The Push for Compressed Natural Gas Personal-Use Vehicles
There has been a recent effort by the natural gas industry to increase the amount of compressed natural gas (CNG) vehicles on the roads. Compressed natural gas is more environmentally friendly than regular gas and saves drivers about $1.50 per gallon compared to gasoline (National Geographic). With great price savings and a smaller negative environmental impact, the first thing that comes to mind is: why aren’t there more CNG vehicles on the road? The answer to this question is that convenience is a major issue for CNG vehicles.
There is only one passenger car that Americans can buy (without aftermarket work done to add in a CNG gas tank), which is the Honda Civic natural gas sedan (National Geographic). Many of the Civics sold are fleet cars, sold to companies that have their own fueling stations, since there are only about 600 CNG fuelling stations in the U.S., compared with 168,000 gasoline stations (National Geographic). Canada has even less CNG fueling stations, with only about 80 across the whole country (CNGV). The image below shows the scarcity of CNG fuel stations throughout the USA.
Due to the challenges of owning a CNG vehicle, there are only about 18.2 million currently (most of which are in Argentina, Brazil, Iran, and Pakistan), which is a small percentage of the 800 million total vehicles in the world (National Geographic). However, analysis done by Navigant Research, an American market research company, predicts that the amount of CNG vehicles could grow to 34.9 million by 2020 (National Geographic). With the challenges of fueling these vehicles, it is likely that only companies with private CNG filling stations would make up the base of the buying power. This companies are generally transport companies, who make up the cost of the vehicle faster; the higher mileage that a driver incurs, the quicker they offset the steeper price of a CNG vehicle, which is easier to do by those driving for a living.
Current Moves Toward More CNG Vehicles
A company based out of Vancouver that adds natural gas fuel systems to trucks launched its new Windsor location Wednesday, October 16, 2013 (Windsor Star). Westport’s new Integration Centre is 20,000 square-feet in size and is located in west Windsor. There, the company will install natural gas fuel systems in Ford F-series heavy-duty pickup trucks, which will run gasoline as a backup once the natural gas runs out (Windsor Star).
At the same time, GM announced its plans to make a small amount (under 1000 in the first year) of Chevrolet Impalas that will run on compressed natural gas with gasoline as a backup (Detroit News). The CEO of GM, Dan Akerson, says that his company plans to keep promoting the compressed natural gas vehicle industry (Detroit News).
The Uncertainty of CNG Prices
Although CNG is cheaper today than gasoline, an important point to address is the volatility of fuel prices. Could the situation change drastically a year from now? Dave Hurst, a senior analyst at Navigant Research, doesn’t believe so. A great deal of the CNG pump price is made up of other costs (such as marketing, distribution, and the gas station’s profit); therefore, if the price of natural gas doubled, customers would probably only see an increase of about 40 cents on US$2 per gallon CNG (National Geographic).
The following graph shows how the price gap between natural gas and gasoline is closing, as natural gas prices drop and gasoline increases. Figure 2 was built using the ZEMA Suite with natural gas prices from Energy Intelligence (Report: NGW – Prices at Major Hubs and Selected City Gates) and gasoline prompt contract prices from NYMEX Future Settlements (RBOB Gasoline Financial Futures).
The Future of Compressed Natural Gas
Although the future of CNG remains unclear, increasing CNG usage has gained political support. The province of Ontario grants offers of up to $8,500 to those who purchase electric or hybrid vehicles (Windsor Star). Bob Bailey, the Member of Provincial Parliament (MPP) for Sarnia-Lambton, is requesting that the province offers incentives to commercial buyers of natural gas-powered vehicles as well (Windsor Star). “I see the increased use of natural gas as a catalyst for Ontario businesses that can help generate jobs and opportunity right here in our province,” says Bailey (Windsor Star).
Kirt Montague, the CEO of business development company Plum Energy, is also optimistic about the future of CNG. “We’re on the brink of one of those tectonic shifts that occur every 100 years in the energy game,” says Montague (Bloomberg Businessweek).
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