Isjust too good to be true? That’s what trucking companies large and small are asking themselves as they weigh the costs associated with switching to either compressed natural gas (CNG) or liquefied natural gas (LNG) against the ever-rising price of diesel fuel, which has hovered above the $4/gal. mark since late February of this year.
Trucking is no stranger to the natural gas pitch (nor the pitch makers themselves), of course, as the industry has pondered this particular alternative fuel pathway many times in the past. Since at least 1988, proponents of the fuel source have urged truckers large and small to switch over to natural gas.
“[Gasoline and diesel] prices are spiking. Again. And again the public is concerned,” wrote T. Boone Pickens, founder & chairman of BP Capital Management and a long-time advocate of using natural gas to fuel transportation needs in the U.S., in an op-ed in the Orlando Sentinel last month.
“Like the 1993 movie Groundhog Day with Bill Murray, we wake up every couple of years and go through exactly the same sequence of events with exactly the same results,” he said. “Put simply, we have little say in the price of oil. It’s a global commodity.”
Today, Pickens added, the U.S. finds itself the world’s “oil police” as well, which adds significantly to the nation’s cost in importing some 43% of the oil it consumes every day.
“There are 11 U.S. carriers [positioned] outside of U.S. coastal waters. There are more deployed in the Middle East — to protect oil supplies — than anywhere else,” he pointed out. “If you factor in those costs, the U.S. has spent $7 trillion on OPEC [Organization of Petroleum Exporting Countries] oil since 1976. It’s fiscal and economic insanity.”
Pickens added that any national alternative energy plan, however, must have transportation as its central focus for it accounts for two-thirds of total oil use in the U.S.
“I have been—and remain—a staunch advocate of renewable energy, including wind and solar, as part of the long-term energy mix. But those are power-generation fuels,” he stressed. “Transportation—replacing dirtier, expensive OPEC crude with cleaner domestic fuels — is the way to go. And on that front, all roads lead to natural gas.”
That’s easier said than done, however, due to the significant upfront cost to switch trucking operations from diesel to natural gas—a cost that has remained the major stumbling block for natural gas boosters like Pickens, who himself has publicly advocated for this switch and who has a 30% ownership stake in natural gas fuel provider Clean Energy through BP Capital.
A recent report by global consulting firm Frost & Sullivan, entitled “Strategic Analysis of the North American Class 6-8 Natural Gas Truck Market,” found that the per-unit premiums for spark-ignited CNG and LNG trucks were $29,750 and $27,750, respectively, with the compression ignition heavy-duty engine systems running on 95% LNG and 5% diesel to power over-the-road Class 8 models costing $72,450 more on average than a comparable diesel-powered unit.
That steep up-front cost is one reason the number of natural gas-powered trucks in the medium- and heavy-duty commercial trucking segment will grow slowly, the firm said, from 1,950 units today to over 29,483 units in 2017, making up just 8% of total Class 6-8 production six years from now.
That’s why many believe the only way to make natural gas truly work in trucking operations is to view it as a “longterm play.”
Kelly Mills, western U.S. territory sales manager for natural gas engine maker Westport Innovations, pointed out that fleets spec’ing his company’s 15L LNG-fired product are going to lose money during the first year or two of their truck ownership cycle, largely because of the $80,000 more a fleet will have to pay for a Class 8 truck equipped with Westport’s GX heavy-duty engine versus a traditional diesel-powered model.
“But that all changes in year three and beyond of the ownership cycle,” he stressed, for that’s when the fuel price differential between natural gas and diesel fuel begins to fall to the bottom line.