Cheap Natural Gas Sells Cleaner Trucks, but Not the Big Rigs Yet
A sharp $2 per gallon price advantage over diesel is finally doing what years of hard-core advocacy from financier T. Boone Pickens and the natural gas lobby couldn't -- put thousands of clean-burning trucks and buses on the road. Even in the absence of industry-friendly legislation that would provide tax credits worth as much as $64,000 per truck, cheaper fuel costs can justify the purchase price premium in just a couple of years.
With little fanfare, natural gas has captured 20 percent of the new bus and garbage truck markets. There's a good reason for that: a gallon equivalent of compressed natural gas (CNG) is approximately $1.30, and liquefied natural gas (LNG) something like $1.90.
A regional solution
Because of the low prices, buses and regional trucks are converting to clean-burning natural gas at record rates, but that's an incomplete solution. The big hurdle and the biggest impact on the environment would be converting fuel-hogging long-distance big rigs, and there the picture remains clouded by the need for a national network of natural gas fueling stations. The current ratio of gasoline to natural gas stations is 180 to one.
According to Pickens, fueling 6.5 million heavy trucks with natural gas would cut imports by 2.5 million barrels a day. But that's always been true, and patriotism alone was never going to convert the heavy haulers from diesel when natural gas was expensive.
Companies like Westport Innovations, the country's largest converter to diesel engines to natural gas, are doing suddenly great business. Westport supplies technology to five of the six large truck makers, and the 25 completed orders it had last year has turned into a 500-order backlog today.
Natural gas capability adds $50,000 to the cost of a big rig, but if a truck is on the road 90,000 miles or more a year (which is typical), then the savings can add up to $20,000 a year.
Conversion costs coming down
Economies of scale with larger volumes has lowered the conversion costs -- just $10,000 for a garbage truck over the $200,000 purchase price. But the long-haul 18-wheelers haven't yet racked up big numbers -- only about 1,000 of them are on the road now. Garbage trucks and buses return to a centralized garage so they can easily add natural gas refueling.
Bill Graves, president of the American Trucking Association, says that natural gas big rigs are "going to be pretty slow in coming." But companies like Peterbilt and Kenilworth are now offering large natural gas trucks as a dealer option. Westport has a joint venture called Cummins-Westport that recently sold 48 long-distance rigs to UPS. Another customer is Ryder, which is putting 200 Freightliner and Peterbilt tractor-trailers into service in California.
David Demers, Westport's CEO, disagrees with Graves. He thinks natural gas for big trucks has reached a tipping point:
Companies are kicking the tires and putting in orders. T. Boone Pickens succeeded in getting a lot of people in the industry looking at the numbers.The big green advantage
The environmental case is clear. Natural gas is a fossil fuel, of course, but it burns 30 percent cleaner in terms of local smog and greenhouse emissions. A battery truck might be "zero emissions," but forget about it because the pack that could move ultra-heavy loads long distances just doesn't exist.
Long-distance operators are going to wait and see what happens. A natural gas bill beloved of Pickens has 180 co-sponsors and President Obama's endorsement. It contains great subsidies for building stations, and if it passes expect to see a lot of big rigs converting to natural gas. Especially if the per-gallon price stays as low as it is now.
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