Natural Gas Quarterly
U.S. Class 8 NG Trends, Forecast, Analysis & Insight
Q1 2015
Natural Gas Quarterly is published monthly by Americas Commercial Transportation Research Company, LLC (ACT), 4400 Ray Boll B lvd., Columbus, IN 47203. Phone: 812-379-2085,
Fax: 812-378-5997, e-mail: [email protected] Copyright 2015 by ACT with all rights reserved. Reproduction, copying, or pub lication of this report in whole or part is not permit-
ted without prior approval. This document is for internal use only. Questions and subscription requests should be directed to K.W. Vieth, Publisher. www.actresearch.net
Diesel price drop continues in Q1’15
Fuel price spread narrows $1.50 to $0.71
NG payback length-ens from 3 to 7 years
NG Indicator Gauge Key
A neutral position on the indicator gauges above indicates that current conditions do not favor either option (diesel or natural gas, CNG or LNG). If the needle points to one side or the other, it should be interpreted as current market conditions support that side of the respective continuum rather than the other.
NOTE: Click on the respective gauge or key points above for detailed explanations supporting the position of each variable in the report. To return to the front cover, click on the footer of any page.
FUEL PRICE SPREAD NG EQUIPMENT
NG FUELING INFRASTRUCTURE NA Class 8 NG RS
NG equipment price premium
remains >$50K
Costs do not stop with truck purchase
Challenge: Tank life is longer than chassis life
Not all stations can accommodate HD vehicles
CNG outpacing LNG 8:1
New stations planned, but many in limbo
YTD March volume down
23% y/y
2014 sales slightly higher y/y
2015 Class 8 NG RS forecasts falling short of expectations
NG Truck Payback Index
28.8
(>10 years)
TABLE OF CONTENTS
Page Fuel Prices ........................................................................................................................ 1 Equipment Prices, Products & Technology Developments ......................................... 2 Fuel Infrastructure ........................................................................................................... 3 Sales Data ........................................................................................................................ 4 Adoption Forecasts ......................................................................................................... 5 Additional Considerations NG Economic Trends ............................................................................................ 6 NG in the News ...................................................................................................... 7 Commentary ....................................................................................................... 8-9 Natural Gas Insight ............................................................................................. 10 Order Form .......................................................................................................... 11 Other ACT Products & Services ........................................................................ 12 Glossary of Acronyms ........................................................................................ 13
Q1 2015 • Natural Gas Quarterly
FUEL PRICES
Q1 2015 • Natural Gas Quarterly • Page 1
DIESEL PRICE DROP CONTINUES IN Q1’15: The price of diesel fuel has
dropped dramatically the last two quarters. The latest U.S. Department of En-
ergy Alternative Fuels Data Center’s (AFDC) quarterly numbers (as of Janu-
ary 2015) show diesel at $3.00/gallon and DGE (Diesel Gallon Equivalent)
adjusted CNG at $2.38. A more current indicator would be independent fuel
pricing websites, yielding 3/31/15 prices of $2.82 for diesel and $2.11 for a
DGE of CNG. Diesel fuel prices will decline at a greater rate than NG because
the crude oil in a gallon of diesel is a much greater percentage of the total cost
of a gallon than the base cost of natural gas in a DGE of CNG/LNG. With the
current number of CNG/LNG heavy duty fueling stations, operators will not be
as inclined to drop NG prices on the basis of nearby competition, which is an-
other reason why ROI calculations are moving away from natural gas.
FUEL PRICE SPREAD NARROWS, $1.50 TO $0.71: At the end of 2012,
the differential in the price of diesel versus natural gas was around $1.50 per
gallon, compared to today’s 70-cent per gallon spread. The declining differen-
tial has a very negative impact on the payback timing for NG power.
NG PAYBACK LENGTHENS FROM 3 to 7 YEARS: Utilizing the assump-
tions made in the base 2012 ACT model and using $4.00 for diesel fuel and
$2.50 for natural gas (the $1.50 differential) and 7 MPG diesel compared with
5.95 MPG for natural gas (15% less than diesel), the payback time to convert
to NG fuel was 3.6 years/43 months. Using the same assumptions with $2.82
for diesel and $2.11 for a DGE of natural gas, the payback time has moved to
9.7 years/116 months. At this ROI, conversion to NG is not practical for the
vast majority of Class 8 buyers since it is beyond a normal trade cycle. Few
operators will consider natural gas fuel with the payback beyond three years.
Exceptions are those niches with longer trade cycles such as transit buses or
refuse haulers.
The graph below was designed to demonstrate the savings, or lack thereof,
between diesel and both CNG and LNG. Note that a tax disparity of $0.21 ex-
ists between CNG and LNG. LNG is taxed at the same rate as diesel, while
CNG is taxed on a GGE (Gasoline Gallon Equivalent) basis. Pending legisla-
tion is circulating in Congress that would correct this inequity. If/when this oc-
curs, ACT Research will adjust its models accordingly.
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
$5.00
2009 2010 2011 2012 2013 2014
U.S. Retail Fuel Prices per DGEJan '09 - Jan '15
CNG LNG Diesel
Source: Alternative Fuel Price Reports (AFDC, US DOE), EIA , ACT Research Co., LLC Copyright 2015
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
$5.00
2009 2010 2011 2012 2013 2014
U.S. Retail Fuel Prices per DGENG Adjusted Price for MPG Degradation
Jan '09 - Jan'15
CNG-MPG Adjusted LNG-MPG Adjusted Diesel
Source: Alternative Fuel Price Reports (AFDC, US DOE), EIA , ACT Research Co., LLC Copyright 2015
($1.00)
($0.75)
($0.50)
($0.25)
$0.00
$0.25
$0.50
$0.75
$1.00
$1.25
$1.50
2009 2010 2011 2012 2013 2014
U.S. Retail LNG & CNG Savings to DieselEnergy Price Equivalent (MPG Adjusted) Comparison
Prices per DGE - Jan '09 - Jan'15
CNG LNG
Source: Alternative Fuel Price Reports (AFDC, US DOE), EIA Real Prices Viewer, ACT Research Co., LLC Copyright 2015
NG EQUIPMENT PRICE PREMIUM REMAINS >$50K: NG truck prices aren’t
falling as fast as the industry had hoped. As the industry matures and with
some natural economies of scale, the price premium is expected to decline.
Since the extra cost of natural gas components are so significant today, it is
important to understand what constitutes the premium. Components include:
The engine as compared to a diesel of like spec
The fuel tanks, which vary widely based on the number of DGEs desired
Added dealer margin to cover costs of upfitting their shops
Non-value added costs, including transporting equipment from the assem-
bly line to a qualified upfitter.
Apart from those major components the rest of the truck is basically identical.
The following table is an estimated breakdown of the premium by component.
*Dealer Margin includes the capital cost recovery of upfitting their facilities to
service natural gas vehicles.
COSTS DO NOT STOP WITH TRUCK PURCHASE: There are several oth-
er operating factors that fleets must consider when evaluating the investment.
What costs, from initial purchase to maintenance to resale, will be incurred?
Can the truck be equipped with sufficient tanks to make routes without extra
stops for fuel, and is there access to fuel within designated routes? Is the fleet
truly weight sensitive and will the added weight of a NG tank be offset by the
removal of DPF and SCR systems in a spark-ignited NG engine? How does
downtime, driver/technician training, and refuel time factor into a fleet’s opera-
tion?
CHALLENGE: TANK LIFE LONGER THAN CHASSIS LIFE: CNG and LNG
tank manufacturers continue to innovate tank designs and fuel capacities.
Cenergy Solutions, for example, filed for a patent on a technology around
ANG (Adsorbed Natural Gas). This technology is still in its infancy. As more
trucks are ordered, the supply chain will become more efficient, lowering NG
component costs. With increased orders the truck OEMs are likely to explore
ways to retool their manufacturing lines to install NG tanks. A typical CNG
tank life is between 15 and 20 years. Separation of tanks from the trucks is
unlikely before the chassis is scrapped.
Q1 2015 • Natural Gas Quarterly • Page 2
EQUIPMENT PRICES, PRODUCTS & TECHNOLOGY DEVELOPMENTS
Component Added Cost to CNG Truck
Added Cost to LNG Truck
Engine (ISX12 G) $13,000 $13,000
Tanks (160 DGE) (includes supporting hardware)
$48,000
(assumes Type IV before installation)
$33,000
Installation, Transport, and Other
$ 4,000 $ 5,000
Dealer Margin* $ 5,000 $ 5,000
TOTAL Upcharge $70,000 $56,000
Simple Payback in YearsEquipment
Upcharge 20,000$ 30,000$ 40,000$ 50,000$ 60,000$ 70,000$
0.600 10.6 15.9 21.2 26.4 31.7 37.0
0.750 4.5 6.8 9.1 11.3 13.6 15.9
0.900 2.9 4.3 5.8 7.2 8.7 10.1
1.000 2.3 3.5 4.6 5.8 7.0 8.1
1.150 1.8 2.7 3.6 4.5 5.4 6.3
1.300 1.5 2.2 2.9 3.7 4.4 5.1
1.450 1.2 1.9 2.5 3.1 3.7 4.3
1.600 1.1 1.6 2.1 2.7 3.2 3.7
1.750 0.9 1.4 1.9 2.4 2.8 3.3
Fleet Assumptions:
100000 - 100,000 miles per year 0.15 - 15% mpg loss on NG trucks
7 - 7 mpg on diesel trucks - Fuel infrastructure available
3.25 - Diesel price $3.25/gal 3 - Desired payback <3 years
Fuel Spread
(DGE)
Fuel
Pri
ce S
pre
ad (
$)
Q1 2015 • Natural Gas Quarterly • Page 3
FUELING INFRASTRUCTURE
NOT ALL STATIONS CAN ACCOMMODATE HD VEHICLES: LNG stations
are new to the fuel supply landscape in the U.S.; therefore they all are being
designed to accommodate class 8 tractor trailer combinations. Similarly, the
new CNG stations or fueling islands at existing diesel stations being built are
designed to handle class 8 vehicles and provide diesel fueling expectations
(or faster). It should be noted, however, that not all CNG stations are class 8
friendly with many of the earlier and/or older stations more attuned to light ve-
hicles and cars. There are currently 570 CNG stations (70% of all CNG sta-
tions) that can handle class 8 vehicles. The LNG station count is 70.
CNG OUTPACING LNG 8:1: The ratio of existing public HD CNG to LNG
fueling stations was near 9:1 in January 2015, but dropped to 8:1 in March. In
Q1’15, six more HD LNG public stations became active, while only two HD
CNG public stations were added. Today there are no active HPDI NG engines
being produced that require LNG as a fuel. The new LNG stations are primari-
ly in the west to southwest supporting existing LNG truck populations as well
as servicing off-road applications and the oil patch. Spark-ignited (SI) natural
gas engines are the only new engines available. Although SI natural gas en-
gines can use a dedicated CNG or LNG fuel supply system, CNG is a lower
cost fuel. LNG requires the same base cost of the CNG plus the cost for lique-
faction and transportation. LNG is a purer form of methane (better engine per-
formance) and minimizes the risk of CNG contamination due to potential pro-
pane and water ingress, but it costs approximately $.50 more per gallon.
When conversion to natural gas fuel is considered, the added cost is a major
consideration over the life of the vehicle and ROI needs.
NEW STATIONS PLANNED, BUT MANY IN LIMBO: Although ACT has not
seen a fall in the number of planned new CNG stations since the first of the
year, there are about ten fewer LNG stations planned. Seen from a different
perspective, however, the analysis is more opaque. The same number of pub-
lic HD CNG stations are planned y/y, while 20 more public LNG stations are
on the planned list. Note that most of those plans were announced before die-
sel fuel prices plunged. It is not known if the pulled plans were put on hold for
a future date or scrapped altogether.
U.S. PUBLIC HD NG STATIONS BY REGION: March 2015
CNG Active = 47
CNG Planned = 20
LNG Active = 2
LNG Planned = 6
CNG Active = 61
CNG Planned = 17
LNG Active = 7
LNG Planned = 11
CNG Active = 197
CNG Planned = 25
LNG Active = 11
LNG Planned = 21
CNG Active = 81
CNG Planned = 23
LNG Active = 14
LNG Planned = 13
CNG Active = 61
CNG Planned = 4
LNG Active = 14
LNG Planned = 6
CNG Active = 123
CNG Planned = 9
LNG Active = 22
LNG Planned = 9
GRAND TOTALS
CNG Active = 570 LNG Active = 70
CNG Planned = 98 LNG Planned = 66
Source: US DOE Alternative Fuels Data Center, geology.com, ACT Research Co., LLC Copyright 2015
0
100
200
300
400
500
600
Jan Feb Mar
Q1'15 U.S. Public HD NG Stations
Active LNG Planned LNG Active CNG Planned CNG
Source: US DOE Alternative Fuels Data Center, ACT Research Co., LLC Copyright 2015
SALES DATA
YTD MARCH VOLUME DOWN 23% Y/Y:
U.S. and Canadian natural gas Class 8 truck
retail sales for these select OEMs started the
year a little slower, but showed sequential
gains in February and March. Despite the
improvement, year-to-date volume is 23%
below 2014’s level.
2014 SALES SLIGHTLY HIGHER Y/Y: Be-
cause there are additional units not record-
ed, as some lower volume OEMs do not re-
port sales, this number falls short of the total
number of Cummins Westport (CWI) natural
gas engine shipments (including the 320
horsepower ISL G, which is not a true Class
8 line haul engine). CWI shipments totaled
just over 10,500 units in 2014, up 200 units
from 2013. Note: There is a time lag between
the shipment of the natural gas engines and
the retail sale of the trucks they are being
placed into. In addition, a portion of natural
gas engines are destined for export markets.
2015 CLASS 8 NG RS FORECASTS FALL-
ING SHORT OF EXPECTATIONS: Original
ACT projections were that 2015 would see a
5% penetration of natural gas heavy duty
trucks. Based upon the actual results from
2014 and the sharp drop in oil prices at the
end of last year, that projection seems opti-
mistic.
Q1 2015 • Natural Gas Quarterly • Page 4
-
100
200
300
400
500
600
700
800
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Un
its
U.S. & Canada Natural Gas On-Highway Class 8 Truck Retail Sales
2013 2014 2015
Includes all US and Canada Class 8 units for Freightliner, International, Kenworth, Mack, Peterbilt, and Volvo.
Excludes transit bus and refuse units not manufactured by OEMs above.
12 liter introduced in August 2013.
ADOPTION FORECASTS
CURRENT HD NG FUELED TRUCK MARKET IN NEUTRAL: NG powered Class 8 truck and bus sales have slowed when calculated as a percentage of the total market. Looking at 2014, their share of the total market was 4%, while in 2015 expectations are for lower penetration. The total U.S. Class 8 market (including NG buses) is forecast at 268,000 units in 2015, or almost 19% higher than 2014. With the significant decline in diesel fuel prices to under $3.00 per gallon and the subsequent narrowing of price spread between CNG and diesel, as well as the high NG vehicle price premium, payback times have lengthened significantly. These facts along with diesel truck operators’ uncertainty about NG vehicles has slowed the conversion to NG. Annualized Q1’15 NG Class 8 sales total about 4,200 units. Assuming recent high profile class 8 NG truck orders encourage others, a duplication of 2014 sales is a reasonable assumption for 2015 at this point. Adding these units to bus and vocational sales suggests a volume of 9,000 to 10,000 units resulting in an NG penetration of 3.3% to 3.7%. Note: The adoption forecasts presented in the table above were all prepared before the decline in diesel fuel prices started in the Q4’14. These formal forecasts will be revisited and adjusted appropriately when the direction of diesel fuel prices and the evolving relationship between oil and natural gas are more clear.
Q1 2015 • Natural Gas Quarterly • Page 5
Additional forecasts and NG transportation fuel details can be found in other ACT publications. For details: http://www.actresearch.net/products-for-natural-gas/
2013e 2014e 2015 F 2016 F 2017 FFOR HIRE:
TL 1% 2% 3% 4% 5%
LTL 0% 4% 2% 2% 3%
Expedited 1% 4% 6% 9% 11%
Owner Operator 0% 0% 0% 1% 1%
PRIVATE 1% 2% 4% 5% 6%
VOCATIONAL:
Refuse 40% 43% 46% 51% 53%
Municipial 1% 2% 5% 6% 10%
Construction 1% 1% 1% 2% 3%
Other 0% 0% 0% 0% 0%
TRANSIT BUS 30% 30% 33% 35% 35%
NG SHARE OF CLASS 8
TRUCK AND BUS SALES 3% 4% 5% 6% 7%
SALES OF NG TRUCKS
AND BUSES (000) 6 9 13 15 16
Memo: 2009e 2010e 2011e 2012e
Total NG Vehicles 2009-12 (000) 3 4 5 6
U.S. Class 8 Natural Gas Adoption Rates--Most Likely/Base Case Scenario
2013e 2014e2015 F 2016 F 2017 F
TOTAL SALES 187,610 224,030 267,000 246,000 212,000 FOR HIRE
TL 324 774 1,442 1,860 2,290 LTL 36 581 346 319 412
Expedited 41 387 692 956 1,007 Owner Operator - - - 89 76
TOTAL FOR HIRE 401 1,742 2,480 3,224 3,785
PRIVATE 675 1,774 3,653 3,985 4,579
VOCATIONAL
Refuse 2,732 3,507 4,471 4,567 4,090 Municipial 53 125 374 431 594
Construction 184 220 523 723 1,039
Other - - 13 12 12
TOTAL VOCATIONAL 2,968 3,852 5,381 5,733 5,735
TOTAL TRUCK 4,045 7,368 11,513 12,941 14,099
Transit Bus 1,500 1,500 1,625 1,750 1,750
TOTAL CLASS 8 NG
TRUCK AND BUS SALES 5,545 8,868 13,138 14,691 15,849
U.S. Class 8 Natural Gas Vehicles - Most Likely/Base Case Scenario (Units)
NG ECONOMIC TRENDS
COMMODITY COST SPREAD: As of March 16, 2015, one million BTUs of
natural gas costs $2.80, while oil is selling for $44.39 (WTI) a barrel. The im-
plication is that the raw material cost in a DGE of CNG and LNG is approxi-
mately $.39 a gallon ($2.80/7.2 as there are 7.2 DGEs in one million BTUs of
natural gas). The difference between the raw material cost and the retail price
of natural gas at the pump consists of the refining costs, compression costs,
distribution and marketing costs, liquefaction (LNG), and taxes.
From a barrel of crude oil (42 gallons), approximately 10 gallons of diesel fuel
can be refined. You can’t convert all 42 gallons of crude oil to 42 gallons of
diesel or gasoline. A certain number of oil-based products are generated from
a barrel of crude, and the ratio of one product to another is relatively constant.
On the right, the chart “Correlation to Commodity – a Breakdown,” (the latest
information available as of January 2015, which lags behind the above costs)
outlines the cost breakdown of a gallon of diesel or a DGE of CNG or LNG.
Although the actual numbers will vary (we know that a gallon of diesel current-
ly sells for less than $3.00), the percentage approximations are in the right
order. From the Correlation to Commodity chart, the cost of crude oil to make
one gallon of diesel is $1.20. Similarly, the raw material cost to make one
DGE of natural gas is approximately $0.64 for CNG or $0.59 for LNG as indi-
cated in the chart.
HOW COMMODITY PRICE TRANSLATES TO RETAIL PRICE: Although
the retail price is what consumers see at the pump, the ratio of raw material
cost of a gallon of diesel fuel to the raw material cost of a DGE of natural gas
sets the stage for how much the price of a DGE of natural gas can change in
relation to a gallon of diesel. This explains how diesel prices can fall faster
than natural gas as the price of crude declines and why the price of diesel es-
calates faster than natural gas when the price of crude increases.
The leveraging down of diesel fuel prices has a detrimental impact on the ROI
calculations at today’s energy prices. When the multiplier is low, there is less
enthusiasm for adopting natural gas as a transportation fuel. When the multi-
plier is higher, the ROI to convert to natural gas is covered in much less time.
Q1 2015 • Natural Gas Quarterly • Page 6
Taxes –18%
Distribution & Marketing –
18%
Refining –24%
Crude Oil –40%
Natural Gas Cost – 27%
Compression/Drying – 20%
Liquefaction –23%
Taxes – 15% Taxes – 22%
Capital Recovery, Margin &
Balance – 38%
Distribution & Marketing – 33%
Natural Gas Cost – 22%
DIESEL$3.00/gallon
LNG$2.66/DGE
CNG$2.38/DGE
Source: EIA, Clean Cities Alternative Fuel Price Report January 2015 (AFDC, US DOE), Blu LNG, ACT Research Co., LLC Copyright 2015
Correlation to Commodity – a Breakdown
$0.54
$0.54
$0.72
$1.20
$0.36
$0.90
$0.48
$0.64
$0.59
$0.88
$0.61
$0.59
Petroleum/NG Energy Content/PriceRatio
MPG Adjusted
2009-2015 (Week 15)
Source: EIA, ACT Res earch Co., LLC: Copy right 2015
2009 2010 2011 2012 2013 2014 2015
0
1
2
3
4
5
6
7
8
9
10Energy Content Ratio
Petroleum/NG Energy Content Ratio
NG IN THE NEWS
Q1 2015 • Natural Gas Quarterly • Page 7
While the casual observer may have concluded that the recent plummet of
diesel prices has obliterated the adoption of natural gas as a commercial
transportation fuel at least in the short-term, a quick internet search reveals
that natural gas still remains in the news. Some of recent stories include:
FLEETS ADDING CNG AND LNG:
1) Canadian truckload carrier C.A.T. Inc. plans to lease 100 CNG sleeper
tractors from Ryder System. Ryder's trucks will replace nearly one-third of
the C.A.T. (formerly Canadian American Transportation) fleet of 325 vehi-
cles. As part of the agreement, Ryder will also service the CNG vehicles
at its Montreal facility that's now being upgraded to comply with natural
gas standards. C.A.T. will use the dedicated-route CNG trucks in its deliv-
ery fleet that travels from Montreal to Laredo, Texas. (October 2014)
2) Using funds provided from the Texas Natural Gas Vehicle Grant Pro-
gram, Dean Foods is adding 57 MD trucks and 7 HD tractors powered by
CNG to its fleet. Additionally, the food and beverage company will have a
fueling station at its Houston facility. (March 2015)
3) Raven Transport plans to add 115 HD LNG trucks to its Southeastern
fleet running irregular routes. (April 2015)
4) UPS has announced plans to add 1,400 CNG units to its fleet, including
800 tractors and 600 delivery trucks. Additionally, UPS will add 15 fueling
stations for the growing alternative-fuel fleet. (April 2015)
OTHER FLEET TYPES ALSO ADOPTING NG: Besides trucking fleets,
there doesn’t seem to be a shortage of articles demonstrating that natural gas
is still being adopted for use in refuse hauling and transit buses. For example,
the Regional Transportation Commission of Southern Nevada recently an-
nounced plans to add 55 CNG buses to its fleet, with an option for 250 more.
(March 2015)
EUROPEAN CNG PACKAGER EYES NORTH AMERICA: Safe SpA, an
Italy-based subsidiary of Landi Renzo SpA that has focused on providing
CNG compression packages and related equipment for 40 years, has made
inroads into the North American market by appointing Broadwind Energy as
Safe's exclusive equipment packager and master distributor. Illinois-based
Broadwind has specialized in providing gears and gearing systems to the en-
ergy and infrastructure markets. Now, Broadwind will package and distribute
Safe's CNG equipment in the U.S., Canada and Mexico, as well as provide
service and technical support in these regions. (October 2014)
RENEWABLE NATURAL GAS (RNG): When biomass decomposes, it re-
leases methane gas or natural gas. The process is well understood as to how
to take this raw methane, clean it, and inject it into a natural gas pipeline and
blend it with the natural gas already in the pipeline. In this way, natural gas is
transported from where it originates via pipeline to where it will be utilized ei-
ther in the form of CNG or, with liquefaction, LNG. The basic biomass comes
from landfills, municipal sewage, animal waste, scrap food, and other sources.
The question becomes what part of today’s natural gas demand could be sup-
plied from RNG?
The answer depends upon how efficient recovery systems are projected to be
and what is included as biomass. As a broad answer, some would project that
RNG could replace about 5% of natural gas consumption currently used for
electric power generation and approximately 50% of natural gas used in the
transportation sector.
HOW SAFE IS THE SHIPMENT OF LNG?: In any discussion about adopt-
ing natural gas for transportation, the question of safety arises. A number of
opinions are generally presented but few facts. Here are some facts to ponder
via a late December 2014 release by Edward Dodge, a technology writer,
which can be found in its entirety at http://theenergycollective.com/ed-
dodge/2175891/how-dangerous-lng. “The LNG industry has been shipping
bulk quantities by container ship since the 1960’s...the industry has conducted
over 33,000 voyages since 1964 covering more than 60 million miles without
there ever being a significant spill, loss of cargo, or environmental inci-
dent...P&L insurance rates are 25% less for LNG container shipping than for
crude oil shipping.” (December 2014)
INFRASTRUCTURE IN THE NEWS: While the level of fleet adoption news
is waning, the level of articles announcing new and/or expanding NG fueling
sites continue to occur with regularity.
COMMENTARY
NG TRUCK INDEX FAVORS DIESEL: By entering all the industry chang-
es into our online calculator, the Natural Gas Truck Index is down to 28.8. In
other words, the net of all the industry changes resulted in a reduced incentive
for our hypothetical fleet to invest in natural gas. Of course, with some factors
not considered in our model including subsidies, grants, and shipper incen-
tives, the return on investment decision could be different from our example.
As with any new technology, you can expect the dynamics of the industry to
continue to change.
OIL PRICE DECLINE CHALLENGES NG EQUIPMENT PAYBACK: The pre-
cipitous drop in oil prices has severely challenged the payback on a natural
gas tractor. One of the unknowns is where oil and diesel prices will be over
the next couple years. If prices remain relatively low while the cost of an NG
truck remains relatively high, the value proposition of switching to natural gas
will remain challenged. We have created an “Index” which takes your fleet’s
profile and the current market conditions and provides an index as a quick
reference tool. If the index results in a figure greater than 100 it signifies that
your targeted payback can be reached. Conversely if the index results in a
figure lower than 100 it means the time might not be right based on the eco-
nomics alone.
CALCULATOR HELPS FLEETS DETERMINE PAYBACK: Subscribe now
and put our research to work for you. We’ll watch all the variables and keep
them up-to-date so you’ll know when to strike on an opportunity. To see your
fleet’s NG payback visit our website: http://calc.actresearch.net.
Q1 2015 • Natural Gas Quarterly • Page 8
114.8
88.2
108.7
74.7
28.8
-
20
40
60
80
100
120
140
2012 2013 2014 2015
Natural Gas Truck Index 3 Yr Payback = 100Index
COMMENTARY
Q1 2015 • Natural Gas Quarterly • Page 9
28.8Payback = 10.4 yrs
NG Truck Payback Index
NATURAL GAS INSIGHT: WHAT’S NEXT FOR NG ENGINES?
DIESEL ENGINE EVOLUTION: Why is it that all of today’s diesel engines
for heavy duty trucks are pretty much the same whether they are manufac-
tured by Volvo, Mack, Detroit Diesel, PACCAR, Navistar or Cummins? They
are all six cylinder in-line configurations with turbo-charging and after-cooling,
use diesel particulate filters (DPF) and selective catalyst reduction (SCR) sys-
tems with diesel exhaust fluid (DEF) for aftertreatment and are electronically
controlled. There are minor variations of displacement and hardware mount-
ing but, over time, the diesel engines have evolved to look much the same.
Gone are the V6, V8 and V12 cylinder configurations, superchargers, air
cooled, two stroke cycle and other variations. Because trucking is a “lowest
total cost wins” business, engines have evolved to be built, maintained, and
overhauled in a configuration that will deliver that lowest total cost.
NG ENGINES HAVE ROOM TO IMPROVE: What about natural gas en-
gines for heavy duty trucks? Are they at the end of their development? Cur-
rently available natural gas engines for heavy duty trucks and their predeces-
sors are/were all of the six cylinder in-line configuration. Today’s Cummins
Westport designs are very similar to John Deere and Detroit Diesel natural
gas engines that are no longer produced. Does this mean that natural gas
engines are nearing the end of their development and they will always be at a
disadvantage on fuel economy, or is there room for improvement? Fortunate-
ly, there is room for improvement; although they will probably remain as six
cylinder in-line configurations. The fact that 80% of the natural gas engine is
based upon the diesel engine design will probably not change, but the fuel
delivery system will change, making the natural gas engine for heavy duty
trucks more fuel efficient.
A spark-ignited natural gas engine uses a modern spark plug ignition system
adapted from today’s efficient gasoline passenger cars. The fuel delivery sys-
tems on today’s natural gas engines for heavy duty trucks have a number of
successive changes that can increase efficiency. The path of changes has
already been adopted on passenger car gasoline engines. Passenger car en-
gines have evolved from carbureted engines to throttle body fuel injection sys-
tems. Next, individual injectors in the intake manifold for each cylinder were
adopted. Today’s most modern design is GDI, Gas (meaning gasoline) Direct
Injection. As emissions became a central focus for passenger cars, more effi-
cient systems were required. The technology moved away from increasingly
complex two barrel and four barrel carburetors to throttle body fuel injection,
keeping the best parts of the carburetor and adding a fuel injection nozzle.
From throttle body, engineers moved to individual injectors mounted in the
intake manifold for each cylinder. The traditional throttle plate was used to
control the amount of air entering the engine. The fuel injectors and “brain
box” on the engine (the ECM or electronic control module) controlled the fuel
mixture. The next step was to keep all of the electronics and inject the fuel
directly into the combustion chamber, a difficult task given the higher pres-
sures encountered directly in the combustion chamber compared with the
vacuum of the intake manifold.
LEARNING FROM THE PASS CAR MARKET: Today’s heavy duty natural
gas truck engines use a system that is old compared with today’s passenger
cars. Compressed air, EGR (Exhaust Gas Recirculation) and natural gas are
all being mixed behind the throttle plate. As the throttle plate is opened (the
operator pushes on the pedal), the mixture moves to the combustion chamber
where the spark plug ignites it. A more efficient way would be to inject the fuel
and/or EGR after the throttle plate, closer to the combustion chamber. Similar-
ly, if the natural gas could be injected directly into the combustion chamber
and ignited with a spark plug, the engine would be that much more efficient
while at the same time reducing emissions. This is an oversimplification, and
there is still engineering work to be done, but as the demand for natural gas
engines increases and more are built, there are more sales to underwrite the
engineering costs involved. The point is that there is a clear path already es-
tablished with the progression of the spark-ignited gasoline engine.
THE NEXT STEP, NEW FUEL SYSTEM TECHNOLOGY: The natural gas
engine will continue to mirror the basic configuration of the diesel engine, and
there are some clearly defined next steps in the development of the natural
gas fuel system. With increased demand and expanded volumes, new fuel
system technology will be adopted. The race for comparative fuel economy
advantage will continue between the diesel and natural gas engine, but the
differential will begin to narrow with the introduction of the next advancements
on natural gas engines. As technology changes the differential between diesel
and natural gas fuel costs, the ACT Fuel Payback Calculator can be used to
measure the impact on the return on investment.
Q1 2015 • Natural Gas Quarterly • Page 10
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Q1 2015 • Natural Gas Quarterly • Page 11
OTHER ACT PRODUCTS & SERVICES
FULL RANGE OF REPORTS ANALYZING & FORECASTING THE NORTH AMERICAN COMMERCIAL VEHICLE INDUSTRY
OTHER SERVICES INCLUDE: SPECIAL CV WHITE PAPERS REPORTS ON NG AS A CV FUEL CONSULTING SPEAKERS BUREAU REPORTS ON CHINA’S CV MARKET, AND FREE NATURAL GAS PAYBACK CALCULATOR
Contact us at [email protected] for more information on any of these services
Q1 2015 • Natural Gas Quarterly • Page 12
Seminars
#53 - September 28-30, 2015
#54—March 28-30, 2016
GLOSSARY OF ACRONYMS
Q1 2015 • Natural Gas Quarterly • Page 13
A
AFDC Alternative Fuels Data Center
(U.S. Dept. of Energy)
B
BTU British Thermal Unit
C
CNG Compressed natural gas
COE Cab over engine
CWI Cummins-Westport Innovations
D
DEF Diesel exhaust fluid
DGE Diesel gallon equivalent
DING Direct injection natural gas
DME Dimethyl Ether
DPF Diesel particulate filter
E
ECM Electronic control module
EGR Exhaust gas recirculation
EIA Energy Information Administration
G
GGE Gasoline gallon equivalent
GHG Greenhouse gases
H
HD Heavy duty
HOV lanes High occupancy vehicle lanes
HPDI High pressure direct injection
L
LNG Liquified natural gas
LTL Less than truckload carrier
M
MMBtu Millions BTUs
Mcf 1,000 cubic feet
O
OEM Original equipment manufacturer
P
PING Pilot injection natural gas
PPM Parts per million
R
RNG Renewable natural gas
ROI Return on investment
RS Retail sales
S
SCR Selective catalyst reduction
SING Spark-ignited natural gas
T
TL Truckload carrier
TRR Technically recoverable shale gas
reserves
U
UOM Unit of measure
W
WTI West Texas Intermediate
Y
YTD Year-to-date
NATURAL GAS QUARTERLY
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