There is a great deal of enthusiasm in the transportation world today about a wide variety of technologies that could fundamentally change the way products are moved to market in the US. Among these potentially revolutionary technologies are electric trucks, autonomous trucks, hybrid technologies, and hydrogen power. Yet, years before any of these were in the headlines, natural gas was the premier alternative transportation energy of the future. So, where is natural gas today and where does it fit in the energy portfolio of tomorrow?
Just five years ago, many of the conversations we are having about alternative energies today were taking place regarding natural gas. How quickly would fueling infrastructure grow, and when would there be enough to make the fuel viable? What would be the operating range of these trucks, on a single fill? How much additional weight would the energy storage require? Many of these same questions are being asked today about electric trucks and other alternatives, so it is worth taking some time to reflect on our experience with natural gas.
Natural Gas vs. Diesel
Before going any further, let’s cover the basics. On the simplest level, natural gas vehicles require different engines, for two reasons. First, natural gas is – as the name suggests – a gaseous fuel, unlike diesel which is a liquid. Second, whereas diesel fuel will combust in an engine when sufficient pressure is applied – no spark necessary – natural gas combustion requires a sparkplug, much like a gasoline engine does. These engines are somewhat more complex than the compression-ignition diesel engines, and a key consideration for natural gas transportation is the difference in maintenance requirements and costs that come with these different engines.
“La Crosse, Wisconsin, USA – September 14, 2012: The nation’s first alternative fueling station, opened earlier this year, owned and operated by Kwik Trip, Inc., one of the largest convenience store chains in the Upper Midwest.”
Moving on to the fuel itself, there are two key types of natural gas as a transportation fuel: compressed natural gas (CNG) and liquefied natural gas (LNG). CNG is simply natural gas taken out of a gas line and compressed such that you can store enough of it on the back of a truck for hundreds of miles of travel. LNG, on the other hand, must be brought down to extremely cold temperatures such that the gas turns into a liquid, before it is stored. CNG is much more popular (and it will be our focus here), as it is cheaper to make than LNG, but LNG is more energy-dense, which means that the fuel takes up less space on the vehicle.
Key Benefits of Natural Gas in Transportation
The key assets of natural gas as a transportation fuel include cost & emissions benefits against diesel. Natural gas is extremely abundant in the United States, which means it is plentiful and cheap. Around five years ago, when crude oil hovered around $100/barrel, a natural gas strategy could save well more than $1 per gallon-equivalent compared to diesel fuel. Furthermore, most of the price you pay for natural gas in transportation is the fixed costs of compression and distribution, with the commodity cost making up only a small portion of the total cost. As such, there is much less volatility in natural gas prices, giving them much greater price certainty for the longer term.
From an emissions standpoint, most of the natural gas in the United States comes from large-scale drilling operations, which can be emissions-intensive. Yet, at the point of combustion, natural gas burns much cleaner than diesel, which lowers GHG emissions from the engine, but also emissions of heavily-regulated pollutants such as NOx. To this day, CNG remains an important part of strategies to reduce NOx emissions and smog in congested areas around the world.
When crude oil prices collapsed in 2014, the price advantage for CNG – and especially for LNG – eroded against the declining diesel market. In the years since, we have seen reduced interest in this type of transportation, as natural gas truck equipment continues to command a price premium that can be difficult to recoup in the recent price environment. Yet, with crude oil prices rising once again in 2018, cost-focused strategies may reemerge in this space. In the long run, we anticipate that there will be room for natural gas in the transportation world for the foreseeable future, especially when it is deployed in a strategic, targeted manner. Yet, insofar as they continue to be fossil fuels (Renewable Natural Gas, or RNG, is a different topic), and as price advantages remain unpredictable, CNG and LNG may struggle in a world where there will be more options than ever for transportation energy.
For more information about natural gas in transportation, or any other facet of Breakthrough Advisory Services, please contact us!