It wasn’t too long ago that enthusiasm in natural gas vehicles was at an all-time high. Yet, as the price of diesel has once again taken a large dip (though it did rise a little this past month), it could be said that natural gas vehicles flamed out.
Yet, it hasn’t. There are still a lot of fleets out there that consider natural gas the most optimal option for many buyers. Natural gas trucks are logical for three types of fleets:
- Fleets that must abide by stringent clean-air rules
- Fleets that want to burnish their sustainable reputation
- Fleets that want to save money over diesel fuel
When diesel prices were on the rise, motor carriers were not required to “go green,” nor was there motivation too. In more cases than one, fleets who made the switch to compressed natural gas (CNG) or liquified natural gas (LFG) sunk large sums of money into the technology. Abandoning it would seem to defy logic.
Yet, what does the future hold for natural gas fuels? Consider that the cheap diesel outlook may stretch into 2019. Will we see more natural gas adoption with that kind of timeline on the horizon? What will be the new compelling reasons to utilize this fuel?
The Natural Gas User
Look back just five years and the profile of the natural gas user has changed. Just a short while ago the primary motivating factor was financial. Today, fleets are taking a more long-term view, viewing natural gas vehicles as an investment. Whether it be to decrease an overall carbon footprint or meet other cost or revenue commitments, sometimes natural gas is the answer.
There certainly was a drop-off in sales of natural gas-powered trucks in the second half of the year as diesel prices dropped. The year started out positive, but then slowed as the months went by. Another factor weighing on the market is current uncertainty in environmental and regulatory policy.
Finally, natural gas vehicles still come in at a higher price point. The higher premium – when combined with low gas prices – make a ripe environment for market slowing.
Looking at who the largest purchaser of these vehicles was in the second quarter, it appears that garbage fleets, transit and school bus operators sit at the front of the back. One such example is that of Waste Management, who recently announced adding their 6,000th natural gas-powered garbage truck and cut the ribbon on their 100th fueling station.
Most of the change comes from fleets who already have the vehicles and are looking to replace units, upgrade to units or simply buy more units.
Still, natural gas remains an attractive option for garbage, municipal and vocational applications. Generally, vehicles use far more gas and belch out more emissions when used on city streets.
The Price of Oil
The elephant in the natural gas room is undoubtedly oil. With some oil market analysts predicting a rise starting in the fourth quarter, natural gas’ dry run may be coming to an end. Some even think we could see diesel prices hit $3 a gallon or more by 2019. Still others are more bearish on the market. At this point, it is hard to say which way the market will go.
If diesel prices do rise dramatically, there could be a solid business case for fleets to convert to natural gas. Other fleets may not have a business case even if diesel rises to over $60 a barrel. The fact is, natural gas doesn’t meet every application requirement for a fleet vehicle.
If diesel prices were to rise to $80 a barrel or more, then we might see greater across-the-board adoption. As companies take a long-term view, some already have fuel price fluctuations in mind.
UPS Natural Gas Moves
UPS, which has taken a long-term view, recently announced plans to build six CNG and 390 new CNG-powered vehicles and terminal trucks. The company already operates over 4,400 trucks.
UPS doesn’t look at natural gas as an either/or proposition. As their director of fleet procurement puts it, they view natural gas as supplementary, as opposed to an outright replacement for diesel fuel. Rather than switching completely to natural gas, they are simply adding more to their fleet.
As UPS removes old diesel trucks from the fleet, they replace them with natural gas variants, but still not in all cases. Not all locations or routes can be refueled by natural gas, so there is still a need for standard diesel trucks and other vehicles.
Of course, UPS did not make this decision on a dime. They took the time to make the necessary infrastructure investments required to make natural gas pay off in the long-term.
Other Manufacturers
Despite a slowdown in natural gas-powered vehicle sales, manufacturers still have plenty of skin in the game. Peterbilt, for instance, continues to manufacture many natural gas-powered commercial motor vehicles and has even enhanced their product line to accommodate refuse companies that utilize biomethane gas from their sites.
Considering refuse site biomethane gas is essentially a free resource, this represents a huge boon to these companies. Not only do near zero emission technologies burnish your green image, but they demonstrate value across a range of usage cycles.
Volvo is also getting in the game. Considering the Chinese-owned manufacturer has pledged to phase out gasoline-combustion vehicles by 2019, it should be no surprise they are also making ‘green’ moves in the truck space.
Still, for fleets who are looking to switch to natural gas purely as a cost-saving measure, the short-term proposition is not promising. There is a higher level of initial capital that must go into infrastructure and procurement expenses when a fleet switches to natural gas.
Other Benefits of Natural Gas
This does not mean that natural gas is not without significant benefits, lower price notwithstanding. Other factors go into whether natural gas is the right option. One example is that natural gas vehicles do not require the use of such parts as diesel particulate filters or catalytic reductions systems.
Fleets that are running small regional or municipal routes may find themselves requiring more frequent manual, parked regenerations. With natural gas-powered vehicles, you don’t get that problem.
As green fuels and technologies become more in demand, fuel sources as diverse as biomethane landfill, wastewater sludge, food waste and more become in vogue. Once you can tap into the limitless potential of free fuel sources, both the short and long-term proposition value for natural gas-powered vehicles becomes far more positive.
While there are plenty of positives to natural gas, there are other considerations. One such is that of the vehicle life cycle compared to its application.
Considering Life Cycle
The typical life cycle – or payback period – for a standard Class 8 big rig is around five years. To drive demand, the payback period must be short. In other applications, however, when a vehicle has a longer life cycle, natural gas presents itself as a viable alternative.
Natural gas tank systems are also designed to last longer than the truck they are built onto. This allows fleets that operate with them to re-use the most expensive component.
Finally, natural gas-powered vehicles hold their value, so a fleet who utilizes them don’t have to worry about what will happen to the resale value of their vehicles at the end of their life cycle.
What Will Drive Change
No matter what the benefit/cost ratio is to using natural gas-powered vehicles, the market will continue to flatten out until there is a major change in the price of diesel fuel. Yet, there is another factor that could cause major change in the market, and that’s California.
California has been pushing natural gas-powered vehicles for some time, even implementing it as part of Southern California Ports Clean Truck Program. California has specifically targeted light- and medium-duty commercial motor vehicle for natural gas-propulsion adoption.
As the state continues to push towards its zero emission goals, manufacturers are adapting their strategies. Cummins Westport, as one example, has been leveraging natural gas not as a cost-changing aspect, but more as a way to meet the near-zero emissions standards that California has regulated.
In partnership with the state, Cummins has produced an engine that produces a whopping 90 percent less amount of NOx and meets all current 2017 EPA greenhouse gas emission reduction requirements.
Of course, the trucking industry is not a monolith and fleets operate under different conditions. Not everyone will find an application for natural gas-powered vehicles. There is never a one-size-fits all solution.
Yet as people talk more about emissions reductions, alternative fuel vehicles such as natural gas will become more and more popular. While oil prices will continue to be a factor, there is certainly going to be plenty of growth in this sector as we move into later years. Such news is good not just for the market itself, but also for trucking and the environment. What’s not to like about that?
from Quick Transport Solutions Trucking Blog http://ift.tt/2mQNwfK
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