A Yes. The debate creates a lot of confusion for both shippers and carriers, and for the market as a whole.
You need to find the right combination of factors to determine whether LNG or CNG is a better fit. It ultimately can
be boiled down to an economic analysis.
Shippers have become savvy about the various technologies and have started to become agnostic on fuel choice. In
some areas or applications, that choice might be LNG, but
it is leaning toward CNG in a growing number of scenarios.
Q What do private fleets need to understand about the conomics of conversion before exploring such a
move? Are there metrics or benchmarks they need to meet
before determining this is right for them?
A Regardless of which fuel you choose, NGVs (natural gas vehicles) have a significant capital cost compared
with diesel-powered vehicles. The incremental cost needs
to be paid back through lower fuel costs. Each fleet must
look at how much fuel it burns per vehicle to determine if
the savings will cover the incremental cost of the vehicles
in an acceptable timeframe. Some heavy-duty fleets simply
don’t use enough fuel per vehicle to meet their own investment hurdle rates. They will have a difficult time making
the switch.
Q What was the biggest challenge your company faced in convincing shippers to make the switch?
A Our biggest challenges have been convincing shippers that the payback is there and the long-term savings
do exist, as well as convincing them that the infrastructure
and technology are available to suit their needs. With the
proliferation of blue-chip fleets entering the market, the
convincing is getting easier.
Q What did you learn from the Frito-Lay project’s devel- opment and implementation that could be useful for
other fleets considering a similar move?
A What we learned from the Frito-Lay project is that large fleets can really help spur the development of
the industry by “anchoring” large public fueling stations.
These anchor tenant arrangements are good for the anchor
fleets and help the fuel station builders develop projects
they might not be able to build on their own on spec. This
helps the other heavy-duty fleets in a given area that are also
looking for low-cost and accessible fueling stations.
QUntil recently, it was diesel or nothing. Diesel will remain a key energy source even as natural gas use
ramps up. Do fleets face more complexity in their deci-sion-making with an alternate fuel source? If so, what is
your best advice as to whether to go with diesel or natural
gas?
A While natural gas fueling infrastructure is still a com- plicating wrinkle in the story, the difficulty in caring
for advanced diesel after-treatment systems has made many
fleets more willing to trade off the complexities between
diesel and natural gas. Where the economics dominate in
high fuel use fleets, it really begins to become a no-brainer
for natural gas. Without high fuel usage, which will drive
the return on incremental capital, today’s NGV incremental costs—which we expect to decline as the industry
grows—will keep some fleets with diesel.
Q Your company has its finger in the public policy pie. Do you believe there should be federal and/or state
subsidies to encourage fleet investment and/or infrastructure buildouts?
A There is room for funding for high-volume fuel sta- tions that provide support for a developing market.
There is also room for some funding of high-volume fuel
users because high initial capital costs are still prohibitive
for fleets that might be cash constrained. With additional
vehicles being built, the cost of all components tends to
drop. This helps stimulate the larger industry. Once the
public infrastructure is there, it will be easier for owner/
operators to make the switch. However, we need to see a
decrease in vehicle incremental costs before we’ll see these
smaller operators enter the market.
Q The cold weather this winter led to a significant draw- down of natural gas inventories and a corresponding
rise in prices. If pricing becomes more volatile, will that dull
the industry’s appetite for conversion?
A Recent price spikes for natural gas on the spot market are unlikely to have much effect on the cost of compressed natural gas for vehicles. The situation is isolated
to the Northeast and Midwest due to pipeline congestion
issues from winter cold spells. If these price increases were
due to fundamental shortages of natural gas in the U.S.,
we’d see similar dramatic increases in other regions.
As for CNG, most sourced gas comes from local utilities
and often under a long-term contract. The bottom line is
that this is a short-term price spike that won’t significantly
affect customers with long-term fuel price contracts or who
purchase gas through local utilities.
QWhat can shippers do—either in word or deed—to facilitate or expedite the conversion?
A Both parties must have an honest dialogue to deter- mine where a project can be successfully implemented.
It will also take attention and focus by both sides to figure
out how to make a project work. Issues such as backhauls,
appropriate fueling infrastructure, and contractual terms
need to be thoroughly reviewed and addressed.
