April 25, 2013

Domestic Heavy-Duty Mobile Natural Gas

History, Technology, and Outlook

NAFA Institute & Exposition – Atlantic City

Presenter:

Kennon Guglielmo, Ph.D.

President, EControls

CTO, Enovation Controls

2

A Snapshot of EControls...

EControls Served OEM Applications:

Heavy-Duty On-Road, Industrial, Marine

Complete OEM fuel system provider...

Marine Industrial Heavy-Duty On-Road

Electronic Control Modules

Fuel Control Actuators & Sensors

3

A Snapshot of EControls...

130,000+ OEM heavy-duty NG systems on the road today

Installed base of 1,000,000+ engine control systems

Engine development and emissions certification

Engine management systems for NG, LPG, Gasoline, Diesel

But... for domestic HD NG we have been skeptics for 15 years!

4

Early Domestic NG Struggles

Why have domestic HD NG engines failed to achieve critical

mass over the last 2 decades ???: Lack of broad-based refueling infrastructure

Limited space for long-range fuel storage

High cost of tankage relative to diesel

Insufficient sustained relative cost advantage of NG to diesel

Proof of this assessment is the fact that transit buses and waste

trucks are currently the only domestic HD NG success stories: No need for broad-based refueling infrastructure

Plenty of room for tankage for all-day operation

Incremental cost of tankage a small percentage of total vehicle cost

5

Fuel Cost Economics

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1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Natu

ral G

as p

rice in

$/M

CF

O

il P

rice in

$/b

arr

el

Year

Historical Oil and NG Fuel Prices

Oil $/barrel

Natural Gas $/MCF

Domestic shale

production hits its stride

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1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Oil /

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$/B

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Year

Relative Energy Cost of Oil and Natural Gas

Fuel Cost Economics

< 2:1 ratio insufficient for critical mass

Domestic shale

production hits its stride

Non-sustainable > 2:1 ratio

triggers 1990’s activity

Sustainable > 2:1 ratio will

drive market build-out

7

Fuel Cost Economics

“We’ve heard it all before”...

“As soon as we commit, NG prices will go up”

“As soon as we commit, oil prices will drop”

Why things are different now (in the last 5 years):

Domestic (and worldwide) NG shale plays • Total NG game changer

• New fracturing technology allows previously economically

inconceivable access to NG

• Current production capability massively outstrips demand

• Future production will continue to outstrip demand

• The U.S. has some of the world’s largest fields

Oil price escalation is here to stay • Oil prices failed to even keep up with inflation in the 1990’s –

those days are over

• China is driving worldwide oil consumption – and will continue to do so

8

Critical Fuel System Technologies

Major Technology Areas:

Vehicle fuel storage type

• CNG = Compressed Natural Gas

• LNG = Liquefied Natural Gas

Engine fuel delivery system

• Air/Fuel pre-mix

• Direct NG injection

Engine ignition system

• Spark

• Micro-pilot diesel

• Standard diesel

9

Vehicle Fuel Storage

CNG = Compressed Natural Gas (3600 psi gas)

≈ 5:1 tank size for the same diesel range

Lower tank price, but more tanks

Least expensive pump delivery price

User-friendly filling

Indefinite fuel storage

LNG = Liquefied Natural Gas (cryogenic 150 psi liquid)

≈ 2.3:1 tank size for the same diesel range

Higher tank price, but less tanks

More expensive than CNG at the pump

Filling requires training / safety gear

Limited time after filling before tank vents (days to weeks)

since tank is essentially a large “thermos” bottle

10

Domestic HD NG Engine Availability

Cummins ISLG: 9L, 6-cylinder

Spark ignition (SI)

Standard CNG or LNG tank system compatible

Up to 320 bhp, 1000 ft-lbs @ 1300 rpm

Cummins ISX12G: 12L, 6-cylinder

Spark ignition (SI)

Standard CNG or LNG tank system compatible

Up to 400 bhp, 1450 ft-lbs @ 1200 rpm

Westport HD15: 15L, 6-cylinder

Micro-pilot diesel compression ignition (CI)

Requires special LNG tank system with high-pressure cryogenic pump

Up to 475 bhp, 1750 ft-lbs @ 1200 rpm

Only 3 OEM “Heavy-Duty” NG engines are EPA 2013 certified:

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Initial Truck Cost Considerations

Why are HD NG engines so much more expensive than diesel? They should be the same or cheaper because...

Spark ignited, pre-mix NG fuel system = HPCR diesel fuel system cost

Spark ignited NG engine aftertreatment is about $1000

Tier4 diesel aftertreatment is about $6000

But...

Low volume production by domestic manufacturers = higher cost

Extremely limited domestic engine competition = higher cost

Domestic market will currently bear a higher price because NG vehicle buying

decisions are driven by fuel cost advantages – not engine cost

What does the fuel storage system cost?

Both CNG and LNG tanks are ≈ $100 / diesel gallon equivalent (DGE)

in high-volume (i.e. mature market) – current domestic cost is $300 / DGE

Mounting brackets and tank to engine plumbing are more expensive than diesel

Fuel heat exchangers required on LNG systems, may also be used with CNG

No SCR system required for leading technology spark-ignited systems

12

NG vs. Diesel Maintenance Cost Differences

For spark-ignited engines (Cummins ISLG9, ISX12G):

Spark plug changes cost approximately $0.01 per mile

No SCR fluid is required – saving about $0.01 per mile

Fuel filter changes are typically much less frequent

Cummins recommends somewhat more frequent oil changes

Valve adjustment requirements are typically more frequent

For compression-ignition engines (Westport HD15):

Both diesel and NG fuel filters must be maintained

The hydraulic system for the cryogenic pump in the LNG tank must be

maintained

SCR is required – costing about $0.01 per mile

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Other Miscellaneous Operating Cost Differences

CNG tanks must be replaced every 20 years

NG truck weight carrying capacity reduction:

CNG tanks add about 10 to 20 lbs per DGE net

LNG tanks add about 5 lbs per DGE net

On spark ignited engines, there is no DPF or SCR system

to maintain or potentially fail

14

Fuel Cost Operating Advantages

Basic Assumptions:

Truck miles per year 100,000 miles

Diesel cost 4.00 $/gallon

LNG cost per DGE 2.50 $/DGE

CNG cost per DGE 2.00 $/DGE

Diesel fuel economy 7.0 miles/DGE

NG fuel economy - CI 7.0 miles/DGE

NG fuel economy - SI 6.3 miles/DGE

Fuel Operating Cost Advantage Analysis:

Truck Premium Diesel Fuel Cost NG Fuel Savings Payback ROI - 5 year

Engine Platform (Initial $) ($ / Year) ($ / Year) (Months) (avg % / year)

Westport HD15 (LNG) $90,000 $57,143 $21,429 50 3.8%

Cummins ISX12G (CNG) - Current $45,000 $57,143 $25,397 21 36.4%

Cummins ISX12G (CNG) - Future/Mature $23,000 $57,143 $25,397 11 90.4%

Yuchai 6112 (CNG) – Current $18,000 $57,143 $25,397 9 121.1%

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Payback Sensitivity to Annual Mileage

0

12

24

36

48

60

72

Westport HD15 (LNG) Cummins ISX12G (CNG)Current

Cummins ISX12G (CNG)Future/Mature

Yuchai 6112 (CNG)Current

Payb

ack P

eri

od

(M

on

ths)

80,000 miles/year

100,000 miles/year

120,000 miles/year