Natural Gas Vehicles – Next Step in Supply Chain Sustainability?

With the price of a gallon of diesel fuel seemingly stuck above $4, it is not surprising talk is growing about options for fleet owners and managers to look beyond traditional fuel engines. Most recent, the Conference Board of Canada released a report in late April supporting the use of liquefied natural gas-(LNG) fueled trucks into that nation’s fleet.

As reported in Truck News, The Conference Board report suggests, despite the high upfront costs, trucks fueled by natural gas could generate savings of up to $150,000 per truck over a ten-year period. “Our models indicate while the capital costs are high, the savings from lower fuel costs make natural gas an economically viable fuel for the trucking sector,” said Vigay Gill, co-author of the report, entitled “Cheap Enough? Making the Switch from Diesel Fuel to Natural Gas.”

As the report notes, “nearly half of these savings are in the form of fuel tax savings, as natural gas is currently exempt from the equivalent of road diesel excise tax.” This advantage, could be wiped out should legislators decide to raise taxes on natural gas.

What is the current status of LNR powered trucks, and how prevalent are they on North American highways?

According to Bloomberg News, about 22,000 natural gas-powered heavy-duty trucks were on U.S. highways during 2010, out of an overall fleet of 700,000. Although the concept is still in its infancy, new developments and incentives are raising expectations that natural gas-powered trucks will be seen as a viable alternative to diesel. “We’re at the cusp of something growing exponentially in the industry,” Glen Kedzie, energy and environment counsel for the American Trucking Association said. “Based upon everything we’ve been witnessing not only on the infrastructure front but also on the vehicle front, these gains are increasing very rapidly.”

What are the biggest obstacles to a wider embrace of natural gas technology?

  • Cost. The cost of a LNG-powered truck is approximately $40,000 more than the $110,000 cost for a comparable diesel-powered truck.
  • Lack of Fueling Stations. The lack of natural gas filling stations along the nation’s highways is a detriment to the wide scale integration of these trucks into the nation’s fleet. According to Bloomberg, the U.S. currently has 18 stations that dispense liquefied natural gas, 14 of which are in California. However, the Department of Energy projects that an additional 70 stations will be up and running by the end of 2012.

Along with those downsides, come strong upsides:

  • Tax Credits. President Obama has been a strong supporter of natural gas technology, and has asked lawmakers to support a tax credit for as much as 80 percent of a vehicle’s cost. Although, Congress has yet to enact those tax breaks into law.
  • Fuel Savings. Liquefied natural gas averages $1.50 for an amount of LNG equivalent to a gallon of diesel, which currently sells for roughly $4.10.
  • Environmental Impact. Although LNG is still a fossil fuel, gas emissions would be reduced by as much as 50 tons per year per truck.

Several leading carriers have announced purchases of LNR-powered vehicles. The concept is catching on, and as technology improves and initial capital outlays decline, we can expect to seen even more natural gas powered trucks on the road.