Are Natural Gas Vehicles Right for Your Fleet?

A growing number of fleets have already made the switch to natural gas after weighing the benefits and challenges.

May 2011, Work Truck – Feature

By Sean Lyden

M-Verizon-CNG-vanA growing number of businesses are transitioning their fleets to run on compressed natural gas (CNG) or liquefied natural gas (LNG) as alternatives to gasoline and diesel.

Delivery giant United Parcel Service (UPS), which began using natural gas vehicles (NGV) in 1989, now operates more than 1,300 CNG package delivery trucks in a dozen markets and recently announced it was adding another 48 LNG-powered tractors to its western freight fleet.

AT&T has deployed nearly 3,000 NGVs, comprised primarily of Ford E-250 vans upfitted to CNG at time of purchase, and more recently ordered 101 CNG Chevrolet Express cargo vans direct from GM. Through 2013, the telecom company anticipates purchasing up to 8,000 NGVs as part of its commitment to deploy 15,000 alternative-fuel vehicles throughout its fleet.

In October 2010, Verizon Wireless Inc. ordered 501 new Ford E-250 CNG vans in what company officials indicate is the first phase of what will be a multi-year deployment of NGVs.

Why are these and other businesses making the switch to NGVs?

“Corporate and government fleets are the strongest adopters of natural gas vehicles” said Dave Hurst, senior analyst for Pike Research, which recently published a report analyzing global clean technology markets. “More and more fleet managers are attracted to the lower fuel costs of natural gas, in addition to the opportunity to reduce their vehicles’ carbon footprint.”

Jerome Webber, senior vice president of AT&T Global Fleet Operations, agrees. “CNG vehicles provide a reduction in carbon emissions – by approximately 25 percent compared with our traditional gasoline vehicles. That supports our corporate commitment to reduce our impact on the environment. We also expect a decrease in our overall fuel costs, especially as gasoline prices continue to trend upwards. Historically, CNG is 30-40 percent cheaper than unleaded gasoline, so adding this many CNG vehicles to our fleet will have a positive impact both economically and environmentally.”

Despite these advantages, NGVs’ need for fueling infrastructure has hindered more widespread adoption. “NGVs are a good fit for fleets like UPS, AT&T, and Verizon because they have relatively high fuel use and are either return-to-base or repetitive route applications,” said Stephe Yborra, director of market development at NGVAmerica. “Investments in fueling infrastructure, whether company-owned and operated or provided by a utility or independent fuel retailer, are driven by fuel use.”

Yborra said that while the transit, airport, and refuse sectors account for more than 75 percent of vehicular natural gas use, there’s been significant growth in work truck fleets applications, such as utilities, food and beverage distributors, textile rental services, and local-regional freight delivery companies. He noted that as more truck platforms become available to meet different fleets’ needs, and the gap between natural gas and petroleum fuel prices grows, economics will drive additional investment in fueling infrastructure. “NGVs are not for everybody – yet,” said Yborra. “Fleet operators need to weigh the benefits and challenges against their corporate goals.”

“Our greatest challenge in deploying CNG vehicles continues to be the limited availability of public refueling facilities,” said AT&T’s Webber. “It’s our hope that by applying our market size, we’re also helping our nation’s infrastructure. To help meet our needs, we’ve teamed with the DOE [Department of Energy] Clean Cities organizations across the nation to help match and time our deployments with public refueling infrastructure.”

What is Vehicular Natural Gas?

Vehicular natural gas is the same “blue flame” gas that is used in factories, businesses, and homes for industrial processes, heating, water heating, cooking, and other domestic uses. Natural gas is comprised primarily of methane (CH4), an energy dense single carbon molecule that produces far fewer harmful emissions than either gasoline or diesel when combusted. While most natural gas used today is a fossil fuel extracted from deposits found deep within the earth, a growing amount of renewable natural gas produced from landfills, sewage plants and agricultural waste (referred to as bio-gas or bio-methane) is being utilized, including by some fleets.

Since nearly 98 percent of all natural gas used in the U.S. comes from North America, proponents argue that increased use, especially in the transportation sector which currently relies heavily on imported oil, is a viable path for the United States to achieve greater energy independence now and for the foreseeable future.

“The existing and growing U.S. reserves of well gas and bio-methane are more than enough to absorb tremendous growth in the transportation sector,” said Yborra. “The 115,000 NGVs on U.S. roads today account for less than one-half of 1 percent of all U.S. natural gas use, so there’s lots of room to grow.”

How Do NGVs Work?

NGVs use internal combustion engines that are very similar to those that run on gasoline or diesel. Most NGVs available today use spark-ignited engines, although some of the largest natural gas engines use compression ignition, utilizing a small amount of diesel “pilot” fuel. Light-duty sedans and pickups and some smaller medium-duty trucks use spark-ignited engines that may be either dedicated (runs exclusively on natural gas), or bi-fuel (designed to run either on natural gas or gasoline but not both at same time). Nearly all spark-ignited medium- and heavy-duty engines run dedicated only.

Natural gas may be stored onboard in one of two ways, either as CNG or LNG, although in all but the largest natural gas engines, fuel is fed to the combustion process as a gaseous vapor at pressures similar to gasoline or diesel. LNG is currently used in less than 5 percent of NGVs with nearly all used by heavy-duty trucking and some transit bus operations because its density allows for a smaller fuel system footprint. CNG is far more prevalent and the fuel system  is available in all light-duty vehicles and most medium-duty work trucks.

Today’s CNG systems operate at 3,600 lbs. per square inch (psi) although some older NGVs still on the road today were designed using 3,000 psi fuel storage systems and many CNG stations still offer both pressures. Different fuel nozzles and receptacles ensure that the higher pressure gas may not be errantly loaded into the lower pressure vehicles.

CNG systems comprise:

1. Storage cylinder(s). Four types of cylinders are available. At one end of the spectrum are steel cylinders, which are cheapest but heaviest. At the other end are composite materials cylinders which are more expensive but lighter. All meet the same stringent strength and safety regulations.

2. High-pressure fuel line, which serves as the pathway for CNG to travel from the cylinders to the engine compartment.

3. Pressure regulator, which drops the gas pressure to the required fuel-injection system pressure.

4. Fuel injectors, which modulate the amount of gas for combustion based on demand.

5. Pressure relief device, which is a built-in fire safety feature to allow for controlled venting of the gas at pressures well below the cylinders’ design “burst” pressure.

6. Various shut-off valves that allow for CNG system maintenance and operation.

7. Brackets, protective plates, and other hardware to secure and protect CNG system components.

Purchase Price Premium for NGVs

Factory built heavy-duty NGVs for delivery fleets, public works and other larger work truck applications (Class 6 and larger) are available from many of the major truck manufacturers including Freightliner, Peterbilt, Kenworth, and International. In addition, conversions are available on Class 5-7 Workhorse, Freightliner Custom Chassis Corp. (FCCC), and Isuzu trucks ordered with gasoline engines. The premium on these OEM and conversion vehicles varies widely based on the amount of fuel storage installed but may range from $20,000 to as much $50,000.

In the light heavy-duty and medium-heavy duty (Class 2b-Class 5) work truck arena, GM offers CNG Express and Savana 2500/3500 cargo vans at a list price premium of $15,910. For other GM and Ford trucks as well as Isuzu, FCCC, and Workhorse trucks ordered with gasoline engines, EPA- and CARB-certified conversions systems are available from several approved manufacturers and their upfitter installers. According to NGVAmerica, the premium for these conversions may range from $10,000-22,000 depending on amount of fuel storage specified.

Business Case for NGVs

The environmental benefits of using NGVs are compelling. According to NGVAmerica, NGVs produce up to 95 percent less overall toxics compared to gasoline and diesel vehicles. Greenhouse gases are reduced between 20-30 percent.

However, with a $10,000-$22,000 (or more) premium for an NGV, what is the business case – beyond being a good corporate citizen – for fleets to operate NGVs?

“I think the biggest driver is the growing differential between the operating cost of running on natural gas versus gasoline or diesel,” said Yborra, who estimated savings of $1.25-$2 per equivalent gallon of gasoline or diesel.

For higher fuel use applications, Yborra said the payback on the premium for the right fleet application typically ranges between three to four years. “If a company runs its trucks eight to 10 years, that’s a good five, six, or seven years that it’s running that vehicle with all that fuel savings going back in its pocket. And that’s without considering grants or tax credits,” he said.

Yborra is referring to federal income tax credits for vehicles, which expired Dec. 31, 2010, for the purchase of a dedicated NGV, covering 50 percent of the incremental cost (or conversion cost) of the vehicle, plus an additional 30 percent if the vehicle met certain tighter emission standards. Put into effect in 2006, these credits helped drive NGV growth by significantly reducing their incremental cost, shortening the payback time, in some instances, to as little as one to two years.

Yborra said the industry is committed to getting those tax credits reinstated, noting that a bill introduced in Congress in early April – the NAT GAS Act – does just that and more. In the meantime, there are still many states that offer tax incentives and/or grants that lower NGV purchase cost premiums. (To learn more about what is available in your state, visit www.ngvamerica.org/incentives/stateNGV.html.)

CNG Payback Analysis

Suppose, for example, you’re considering replacing a gas-powered Chevrolet 2500 Express cargo van with the CNG-version of the Express. How long will it take to recoup the investment? (See “CNG Payback Projection” chart.)

Estimate the CNG premium at $15,000, without factoring in any available tax credits. Suppose the van travels 24,000 miles per year. At an estimated 12 mpg, that’s 2,000 gallons of fuel burned per year. Since gasoline and CNG offer comparable fuel economy, estimate 12 mpg for both. Plug in $3.75 for regular unleaded and $1.75 for natural gas.

The annual fuel cost differential, therefore, is $4,000, in favor of natural gas. Under these assumptions, the payback is approximately 3.75 years.

Keep in mind these numbers are based solely on the estimated fuel cost differential, which may fluctuate considerably over the next five years. For example, if gasoline spikes to $4.50 per gallon and CNG rises more modestly to, say, $2.10 gasoline gallon equivalent (GGE), the payback time shortens to 3.125 years.

Also, this projection doesn’t factor in any differences in maintenance cost, investment in on-site fueling infrastructure, available or future tax credits (that could lower the CNG cost premium), and other variables. Instead, its purpose is to provide a quick snapshot to help determine whether to look deeper into CNG for the fleet’s application.

Limitations of CNG

Despite fuel cost advantages, there is one primary constraint impeding widespread fleet adoption of natural gas, even in high-mileage applications: infrastructure.

Currently, there are about 1,000 CNG fueling locations in the U.S., but only 50 percent are open to the public. A listing of public CNG refueling stations is available at: www.eere.energy.gov/afdc/fuels/natural_gas_stations.html.

Best Applications for Natural Gas

With the advantages and limitations in mind, which fleet applications work best for NGV use?

“Any metro market business that has return-to-base operations, with repetitive routes, and always comes back to a fueling site or at least passes a fueling site on the route,” Yborra said. He recommended using the following questions as a guide:

Will the vehicle run sufficient miles per year to justify the incremental cost for CNG?

Will the vehicle be used on daily routes that require one tankful or less of fuel?

Will on-site CNG fueling or convenient access to public CNG refueling stations be available?

If the answer all three of these questions is “yes,” a compelling business case for CNG conversion is possible.

What Does the Future Hold?

“The overall economies of scale are starting to kick in, and I think they will kick in even more for engine suppliers and all the available systems that are related to supplies in the CNG market,” said Yborra. “So we’re right on the verge of what I think can be a very important growth time. And growth always means more availability of components such as engines, valves, injectors, pumps, pipes – you know, all the various pieces of the systems. This economy of scale is bringing down the premium [to convert to CNG].”

Yborra also expects the number of public access CNG fuel stations to continue its growth trend, especially in major metro markets. “This will make the hill less steep for fleets to convert to CNG. And more public access to fueling will be available as more and more fleets adopt this technology.”

“As alternative-fuel technologies evolve, we’ll continue to explore them to determine if they’re right for our company,” said AT&T’s Webber. “For now, CNG is a good option for our fleet and the technology for our vehicles is readily accessible. We plan to continue deploying CNG vehicles as long as it makes sense to do so.”

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