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Natural Gas Vehicles Driving in a Vicious Circle

natural gas vehiclesThe U.S. is in the midst of a natural gas boom, thanks to new forms of technology that make it possible to reach this resource in areas where it was previously unattainable.  As a result, in 2012, the price of natural gas dropped to its lowest point in a decade.  Companies across the nation found many uses for the flowing resource, which included fueling vehicles.  Unfortunately, natural gas vehicles are taking much longer to catch on than manufacturers had originally predicted.  With the price of gasoline rising, as well as the efficiency of natural gas, why aren’t more people investing in natural gas as a fuel for transportation?

Yes, the initial cost of a natural gas vehicle may discourage some consumers from purchasing, but there is another underlying reason for the sluggish sales.  Take a second to think about how many natural gas refueling stations are in your town…exactly.  Consumers realize that there are only a limited number of these stations in any given city, meaning that they would probably have to drive out of their way just to refuel their car, so they don’t buy them.  On the other hand, companies see that only a small amount of people are buying these vehicles, so they have little incentive to build more refueling stations.  It’s a vicious circle!

Christopher Knittel, professor of energy economics at MIT, published a paper where he discusses this situation:

This creates a chicken-and-egg problem, or network externality issue.  Consumers are unwilling to purchase natural gas vehicles before a refueling infrastructure is built, but businesses will not invest in natural gas refueling stations until there is consumer demand.  Each side would be better off if the other side acted first, but neither is willing to move without the other.

Manufacturers have discovered that one way to circumvent this problem is to create vehicles that have the option to run on compressed natural gas or gasoline.  Some vehicles that are taking this route are the Ram 2500 Heavy Duty CNG Truck, the 2013 Chevrolet Silverado 2500HD, and the GMC Sierra 2500HD.

The obvious benefit of having a dual fuel car is the ability to enjoy the advantages of efficient natural gas while also having the option to fill up with regular gasoline if need be.  But don’t expect these vehicles to be popping up more frequently; there are still not enough fueling stations across the country to encourage consumers to go out and make a purchase.

Chairman and CEO of General Motors Daniel Akerson believes the government should take control of the situation and encourage natural gas refueling stations.  “Why can’t we get natural gas refueling stations at one out of four gasoline stations?” He added, “If you really want to take advantage of a gift, you have to change your infrastructure.”  Akerson explained that he would like to see a presidential mandate that would develop and integrate an energy plan, seemingly one that would include some sort of incentive for these refueling stations.

Companies need to stop fighting this movement toward a cleaner society.  With natural gas vehicle production almost at a standstill, companies need to begin building the necessary infrastructure to encourage more consumers to purchase these efficient vehicles.  As a step in the right direction, residents in Madison Wisconsin, Fairborn Ohio, and Jacksonville Florida will be seeing new natural gas refueling stations very soon.

Sarah Battaglia's picture

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John Miller's picture
John Miller on Mar 16, 2013

Sarah, natural gas motor fuels face similar fueling logistics constraints as electric vehicles.  The lack of public fueling stations is one of the primary reasons why natural gas is most often used in medium/heavy duty in-town commercial vehicles and public transport buses.  It’s far cheaper to build and operate commercial trucks/public buses from centralized fueling networks than significantly expanding smaller, numerous, and more dispersed general public natural gas fueling stations.

Even though natural gas motor fuel may not have grown at the rates some people believe the drop in market prices should support, it still has grown at 3-4% per year in recent years.  This rate is surprisingly quite significant compared to politically popular electric vehicle’s growth.  Over the past 6 years natural gas motor fuels total consumption has grown by about 22% (Re. EIA MER Table 2.5), while electric vehicles power use only grew by a fraction of 1%.  At the end of 2012 natural gas displaced over 350,000 barrel per day of mostly petroleum diesel.  In 2012 electricity only displaced about 14,000 barrel per day of petroleum gasoline.  Based on these data, which alternate fuel do you think had the greatest impact on reduced U.S. carbon emissions?

Ron Wagner's picture
Ron Wagner on Mar 16, 2013

There is a lot of growth in CNG service stations, and LNG service stations. I study this daily, and know almost all the activity that is going on. Convenience store chains are fairly large businesses and are supporting CNG. They can make a larger margin, and still sell fuel at a big discount over gasoline. More populous, or highly traveled areas tend to have CNG, other routes  or rural areas may not. See cngprices.com for an interactive map. 

It is true that a bifuel vehicle would be much more practical for driving around the country, or for not having to go out of your way to fuel up, but who woudn't go out of their way to save a dollar or more per gallon? In a few years this should not be a problem. Remember that in the 1930s we only had one highway to the far west. Route 66 started out as a dirt road. We are very spoiled today. 

ENN, a Chinese company has just entered the LNG service station market in the USA. It plans on opening 50 stations by the end of this year. Possibly up to 500 eventually. They are working with BLU stations of Utah, and have an association with Westport Innovations. Clean Energy is building out its own LNG highway and declined an association with ENN. They are rapidly buiding out LNG stations with a master plan. Shell Oil is a Dutch company and is building LNG production facilities for the Great Lakes and near the Gulf. LNG can be used in ships and barges in both areas. None of our largest domestic oil and gas companies hae done anything substantial to build out our natural gas infrastructure. Chesapeake is fairly large, and has done a lot, as have some smaller companies. 

Ron Wagner

Ron Wagner's picture
Ron Wagner on Mar 16, 2013

There is a lot of growth in CNG service stations, and LNG service stations. I study this daily, and know almost all the activity that is going on. Convenience store chains are fairly large businesses and are supporting CNG. They can make a larger margin, and still sell fuel at a big discount over gasoline. More populous, or highly traveled areas tend to have CNG, other routes  or rural areas may not. See cngprices.com for an interactive map. 

It is true that a bifuel vehicle would be much more practical for driving around the country, or for not having to go out of your way to fuel up, but who woudn't go out of their way to save a dollar or more per gallon? In a few years this should not be a problem. Remember that in the 1930s we only had one highway to the far west. Route 66 started out as a dirt road. We are very spoiled today. 

ENN, a Chinese company has just entered the LNG service station market in the USA. It plans on opening 50 stations by the end of this year. Possibly up to 500 eventually. They are working with BLU stations of Utah, and have an association with Westport Innovations. Clean Energy is building out its own LNG highway and declined an association with ENN. They are rapidly buiding out LNG stations with a master plan. Shell Oil is a Dutch company and is building LNG production facilities for the Great Lakes and near the Gulf. LNG can be used in ships and barges in both areas. None of our largest domestic oil and gas companies hae done anything substantial to build out our natural gas infrastructure. Chesapeake is fairly large, and has done a lot, as have some smaller companies. 

Ron Wagner

Ron Wagner's picture
Ron Wagner on Mar 16, 2013

Sorry about the double comment. 

Sarah, and John, you know that most people just drive around town most of the time too. Most families also have more than one vehicle. If there is one CNG station , or you have a home pump, it is quite possible to use a mono fuel natural gas vehicle like the Honda Civic. Of course it is better to have more than one source, because there can be problems at one. I would always prefer bifuel due to the long time it will take to totally build out CNG fueling infrastructure everywhere. 

Bob Meinetz's picture
Bob Meinetz on Mar 16, 2013

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Bob Meinetz's picture
Bob Meinetz on Mar 17, 2013

John, I'm not sure exactly what you mean by "politically popular". People do many things for politics - they campaign, they write their representatives, but one thing they don't do is consider politics for a decision like buying a car.

People buy electric cars because they're clean, they're fun to drive, and they're very inexpensive to drive. They buy electric cars because they're often rated higher in direct comparisons to their gas-guzzling counterparts.

Your comparisons are specious, for several reasons:

1) Sarah's article obviously is referring to natural gas cars for consumers, whereas the figures you're quoting are almost entirely from gas used in buses, trucks, and other fleet vehicles.

2) The increase in use of LNG is because it's cheap - right now, anyway. The price is more volatile than the fuel, however, and few car owners want to be on the hook when prices rise by a factor of 10, as they have within the last decade.

3) As I've reported here several times, EV owners seldom use (or need) public recharging stations. It takes too long, and it's much easier to charge overnight from home. Yet somehow this meme, a relic of the internal-combustion mindset, continues to resurface like a bad habit.

Where are you getting your figures for your claim that "electric vehicles power use only grew by a fraction of 1%"? The EIA MER doesn't provide electric vehicle (primary use) statistics, and considering the number of commercially-available electric vehicles has grown from zero to roughly 30,000 in the U.S. in the last three years, that statistic doesn't make any sense.

If your outlook is bearish on EVs, it's a minority one. AFP reports that the U.S. is predicted to become the world's largest electric car market by 2020 - selling 1.8 million vehicles/year, and Barron's predicts 130% annual growth in electric vehicle sales beginning this year.

Steve Frazer's picture
Steve Frazer on Mar 21, 2013

CNG requires high maintenance compressors, a multi-$Trillion distribution system, serious environmental impact for extraction (fracking) and is not only the most volatile (unstable and explosive) transportation fuel, but also has the most volatile price history of any energy source over the past 10 years. CNG is a fossil fuel with a finite volume available. It has little future for achieving large scale production status. [2010 - $75 barrel equiv.; 2008 - $340 barrel equiv.; 2006 - $225 barrel equiv.]


For
Bob Meinetz:  EV's and Hybrids are not economically feasible or finite resource viable (Batteries/Grid Issues and Peak Minerals) - they have no near future, large scale production potential.  For more information:  EV's and Hybrids are not our Future (http://etcgreen.com).

Considering current options and technologies, biodiesel from 2nd generation, high yield feedstocks (800-14,000 gallons/acre/year) is our only sustainable and economically viable, large scale solution for petroleum replacement. The fact that it is a drop-in fuel saves literally $T's in infrastructure expenditures:

Join the Migration - http://etcgreen.com  U.S. Migration

I K's picture
I K on Mar 29, 2013

Why would a natural gas refuelling infrastructure cost trillions?  Its not much more complicated than the pumps at a gas station you use to inflate your tyres and most places are already close to the national gas grid if not already connected.

It would not cost trillions it would be fairly cheap and pay back itself many times over.

Ron Wagner's picture
Ron Wagner on Mar 29, 2013

Europe has proven that small natural gas vehicles are quite useful. See:http://www.ngvaeurope.eu/cars

http://www.ngvaeurope.eu/vans

For lots of existing CNG stations see cngprices.com. 

The Big Three alread make CNG/gasoline bifuel pickups, CNG vans and more are coming. 

Steve Frazer's picture
Steve Frazer on Mar 29, 2013

When we researched the various transportation infrastructure options, we did a complete minerals to recycling (vehicle in between) and fuel source to emissions and $T’s would be the correct cost estimate to build the necessary nationwide infrastructure to support even a 10% migration to CNG for the U.S. light fleet.

One of the dark secrets that the CNG industry does not advertise is leaks. We reviewed the contracts of 5 conversion companies and all included a caviate that the resulting converted CNG vehicle would never be stored inside a structure; ie a garage. We thought this odd so we interviewed various firms and determined that fleet managers of CNG no longer were “filling up” at 5pm when the trucks/cars were coming back from the work day, but rather would fill up the next morning right before the next shift to minimize the volume of CNG that would leak. The last interview was with the Fleet Manager of Southwest Gas. They do the same for the same reason.

The price of NG will hit $6 this year and likely over $8 again by 2015, while the price of advanced biodiesel blends is dropping from increased production. Our direction is clear. Join the Migration
http://etcgreen.com U.S. Migration

Steve Frazer's picture
Steve Frazer on Mar 29, 2013

I respect that people will have opinions and their preferred mode of transportation might even have a higher viability for their specific needs than the main stream path we are projecting.

However, the good folks on this website – virtually all of whom are well educated and worldly in their knowledge and experience – have so many notions for primary transportation solutions and infrastructures.

Per my training, this is not a case of cultural or economic differences, this is a case of limited perspective. Our team has worked with thousands of individuals from Scientists in National Labs to high school kids and we are constantly amazed at how little most understand about mineral mining, milling, refining and recycling, fuel processing, logistics, etc.

EV’s, hybrids, CNG, LNG, compressed air, and gasoline powered vehicles from this point forward will generally receive less support and lower sales.

The recent rapid Migration from gasoline to biodiesel powered vehicles in India is a good example. This has been the standard Migration in all industrialized nations over the past 10 years. The only reason it did not occur in the U.S. before now is due to U.S. Federal petroleum subsidies. When they are removed – as the IMF is now demanding of all nations – then too will the U.S. Migrate to advanced biodiesel blends.

Join the Migration – http://etcgreen.com U.S. Migration

I K's picture
I K on Mar 29, 2013

Well you were most likely wrong because some of the poorest countries in the world rely on CNG in canisters for cooking, if 3rd world poverty stricken nations can do it what makes you think it will cost trillions?

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