answer.
Commercial fleet operators from across the country this week are in Houston discussing the economics of natural gas, which often is touted as a less expensive, cleaner-burning alternative to gasoline.
But industry officials at the Natural Gas Vehicles USA conference say despite their hopes for natural gas, converting fleets to run on the fuel isn’t always easy. Though the fuel has its advantages, the finances of making it work for fleets don’t always add up.
“There needs to be some changes in the cost model,” said Bill Bliem, senior vice president of fleet services at NFI Industries, a New Jersey-based logistics company. “Right now, we’re doing it solely for sustainability. We’re not saving any money. I’m glad to hear we’re not the only one struggling with fuel mileage.”
Bliem said his company has about 2,000 trailers on the road, including nearly 30 that run on compressed or liquefied natural gas. But given the huge expense of natural gas vehicle infrastructure, trucks have to put on a lot of mileage to achieve substantial savings over gasoline or diesel.
NFI trucks serving California, for example, aren’t driving enough miles to compensate for the higher cost of the vehicles. Meanwhile, the company is getting about 9 percent less fuel economy with natural gas than it initially expected when it was calculating whether to invest in the technology, Bliem said.
Indeed, natural gas experts say that while savings from compressed natural gas eventually add up, they might not happen as quickly as some might hope.
“The payback around CNG is challenging,” said Brad Hoffelt, senior vice president and general manager of products and services at GE Capital. “It’s challenging just on the vehicle infrastructure, and if you provide fueling infrastructure as well, it’s particularly challenging.”
As Hoffelt describes it, most fleet customers will only consider switching to alternative fuels if they believe they can save money by doing so. For most, the environmental benefits are “generally a small part of the discussion.”
That’s because of the big expense that comes with building a CNG fueling station. Stations that can dispense natural gas as quickly as a typical gasoline station can cost $700,000 to $1 million to build and generally need to support a fleet of at least 150 trucks in order to make financial sense, he said. Slow fill stations, which fuel trucks overnight, cost around $300,000 to build.
Those costs put fleet operators in a bind. Generally, they prefer to have their own fueling stations so they don’t pay markup on fuel. But building a private station is pricey, and it can take a long time for the investment to pay off.
“It’s not really a question of whether it will pay back,” Hoffelt said. “The CNG investment will pay back over time. But some people think two years is too long, and some people think five to seven years is adequate.”
Even companies that have embraced the technology on a wide scale concede there are challenges and the technology may not be right for everyone.
Dennis Beal, vice president of global vehicles for FedEx Express, said trucks that run of natural gas cost 50 percent to 80 percent more than their gasoline and diesel counterparts.
“If you’re an independent operator, and you’ve got to spend 50 to 80 percent more to acquire a vehicle … the return on investment isn’t quite the same as it is for a corporation,” he said.
He added that public fueling infrastructure for natural gas is lacking, forcing the shipping industry into a chicken-and-the-egg dilemma. As it stands today, there are fewer than 1,400 public and private stations dispensing natural gas nationwide, according to the U.S. Department of Energy, compared to an estimated 157,000 gas stations. He said FedEx, which mostly relies on public fueling stations for its fleet, will only utilize CNG trucks in cities where it’s identified plenty of options for fueling.
http://peakoil.com/consumption/economics-of-natural-gas-dont-always-add-up-for-fleets