Recently, I have given a lot of thought to a forward-looking reality of viable alternative transportation fuels sold at traditional U.S. retail gas outlets. To better understand the conclusions I reach in this column, it is important to be aware of what is possible today.
Unless your only link to the outside world is through watching “Survivor” reruns, you are no doubt aware that alternative fuels do exist. There are a number of interesting options promulgated by the Energy Policy Act of 1992, which set goals and created mandates to increase the use of clean energy. Existing or emerging alternative transportation fuel/energy sources include biodiesel, hydrogen cells, electricity, ethanol 85% (E85), liquefied petroleum gas (LPG/propane), liquefied natural gas (LNG), and compressed natural gas (CNG). But do any of these fuels make the long-term economic case for auto and truck drivers, or owners of large fleets who can potentially save thousands of dollars by using a cheaper fuel source?
The time has come to consider the next great thing in transportation fuels. Put your Ouija boards aside, though, and try to see what is in front of us, just as Phil Mickelson read the greens during his final 2013 British Open victory round.
A Look at the Options
Before I attempt to connect the dots with my prediction of the leading mass-market case for an alternative fuel, I want to briefly review each option. Keep in mind that some of them have been thrust into use by a U.S. government intent on supporting “green,” environmentally friendly initiatives with the hope of creating a market; reducing greenhouse gases, mainly carbon dioxide (CO2); and improving domestic energy security with less reliance on foreign petroleum supply.
- Biodiesel (typically 20% bio, labeled as B20) has struggled to gain traction despite heavy governmental subsidies and incentives. Biodiesel is a domestically produced renewable fuel that can be manufactured from vegetable oils, animal fats or recycled restaurant grease. According to the U.S. Department of Energy (DOE), this fuel contains 8% less energy per gallon than conventional diesel, therefore making B20 about 2% less fuel-efficient. Many conventional diesel vehicles on the road today can run on B20. The DOE also indicates that there are only 335 publicly available locations at which to refuel on this bio-blend, and the majority is in six states (California, Washington, Oregon, North and South Carolina, and Tennessee). Plus, it’s a more expensive fuel, and scientific studies have concluded that the corrosive elements of this product could cause leaks in the fuel infrastructure at retail locations as well as in a vehicle’s fuel-handling system.
- Hydrogen is a near zero-emission alternative fuel. However, it requires a far larger tank than can be accommodated in light and medium duty vehicles due to its low energy density by volume. Plus, the costs of producing hydrogen fuel cells remain high, making this option non-economic as a transportation fuel. There are only 10 hydrogen-refueling facilities in the United States, nine of which are in California, according to the DOE.
- The economic case for electric cars and trucks vs. their conventional petroleum counterparts has indeed been made in plug-in hybrid electric vehicles (PHEVs) and all electric vehicles (EVs), and with support from a generous $2,500 to $7,500 federal tax credit. However, the cost of PHEVs and EVs is still significantly higher than gas or diesel engine vehicles despite the credit. As far as CO2 emissions go, life-cycle benefits may also be low given that fossil fuels generate much of our nation’s electricity. Also, public recharging stations are not as ubiquitous or convenient as gas stations, with only 6,394 in the United States. This makes long-distance travel very tricky, made worse because 55% of the stations are located in only eight states (Oregon, Texas, Washington, Arizona, California, Florida, Georgia and Hawaii). Plus, battery recharge times are extremely long when compared to gasoline or diesel tank fill rates.
- E85 (15% gasoline and 85% ethanol, aka ethyl alcohol, predominantly corn-based in the United States) exists only with significant government incentives and subsidies on price and investment in infrastructure. While availability of this fuel at retail locations has indeed expanded to more than 2,000 sites, nearly 50% are located in the Midwest states of Michigan, Missouri, Minnesota, Iowa, Illinois and Indiana, where corn-based ethanol production is concentrated. What is most revealing, however, is that E85 has a severe 25% to 30% negative mpg impact vs. conventional E10 gasoline, according to the DOE and other sources. Taking this into account, there may not be much consumer price advantage.
- LPG/propane, a byproduct of natural-gas processing and crude-oil refining, is used mainly as a residential heating and cooking source (stoves, furnaces, hot water heaters, gas grills), and not widely used as a transportation fuel. However, when sold as vehicle fuel, propane can be a mixture of propane with smaller amounts of other gases. Propane is stored onboard a vehicle in a highly pressurized tank. Under this pressure, propane becomes a liquid with a higher octane rating than gasoline, and clean burn characteristics. However, it has a lower BTU rating than gasoline, so it takes more fuel to drive the same distance, thereby having a negative mpg/economic impact. And given the need to dedicate storage at a retail site, there are few gas stations that market this fuel for vehicles. This may be why there has been a 25% decline in the number of LPG vehicles since their peak in 2003, according to the DOE.
- LNG is produced by purifying, cooling and condensing natural gas to the super-cold temperature of minus 260 degrees so it turns into a liquid form. Because it must be kept at cold temperatures, LNG is stored in expensive double-walled, vacuum-insulated pressure vessels. It takes 1.5 gallons of LNG to equal 1 gallon of diesel or gasoline, making it much less cost effective. It too has to be trucked in, and according to the DOE there are only 33 total retail sites that are available to the public (six east of the Mississippi), with a significant investment required in infrastructure.
And the Winner Is …
CNG is gas supplied by a local utility through existing supply lines, compressed at the pump and stored onboard in pressurized tanks to allow for adequate driving ranges. Priced currently up to $1.90 less per gasoline-gallon equivalent than conventional gasoline, the use of CNG reduces fuel costs significantly for vehicle and fleet owners and lowers greenhouse-gas emissions up to 23% in medium- to heavy-duty vehicles. CNG fuel systems are completely sealed, and CNG vehicles produce no evaporative emissions. It also produces at least equal to a slight efficiency mpg advantage over conventional gasoline. What’s more, some fleet operators have reported that engine maintenance costs are reduced by as much as 40% by converting their fleets to CNG. And these conversions are reliable and make economic sense by breaking even sometimes in two to three years.
Also, natural gas is a secure, abundant North American energy source: Ninety-eight percent of the natural gas consumed in the United States is produced in the United States and Canada. There is no need for large underground storage tanks at retail gas stations because only minimal backup storage, in the form of a few smaller aboveground cylinders, is needed. Onboard vehicle canisters have no safety concerns if properly installed and certified. For retail station owners, CNG is environmentally safe because any leak will not cause soil or water contamination, as with other liquid fuels. Also, CNG does not have to be trucked in like its LPG and LNG brethren.
Moreover, there is an existing natural-gas distribution system already in place, with 2.2 million miles of transmission and distribution pipes throughout the United States. And at the time of this writing, New York Gov. Cuomo had announced that $6 million will be available in vouchers of up to $40,000 for the purchase or lease of CNG (and electric) trucks in New York City, which is likely to start a trend. This incentive also allows for repowering a diesel truck with CNG. The alternative-fuels voucher and diesel retrofit funding for NYC were scheduled to have begun by press time.
So, based on the foregoing, it is CNG, I believe, with its significant availability, environmental and cost-savings benefits, that has the greatest chance of becoming our most successful mass-market alternative fuel for transportation vehicles. It is for this reason that my firm is partnering with Trio Energy Group, a New York-based company that is bringing CNG to the retail gasoline market. While it is still early in the product life cycle, CNG will be coming to a neighborhood near you.
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