On a Blue Streak
CNG sparks interest as retailers look to grow sales and save money.
Separate But Equal
So where do you sign up? Well, first you should figure out if it’s worth it to commit to CNG. There are some significant barriers to entry, starting with the price. For a “medium-sized” station with a volume of 1,000 to 2,000 GGEs per day, expect equipment costs of $400,000 to $450,000 and installation costs of $250,000 to $300,000. (See “An ROI on CNG,” p. 72, for more on calculating the return on investment for CNG.)
In a typical fast-fill CNG fueling site, an inlet gas dryer is hooked up to the local natural-gas line. The gas then feeds into a compressor (the most expensive component), which compresses the gas to 3,600 to 4,000 dpi. From here, the CNG is kept in aboveground storage tanks, which are connected to the CNG dispenser.
Cost variables include the desired throughput, which determines the size of the compressor and the amount of storage tanks required. The typical c-store would need a compressor that delivers 2 to 4 gallons per minute to keep it in line with the petroleum fueling experience.
According to Jared Hightower, vice president of domestic CNG sales for ANGI Energy Systems Inc., Janesville, Wis., a provider of CNG fueling systems, other logistical factors to consider include:
Do you understand your base load customers and also the potential for growth? Developing a three- and five-year growth plan for the CNG business is key.
Does your site accommodate the type of traffic a CNG fueling station would attract, including light-duty and heavy-duty trucks?
Do you have enough space on your site for the CNG fueling equipment, which can range from 8 to 20 feet to as much as 30 to 50 feet, depending on your needed flow rate?
Can your electric and gas utilities accommodate the demand? Sites near an interstate gas pipeline with excellent gas pressure can get greater “bang for the buck,” reducing the horsepower requirements for the compressor and in turn the capital costs. Sites that sit very far from a gas line will quickly lose the benefits of installing CNG.
Hightower also warns retailers not to overbuild or underbuild the CNG fueling setup. In the first case, a retailer can get hit with hefty demand charges associated with the electric motors that run the compressor. “If you’re only operating the electric motor 1 to 2 hours a day, you’re averaging electric demand charges over a smaller number of gallons, so the per-gallon electrical costs to compress are expensive,” he explains. “If you have a high-volume, high-traffic location, you still have the same demand charge but you get to spread it out over many more gallons.”
So if a CNG station is built to serve 4,000 gallons per day but sells only 1,000 gallons, demand charges become a significant portion of the overall cost. “A lot of customers will understand that and say, ‘OK, for the first year, we’re just going to have expensive electricity,’ ” Hightower says. “But as they get into year two or three, if they know the fleets around them are growing and signed some deals, then they will go ahead and do it. But if they’re not expecting a lot of growth, we discourage them from oversizing the equipment.”
Underbuilding is also a pitfall, he says. If a station is undersized, the low flow rate and higher fueling times can disappoint customers. “You don’t want to have very long lines at the station,” he says. “You want to properly size the whole system to easily get fuel on board the vehicle quickly.”
Some retailers attempt a middle ground by installing one compressor at the site with room for a second as the business grows. They then create redundancy by having a network of stations near each other.
Another important aspect to understand is peak filling rate. A retailer that sells 1,000 GGEs per day evenly spread throughout 8 hours needs a different size station than one that sells 1,000 GGEs per day but half of it between 7 and 8 a.m. In the latter case, a much larger station is required because there would not be enough storage to service all of those vehicles. “So you have to have a compressor that can compress a lot more gas, and you want to make sure you size the piping and installation to meet or exceed customer demand,” Hightower says.
Kwik Trip chose its CNG fueling system from ANGI Energy Systems, which included dual compressors, dryers and storage, as well as standard Gilbarco dispensers outfitted for CNG. Its main objective was to offer the CNG customer the same experience as the gasoline or diesel customer.
“You will find natural gas under the canopies, no different than diesel and gasoline,” says Hollett. “You will find the POS the same. We are trying to replicate dispensing rates. We’re trying to make that consumer feel as confident in this product, and thought if we could keep it similar to what they are accustomed to now, that would help with that confidence.”
Griffith of OnCue Express says Kwik Trip has done “a fantastic job” with its CNG rollout: “It’s a matter of time before others look at it and say they’re doing pretty good and we need to take a look. When they start seeing some of their customers converting and going with the Kwik Trips, that’s when it will get their attention.”
An ROI on CNG
Calculating a return on investment for CNG—for which the average price for installing a CNG fueling setup runs around $700,000—can be tricky. According to natural-gas vehicle advocacy group NGVAmerica, the several components of figuring out the ROI include:
- Natural-gas prices in your area.
- Compression needs (and electricity costs including demand charges for compressors with an electric motor).
- Maintenance, repair and service costs, which could run 20 to 30 cents per GGE.
- Capital amortization of equipment.
- Federal, state and local excise fuel taxes.
Availability of local or state grants to help offset the investment. For example, for its first alternative-fuel station in La Crosse, Kwik Trip received some assistance from the state of Wisconsin toward the $3 million investment, while the state’s Energy Office awarded it a $400,000 grant toward its second location.
For a more detailed breakdown of these factors, visit the Workshop section of www.cleanvehicle.org and check out “NGV Economics: Components of CNG Cost, Calculating Simple Payback and Life-Cycle Cost Savings.”
CNG fueling equipment has evolved recently toward even more integrated solutions to simplify the offer for operators who may have time and/or space constraints. At the 2012 NACS Show, Chesapeake affiliate Peake Fuel Solutions officially debuted its CNG In A Box system, a “plug-and-play” CNG fueling system that has all of the major components—dispensers, credit-card readers and a power supply—delivered on site in a standard shipping container. The 20-foot container houses a dryer, 400-horsepower compressor and control system.
The purpose of CNG In A Box is to make entering the natural-gas fueling business as simple as possible for operators, offering a site assessment, turnkey equipment and financing all from one source. Through its partner GE, Peake offers a 2.9% finance rate on the CNG In A Box’s $700,000 list price, with cash discounts also available.
Despite the plug-and-play approach of CNG In A Box, the system is also designed to grow with a retailer’s business.
“There are a number of systems out there you can buy that have about one-third the capacity but will cost one-half to two-thirds of the price,” says Kent Wilkinson, vice president of natural gas ventures for Peake Fuel Solutions. “You don’t want to have a second upgrade cost in short order. I want to approach the market in a cost-advantaged way by doing it on the front end, and give the kind of quality customer-service experience my customers typically get from a liquid-fuels experience.”
There are several operators who are in the middle of installing CNG In A Box, says Wilkinson, although none have officially been announced. What do they have in common? “The bottom line is they’re able to align value-oriented decisions in terms of personal values with economic values,” he says. “It is a lower cost of fuel, improving their bottom line and that of their customers.”
The trend toward simplification extends to the dispensers as well. Late last year, Wayne introduced its Vista CNG dispenser, which offers pay-at-the-pump capability and a simplified cabinet design. The advantage of Vista CNG, according to the company, is that the same manufacturer has built the payment terminal and CNG dispenser and electronics.
The dispenser offers a 3- to 5-minute fill time, assuming the compressor is sized correctly, which would put it in line with a petroleum transaction. According to Wayne, a CNG dispenser costs three to four times more than a traditional petroleum dispenser, although it represents only about 5% to 10% of the total cost of a CNG fueling setup. This premium is partly because the CNG dispenser controls the fill and calculates how much a tank can hold by factoring in the outside temperature.
Wayne dispensers are featured in CNG In A Box and also available through system packagers and the existing distributor channel.