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IN THE PAST 2 YEARS, SEVERAL COMPANIES HAVE ANNOUNCED AMBITIOUS EFFORTS TO CONSTRUCT PUBLIC ACCESS NG INFRASTRUCTURE. THESE PLANS

GENERALLY CLOSELY TRACK MAJOR U.S. TRUCKING ROUTES AND PATTERNS. IN GENERAL, TO DATE CNG FUELLING STATION NETWORKS HAVE BEEN DESIGNED LARGELY TO SERVE LOCAL AND REGIONAL FLEETS. THE THRUST OF LNG STATION DEVELOPMENT HAS BEEN TO CONNECT THESE REGIONAL HUBS.

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NGV USA Market Overview:Key considerations to address when converting your fleet to NGV’s

In the CNG area, for example, Trillium announced an expansion project in June 2013 to construct and open 101 new CNG stations in 29 states within 3 years. This project includes plans to build new stations in states that already have extensive CNG infrastructure - including California, New York, Ohio, and Pennsylvania, Texas - and will also locate many new stations in states that currently have few public access CNG stations, including Florida and Georgia, but are nonetheless high-volume parts of current U.S. trucking networks.

Despite the relative cost advantage for fuelling NGVs compared to traditional diesel or gasoline-fuelled models, the higher relative costs of NGVs compared to traditionally-fuelled vehicles has presented a major obstacle to wider use of NG as a transportation fuel.

OEMs have started to offer a wider range of NG options, from automobiles, to vans-both passenger and cargo-and light and medium-duty truck options. Total sales have been modest but growing, and each OEM has announced plans for expansion of NG product offerings in forthcoming model years.

At least 21 states provide some form of incentive for fleets to convert to light-duty CNG vehicles, in the form of grants or rebates, loans, state tax credits, or combinations of these policies.

With OEMs now offering a wider range of NGVs, the impact of these incentive policies may now be more pronounced. All major heavy-duty truck manufacturers offer NG options, either in CNG or LNG formats.

PASSENGER AUTOMOBILESThe US market lags significantly behind the

European market in the number of NG options offered as passenger vehicles. Currently, only Honda offers a CNG option, the Civic NG, nationwide in the US, compared to Europe, where many automakers, including Fiat, GM, Mercedes, Peugeot, Toyota and Volkswagen, offer CNG options. Honda is strongly committed to develop the US NGV market and has offered a CNG automobile option since 1998 in the US.

Chevrolet announced in October 2013 that it will launch a bi-fuel Impala, beginning with the 2015 model year, to both passenger and fleet customers. The vehicle will include both a CNG tank in the trunk, and a gasoline tank, allowing for a total range of up to 500 miles by switching between the two fuels-150 miles on CNG and 350 miles on gasoline.

GM has neither announced an expected price, nor projected fuel economy figures, and expects to sell as many as 1000 vehicles, largely to fleets, during its first model year.

Despite a lack of strong consumer demand, OEMs recognize that shifting to NG provides immediate emissions benefits, without any

need for further technological innovation, and thus help fulfil their obligations to meet emissions standards for their product offerings.

Two major obstacles have prevented wider consumer adoption of NGVs. Although the costs of operating CNG vehicles are much lower, consumers must first pay the higher incremental cost of buying a CNG vehicle. The actual break-even point depends on the higher incremental cost for the CNG vehicle, and average number of miles driven. Moreover, passenger cars face greater infrastructural obstacles, for unlike fleets, they do not necessarily drive in consistent and familiar patterns, and they lack access to dedicated fuelling arrangements-either company-owned, or third-party-that are available to fleets.

Use of NG is impractical, at present, for non-fleet passenger vehicles, outside of states that have well developed CNG infrastructure, such as California, New York, Oklahoma, Texas, and Utah. In the near-term, there are other pockets where use of such vehicles might catch on, especially in bi-fuel options, which can reduce fuelling and range anxiety.

One looming technological innovation might promote popularity of NG as a transportation fuel for passenger vehicles: the development of a cheap, widely available home refuelling option. At present, consumers are making a switch in how they view fuelling options. Outside of remote rural areas, drivers are not accustomed to considering refueling possibilities when they drive passenger cars. But this is changing, with the hybrids such as Toyota’s Prius and Chevrolet’s Volt.

Wider use of such vehicles may promote a shift in how drivers think about fuelling their cars.

Electric vehicles have limited range, and are generally most useful for commuting short distances. Drivers are able to charge their batteries when the vehicle returns home.

The lack of a cost-effective home fuelling appliance is seen as a major impediment to the development of the NGV passenger automobile

Source: Trillium CNG

MAP 1 – PROJECTED EXPAN-SION OF TRILLIUM CNG STATION NETWORK, 2013-2016

Stations Opening2013-2016 Projected

Existing Trillium Stations

market, one which the federal government has devoted part of $30 million in research funds to finance proposals to create such appliances.

The Drive Natural Gas Initiative (DNGI), a major industry trade association launched its Home Fueling Appliance Task Force determine specifications for such a product. The appliance should be able to provide a fuelling rate of 1 GGE per hour, should provide for 6,000 hours of service, and should cost less than $1,500. This translates to a fuelling cost per GGE of CNG of $0.25 (in addition with the cost of the fuel itself and the cost of the

electricity to run the compressor). The task force decided that the cost of the appliance, plus the premium paid for the CNG vehicle (compared to the same non-CNG model), must payout in 3 years or less, in order to support a sustainable market. Several utilities, and manufacturers, are joining to develop products that meet these specifications. The timeframe for launch remains at least eighteen months away.

Table1 Home fuelling specifications

Source: America’s Natural Gas Alliance

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LIGHT AND MEDIUM DUTY TRUCKING VEHICLE OPTIONSThe major OEMs have responded to demand for CNG-fuelled vehicles,

and either now offer, or plan to offer for model year 2014, a mix of vans, and light and heavy duty pick-up trucks.

Ford expects to sell 15,000 CNG/LPG-prepped vehicles in 2013, representing a 25% increase on its 2012 sales of similar vehicles. Beginning with model year 2014, Ford intends to extend its product range and offer its F-150 truck with a gaseous-fuel prep option on the 3.7-liter V6 engine, enabling the vehicle to run on CNG or LPG. This prep package includes hardened valves, valve seats, pistons and rings so it can operate on either CNG/LPG or gasoline through separate fuel systems, and from the factory costs approximately $315 before the customer chooses a Ford Qualified Vehicle Modifier to supply fuel tanks, fuel lines and unique fuel injectors.

Upfits run approximately $7,500 to $9,500, depending on fuel tank capacity. So equipped, F-150s would be able to run more than 750 miles on one tank of gas, depending on the tank size selected. The Ford F-150 averages 23 mpg on the highway. Ford expects that CNG versions of the F-150 will qualify for California HOV lane status certification, thus providing its commercial customers with a significant time advantage, in addition to the cost savings they can expect to achieve on fuel.

With the addition of the F-150, Ford will have eight commercial vehicles available to run on CNG/LPG.

Table 2 Ford CNG model options (as of model year 2014)

Source: Ford press release

Chrysler launched the Ram 2500 CNG pick-up in 2012 and sold its first vehicles in 2013. This is a bifuel vehicle that uses CNG as its primary fuel source, but automatically switches to gasoline when the CNG tanks are emptied. Using its two CNG tanks, the vehicle’s range exceeds 250 miles, and its back-up gasoline tank extends this range to nearly 370 miles. The Ram 2500 is available to fleet and retail customers, and is powered by a Hemi 5.7 liter V8 engine.

Of the 3 major US OEMs, Chrysler offers the smallest range of CNG products, offering a pick-up only for model year 2014.

Table 3 Chrysler CNG model options (as of model year 2014)

Source: Chrysler press release

In 2013, GMC introduced its bi-fuel CNG Silverado 2500 HD extended cab pick-up truck (the wquivalent Chevrolet model is called the Sierra 2500 HD), and expects to sell 1300 of these vehicles during the 2013 model year. The vehicle incorporates factory-installed hardened exhaust valves and intake/exhaust valve seats, both of which are engineered to GM durability standards for gaseous fuel use. The bi-fuel CNG option is available on long- or standard-bed models in either 2WD or 4WD. The fuel system automatically switches to gasoline when the CNG tank is empty, or the driver may manually switch between fuel sources while driving. The combined 17 GGE CNG tank and 36-gallon gasoline tank allow for a total range of about 650 miles.

GMC and Chevrolet expect to offer a range of several truck and cargo van options for the 2014 model year.

Chevrolet has also announced plans to offer its Impala automobile in a CNG configuration.

Table 4 GMC and Chevrolet CNG model options (as of model year 2014)

Source: GM website http://www.gmfleet.com/vehicle-overviews/fuel-efficiency/bi-fuel.html

PAYBACK: BOTTOM LINEAssessing the conditions under which switching to NG may be

a commercially viable strategy for light and medium-duty LGVs relies on a careful assessment of over what timespan the additional premium for purchasing differential vehicle can be recouped by the cost savings for CNG fuel-which currently average between $1.50 and $2 per DGE or GGE.

A fleet operator must consider how many miles can be driven fuelled by CNG alone, since most OEM bi-fuel options actually are currently configured with a much higher gasoline capacity compared to CNG. In general, payback calculations are a less certain value proposition, since vehicles in these classes already have higher fuel economy, and travel fewer models.

Figure 1 Calculation of light-duty truck payback, based on various fuel price and truck premium assumptions

Source: Paul Armstrong, GTI Director of Business Development,to Guild of Gas Managers

Many states offer significant incentives in switching to CNG, but these vary widely among states, and many of them are time-bound. These factors may tip the balance toward CNG significantly beyond what market factors alone would dictate.

STATE SUBSIDIES FOR LIGHTDUTY NGVSAs of September 2013, 27 states offer some form of incentives for

converting fleets to light-duty NGVs, according to VNG.CO, a company that offers a nationwide CNG retail-centric fuelling facility program to owners and operators of light-duty NGVs. Thirteen states offer grants or rebates, eight states offer tax credits, and six offer loan financing at concessionary rates. Several states offer various combinations of these incentives.

Table 5 Summary of state incentives for lightduty CNG vehicles

Source: VNG.CO website

Figure 2 Map of states offering various incentives for light-duty CNG vehicles

■ Arkansas Up to $5,000 (<8,501 lbs) or up to $8,000 (8,501-14,000 lbs)■ California $3,000 (<8,501 lbs) or $8,000 (8,501-14,000 lbs)■ Colorado 10.5% of total vehicle costs, up to $6,000 per vehicle■ Connecticut Unspecified funding for public fleet NGVs only■ Florida 50% of incremental costs, up to $25,000■ Georgia 10% of total vehicle costs, up to $2,500■ Illinois 80% of incremental costs, up to $4,000■ Indiana Up to $150,000 per fleet conversion project (max for all vehicles purchased)■ Louisiana 50% of incremental costs■ Maryland $3,000 (<8,501 lbs) or $5,000 (8,501-14,000 lbs)■ Mississippi Zero-interest loans for municipal vehicle NGV fleets only■ Montana 50% of conversion costs, up to $500■ Nebraska 5% interest loans, up to $750,000 per borrower■ North Carolina Up to 80% of incremental costs■ ■ ■ Oklahoma Tax credits of 50% of incremental costs, 3% interest loans■ Oregon Low-interest loans (terms not specified)■ Pennsylvania 50% of incremental costs, up to $25,000

■ Texas $2,500 rebates (up to 9,600 lbs), grants up to 90% of total costs (8,501+ lbs)■ ■ ■ Utah Tax credits of 35% of total cost up to $2,500, grants of 50% incremental costs■ ■ Virginia Unspecified grants and loans for public fleets only■ Washington Exemption from 6.8% state sales tax on vehicle purchase■ West Virginia 35% of new vehicle purchase price or 50% of conversion costs, up to $7,500

Source: VNG.go provides details on these state programmes, as of September 2013

HEAVY DUTY TRUCKINGFleets operating heavy-duty trucks now have the option to consider both

CNG or LNG options. All major truck manufacturers currently offer NG engine options, including Freightliner, Isuzu, Kenworth, Navistar, Peterbilt, and Volvo/Mack. These are based around engines offered & manufactured by Westport Innovations, in a 15 liter LNG option only, and in a joint venture between Westport and Cummins, in both CNG and LNG versions, and 8.9 liter and 11.9 liter sizes.

Volvo has announced plans to launch its own 13 liter LNG engine sometime in 2015. Technological innovation should over the longer term reduce these premiums. Manufacturers are currently developing new tank designs for both CNG and LNG.

Additionally, innovations in the fuel system space - which accounts for the majority of the premium, should reduce overall truck premiums as well.

Some idea of the current premium for heavy duty CNG or LNG rigs can be derived from Table 10, which compares a CNG truck equipped with saddle tanks with 90 DGE of storage capacity to a single tank LNG truck with 75 DGE of storage capacity. All of these figures are provisional, and are highly dependent on the relationships between suppliers and fleet managers.

Table 6 Heavy-Duty engine options

Source: Love’s Travel Stops, August 3, 2013 presentation

Figure 3 Natural gas engine comparison–power (hp)

Source: http://www.westport.com/products/engines/15

Figure 4 Natural gas engine comparison–torque (ft-lb)

Source: http://www.westport.com/products/engines/15

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FACTORS TO CONSIDER IN HD FLEET CONVERSIONSAssuming access to adequate fuelling infrastructure, without the need to

construct or secure access to a private fuelling network, many calculations of expected payback on conversion from diesel to either CNG or LNG rely only on the average differential in fuel price-currently about $2 for CNG, and $1 for LNG. Yet there are other inefficiencies necessary to consider when running heavy-duty trucks, and these should be quantified on a per unit basis and deducting the sum of inefficiencies from the gross discount.

LNG FILLING ISSUESLNG may vent fuel into the atmosphere to avoid explosion in a vacuum

tank, and it may have a shelf life as short as four days. Filling completely empty methane tanks can be problematic, as methane may expand rapidly as LNG enters a tank at ambient temperature, sometimes delaying operations by up to one day until a complete fill can be achieved. Dealing with low temperature LNG raises some safety concerns; dealing with these imposes certain training costs and also raises possible workers’ compensation concerns.

CONCLUSIONManufacturers have stepped up their offerings of NGVs, across vehicle

classes, especially in the heavyduty truck sector, where customers are responding to the potential significant fuel costs savings.

The value proposition for passenger cars is less certain, outside certain regions already well-served by adequate fuelling infrastructure, in the absence of a home refuelling option. In the light-duty sector, the value proposition is also at present somewhat ambiguous, but should improve, once technological improvements and economies of scale drive the premiums for NGVs downward. At the moment, many of the NGVs on offer are not fully configured by the OEM, but involce conversion elements. Costs should fall when OEMs commit to fully configuring NGVS themselves, rather than relying on outsourcing and conversions.

Figure 5 Sample calculation of expected payback for HD fleet conversion

The future of NG infrastructure in the United States will combine a network of CNG, LNG, and LCNG stations. In deciding whether to opt for CNG of LNG, managers need to consider what is better for their fleets. This depends on where the fleet will operate, and what its range needs are. This chapter has discussed various considerations that determine whether CNG or LNG makes most sense for a fleet, as well as what considerations should go into a company’s decision to construct fuelling stations-whether CNG, or LNG.

Source: from FC Gas Intelligence, gvevent.com

Source: Love’s Travel Stops, August 3, 2013 presentation

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