Fueling the Future: An Overview of Alternative Transportation Energy
February 1, 2019
Both shippers and carriers have a lot to consider as they aim to diversify their mix of transportation energy. It’s a balancing act involving several factors, including capital investment, cost of consumption, available infrastructure, and sustainability goals.
While traditional diesel will likely remain the standard heavy-duty transportation fuel of choice for the near future, other forms of energy are slowly becoming more viable options. Each one offers potential benefits and obstacles to overcome.
In his article covering the Challenges of Alternative Energy in Transportation, Breakthrough’s Applied Knowledge Director, Brett Wetzel, notes the industry has reached a point at which many are waiting and watching as early adopters make the first moves in the alternative energy space. The market has much work to do to overcome the challenges of cost of entry, infrastructure limitations, and lack of awareness, as well as a need for standardization.
A 2018 report from the International Energy Agency (IEA) found that, while adoption of renewable energy in the transportation sector is expected to grow by 19 percent between 2018 and 2023, transportation lags behind the power and heat sectors with the lowest penetration of renewables.
At Breakthrough’s 2018 Mercury Group conference, we noted data showing that transportation surpassed power generation for being the most carbon-intensive industry in 2016. Historically, the power sector’s reliance on coal made it one of the most harmful and “dirty” industries in terms of energy use. In recent years, however, the power sector has significantly reduced its carbon footprint while transportation still relies heavily on crude oil refined products—another niche of famously dirty energy sources. Now, it’s transportation’s turn to follow in power’s footsteps and pursue ways to cut emissions.
Wetzel says, amid all the optimism surrounding advancements in sustainable transportation, industry players should work together to clear the way for alternative energy use.
“These challenges must be scaled collectively by the transportation industry to proliferate the adoption of diverse energy types.”
Taking a closer look at four main types of alternative energies will help shippers identify strategies that make the most sense for their organization’s transportation strategy.
1. Biodiesel, Renewable Diesel
The federal government encourages adoption of alternative fuels, specifically in transportation, through the Renewable Fuel Standard (RFS) program. This program requires blending of alternative fuels—such as renewable diesel, biodiesel, ethanol, and renewable natural gas (which we will address later)—with fossil fuel supplies, to incrementally decrease greenhouse gas emissions.
As the government raises minimum blending requirements each year, existing market share will diffuse among a wider mix of fuel types. The idea behind this program is to promote gradual adoption of new energy rather than enforcing it all at once. RFS is also the reason ethanol is found in the gasoline that fuels your car or personal vehicle. Find out more about the RFS program on the Breakthrough blog.
Examples of common biodiesel and biofuel mixes seen at most fueling stations include E10, B5, and B2. Additionally, B20 is a biodiesel mix that is required in Minnesota during the summer months.
Renewable diesel is derived from the same feedstock types as biodiesel. The process of hydrotreating, which is commonly used in oil refineries, creates a product that is nearly identical to conventional diesel fuel.
Opportunities and Challenges: The most limiting aspect of biodiesel and similar advanced biofuels is that they are only used for blending. Pure biodiesel cannot be used in colder temperatures because it can crystalize and gel, potentially damaging a truck’s engine. For this reason, most major engine manufacturers void warranties if a blend above 20 percent is used in a diesel engine.
Renewable diesel’s biggest benefit is that it can be a direct replacement for traditional diesel and can be used in common diesel engines, but the cost of production is high barring more widespread use throughout the industry.
Sustainability: Both biodiesel and renewable diesel are non-fossil fuels made from organic waste such as vegetable oil and animal fats, making them more sustainable fuel types when compared to traditional crude oil refined products. .
Biodiesel and biofuels currently dominate diesel alternatives on a national scale due to state-level blending requirements and the renewable fuel standard program. Most renewable diesel is sold in California where the state’s Low Carbon Fuel Standard makes it competitive with traditional diesel prices. Pure renewable diesel product emits 60 percent fewer lifecycle emissions than traditional diesel making it an attractive option from an emissions standpoint, however the cost of production makes it a challenge to singularly adopt across fleets.
The cost of renewable diesel, as well as other alternative fuels, continually become more affordable as new regulations and incentives create a competitive landscape.
2. Natural Gas
Compressed natural gas (CNG) was a top alternative in consumer vehicles decades ago, but has continued to gain market share in the heavy-duty transportation space as of late. The fuel itself offers a low, stable price point, and reduced emissions compared to diesel.
Liquefied natural gas (LNG) is less popular than the condensed form of natural gas because it must be brought down to very cold temperatures to liquefy the fuel, making it costlier to produce, store, and transport. It also emits higher levels of greenhouse gases through this cooling process making its environmental benefits more muted. It is more prevalent throughout Europe because Europe lacks pipeline infrastructure, compared to the US’s expansive natural gas pipeline network.
Renewable natural gas (RNG) is chemically the same as conventional natural gas, however it is sourced from renewables like animal waste, landfill gas, and decaying organic matter. This is important to note because of its carbon intensity—in some cases, particularly dairy waste, it actually eliminates carbon emissions in its lifecycle of production. CNG and RNG share the same pipeline network and uses, so once it is refined to its final form they are indistinguishable, but understanding the lifecycle of this energy source becomes imperative to understand overall carbon intensity. To learn more about lifecycle emissions view our article on what shippers need to know about LCFS.
Vehicles running on natural gas do require different engines and fueling stations than diesel trucks, which means upfront investment is significant.
See our article, Natural Gas | Alternative Energy 101 for a complete breakdown of CNG vs. LNG and a more in-depth look at this fuel source.
Opportunities and Challenges: One of the benefits of CNG is that it experiences far less price volatility than diesel. Typically, when a shipper reimburses a carrier for CNG, the reimbursement is based on a price set at the beginning of each month. Natural gas is very abundant in the US because of the shale boom, which resulted in increased domestic oil and gas production. The supply of natural gas currently produced is so significant, some oil producers must burn excess supply off due to lack of capacity in pipelines.
One of the biggest challenges facing adoption of CNG is that it gets compared directly to diesel because diesel has been the industry standard. In recent months, diesel prices were low making it a more cost-effective option over CNG. Before the crude oil market plummeted at the end of 2014, when the price of oil was above $100 a barrel, CNG provided cost savings of around $1 per gallon over diesel with a well-managed strategy. The recent low diesel fuel price environment, however makes fueling trucks with diesel more economically advantageous. If, and when, the price of oil spikes again, CNG is positioned to be one of the most practical alternative fuels if all other factors align.
As we’ve pointed out in our article The Viability of CNG in the Supply Chain, infrastructure for natural gas is still expanding, however this growth has slowed year over year since 2014. Regardless, ongoing price stability make it an attractive option when implemented in the right use cases.
Sustainability: CNG burns much cleaner by emitting fewer greenhouse gas (GHG) emissions than diesel at the point of combustion. Yet, it is still a fossil fuel, and most of it comes from large-scale drilling operations, which have a large carbon footprint. RNG is a renewable option for natural gas consumption, but the cost to produce it is still high. RNG, also known as biomethane, is an advanced biofuel made from organic material including waste from landfills and livestock. Programs that take advantage of federal and state incentives can improve their financial viability. Lifecycle emissions become more important for RNG because its production process repurposes methane gases—which would otherwise be released into the atmosphere.
California is leading the charge in utilization of RNG for transportation fuel with regulations and incentives for implementing technology to make it more cost competitive with diesel fuel.
3. Battery Electric
While CNG may be the most viable long-haul, over-the-road alternative energy option at present, battery-powered electric vehicles (BEVs) are also making headlines and could potentially be the most promising option if the technology continues to advance.
As of this writing, BEVs haven’t yet gained mainstream tractions in heavy-duty applications, but major pre-orders in the shipping industry signal the beginning of a shift. These purchases include UPS ordering 950 Workhouse electric delivery trucks and reservations for heavy duty class 8 battery electric trucks, such as Tesla semis, from major consumer packaged goods (CPG) shippers, retailers, and carriers.
Market disruptors like Tesla and Thor are being met by industry mainstays like Daimler and Cummins to develop the BEVs of tomorrow’s freight market. Some of these companies have announced that these battery electric trucks are expected to be available and incorporated into transportation supply chains by late 2019 or early 2020.
Opportunities and Challenges: The future of BEVs looks bright, once these technologies are adopted into the mainstream supply chain. The main benefits of BEVs are increased energy efficiencies and long-term cost benefits because of lower energy costs compared to diesel. Power and performance will be able to compete directly with diesel drivetrains—a characteristic not yet shared by any other energy types. Finally, tailpipe emissions fall to zero, making them highly attractive for congested urban areas, and lifecycle emissions will continue to improve as the US energy grid continues to move away from fossil fuels.
The biggest hurdle for BEVs is lack of infrastructure. For that reason, the shippers most likely to take advantage of electric trucks are those with private fleets running specific lanes. These shippers could invest in charging infrastructure on-site or along dedicated routes. Another potential strategy is to use electric vehicles within city limits for repetitive routes like city-transit, while diesel trucks continue to move goods on longer length of hauls (LOH) across the country.
Infrastructure may be sparse, however limitations on the range of battery charge exacerbate this challenge. Batteries are extremely heavy. Trucks have weight-restricted carrying capacity, so it is unappealing to forego a full truck for an electrified powertrain. Additionally, battery technology takes too much time to charge a battery, and once it is fully charged its range isn’t long enough for most long-haul shipments—only guaranteeing around 300-mile ranges, compared to the traditional OTR haul nearing 1,000 miles or more. For every minute a truck isn’t moving it makes $0 dollars, so that downtime—and frequent stopping—is unappealing in most supply chains. Eventually, we could see utility companies, multinational energy companies, and electric vehicle manufacturers, such as Tesla, building stations to support their specific network of trucks.
Sustainability: California’s GHG emissions regulations and incentives are paving the way for this alternative energy as well. In late 2018, Anheuser-Busch, a major beer producer, announced its plans to add forty all-electric Tesla trucks to its fleet as part of its efforts to reduce carbon emissions.
Electricity as an alternative energy shows a lot of promise for shippers seeking sustainable options as carbon emissions from the tailpipe are eliminated. Yet, measuring the true sustainability benefits of electric trucks gets complicated because you must also consider the lifecycle emissions, and more specifically how the power to create the electricity was produced. For example, Electricity generated from coal plants still emits significant amounts of GHG emissions into the atmosphere, compared to electricity derived from a wind turbine. This will become increasingly relevant as the technology proliferates throughout the industry, and reporting and elimination of carbon emissions becomes more regulated.
4. Hydrogen Fuel Cell
Hydrogen fuel cell electric vehicles (FCEVs) are similar to electric trucks because they both are battery-powered, however the energy source, differentiates the two. These heavy-duty vehicles use a fuel cell to combine pure hydrogen and oxygen that in turn produces electricity to power a truck’s battery. The most well-known manufacturers of this type of transportation are Nikola and Toyota.
Opportunities and Challenges: Price point is the biggest challenge facing the adoption of hydrogen fuel cells as an alternative energy source. The energy to power the truck is expensive and may not make financial sense for most shippers and carriers. Hydrogen is expensive and difficult to process, and it can be even more expensive to transport. As new battery technology emerges, however, it’s possible the price will drop and this will become a more attractive option.
The greatest advantage that hydrogen fuel cell trucks have over other electric options is range. Electric vehicles are expected to have a maximum range of 100 to 300 miles on a single charge, although Tesla claims its electric semis have a 600-mile range. On the other hand, Nikola says its hydrogen fuel cell trucks can travel over 1,000 miles at a time, making this an attractive, energy-efficient option for long hauls.
Hydrogen fuel cell technology faces an even steeper uphill battle than electric in terms of infrastructure. While hydrogen trucks will need fewer recharges due to their extended range, they still need specific hydrogen fueling stations. In 2018, there were only 40 public hydrogen fueling stations in the U.S. and all of them are in California.
Sustainability: Converting hydrogen gas into electricity is relatively clean when considering tailpipe emissions. Using hydrogen gas produces only heat and water as byproducts. Despite this clean emission, producing hydrogen raises sustainability concerns. Some hydrogen production relies on fossil fuels and a thermochemical process known as steam-methane reforming. These processes emit greenhouse gases, which is why considering the lifecycle emissions of energy sources has become increasingly important to ensure true sustainable supply chain practices.
The alternative is to use renewable hydrogen, through the electrolysis of water molecules and hydrogen-producing microbes, but the technology is still in limited use and the processes are considered expensive.
What’s Your Alternative Fuel Strategy?
Deciding which alternative fuels are the right options for your transportation strategy may come down to your organization’s core values. If you emphasize sustainability and want to be seen as an eco-friendly, forward-thinking brand, bean early adopter. If you are committed to reducing GHG emissions, you may experience higher energy prices until the technology and methods become more commonplace, but you are more likely to be on the leading edge of a rapidly changing corner of the industry.
The biggest challenges for all shippers and carriers are the costs and complications of switching from diesel to alternative fuels. Even as alternative fuels gain incremental market share, diesel remains the most economically viable option for moving goods to market, and it will likely stay that way for the foreseeable future. Diesel is also a very volatile commodity, however, and diversifying energy portfolios gives shippers flexibility, supporting an agile supply chain. Setting up strategic partnerships with carriers and energy providers can increase the financial viability and long-term program success. Breakthrough can help.
Managing fuel costs and navigating decisions regarding the future of transportation is easier when you have Breakthrough as a supply chain strategy partner. We have in-house expertise and network connections to help you make data-driven decisions surrounding the future of your transportation and supply chain strategies.
Visit our Solutions page to find out more about how Breakthrough works with shippers to bring transparency and accuracy to transportation while keeping clients informed on where the market is heading with forecasts and advice from our Applied Knowledge team.
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