A Shift Toward Natural Gas Vehicles

Natural gas vehicles, or NGVs, hold tremendous promise for both the U.S. and the world's future. Not only is natural gas significantly cheaper than oil on an energy-equivalent basis right now, vehicles running on liquefied natural gas (LNG) or compressed natural gas (CNG) release about 25% less carbon dioxide on average than their gasoline and diesel-powered counterparts.

While the nation as a whole seems energetic about the concept of using alternative fuels to power their vehicles, one state is expected to be a clear standout in facilitating the shift toward NGVs over the next year and a half – Texas.

Texas to lead the way in NGV fueling stations
According to Lynn Lyons, a spokeswoman for the Texas Clean Transportation project, the Lone Star State leads the way in the number of proposed fueling stations for natural gas vehicles. Over the next six to 18 months, the number of refueling stations in Texas supplying LNG, CNG, or both is projected to double, from a little over 60 currently to more than 120.  

Of the planned new stations, 23 will supply LNG, while the remaining 39 will be equipped to meet the refueling needs of CNG-powered vehicles. According to Lyons, Texas is poised to lead the way due to a combination of factors, including strong support from the state government and enthusiasm among transportation fleet owners.

However, while Texas plans on adding more stations than any other state over the next year and a half, its current refueling infrastructure pales in comparison to California, which boasts the most refueling stations of any state by far. Of the approximately 70 LNG fueling facilities currently dotting the country, nearly two-thirds are located in the Golden State, as are more than a fifth of the nation's roughly 1200 CNG stations.  

According to data from the Alternative Fuels & Advanced Vehicles Data Center, a U.S. Department of Energy program initiative, California had 257 CNG stations and 42 LNG stations as of April 25, whereas Texas had 57 CNG stations and nine LNG stations. In fact, Texas currently lags even New York, Oklahoma, and Utah in terms of the number of CNG stations.

Growth in natural gas as transport fuel
The enthusiasm about NGVs stems from the nation's massive supply of natural gas, made possible by radical advances in drilling technologies that have helped unlock a previously inaccessible bounty of shale gas. According to a recent study by PIRA Consulting, U.S. vehicles could use as much as 5 trillion cubic feet of the cleaner-burning fuel by the year 2030.

Another study, by the National Petroleum Council, determined that natural gas vehicles could capture half of the light- and heavy-duty truck market and 35% of the medium-duty market by the year 2050. Already, there has been significant progress in this market, with several companies having invested aggressively in nat-gas-powered trucks.

Natural gas making inroads in trucking
For instance, UPS (NYSE: UPS  ) recently announced that it will buy about 700 natural gas vehicles by the end of 2014, adding to its current fleet of 112 18-wheelers than run on LNG. The package delivery company said its trucks will use engines manufactured by Cummins (NYSE: CMI  ) , under a joint venture with another engine manufacturer, Westport Innovations (NASDAQ: WPRT  ) .  

Another major freight services company, FedEx (NYSE: FDX  ) , is also investigating the benefits of natural gas. The company is currently running tests – using two LNG-powered and two CNG-powered trucks – to determine whether or not to convert more of its 90,000 motorized vehicles to run on the cleaner-burning fuel. The company's chairman and CEO, Frederick W. Smith, said he expects 5%-30% of long-distance trucks to run on CNG or LNG over the next decade, as costs fall and the number of fueling stations rises.  

One stock to play the shift to NGVs
One company investing heavily in natural gas fueling stations in Texas, as well as across the country, is Clean Energy Fuels (NASDAQ: CLNE  ) . The California-based company is the largest provider of natural gas fuel for transportation in North America and already fuels tens of thousands of vehicles every day at various locations across the United States and Canada.

"We're building out a national network of LNG stations that will allow truckers to travel pretty much from coast to coast and border to border. And we're filling in some of the other major routes, such as the Texas Triangle," said Gary Foster, a spokesman for the company. Clean Energy boasts both LNG and CNG fueling stations, many of which are located strategically at truck stops across the country, including a handful in Houston and the Dallas-Forth Worth area, and one or two in Austin.

As Clean Energy Fuels and others continue to make rapid progress, the transition toward natural gas vehicles may come sooner than we might think. As a pioneer in the space, Clean Energy Fuels stands out as one of the biggest and potentially most lucrative opportunities. It's a first mover that's poised to make a big impact on an essential industry. Read all about Clean Energy Fuels in our brand-new report. Just click here to get started.


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  • Report this Comment On May 15, 2013, at 9:42 AM, KimFeil wrote:

    Businessweek reported in May 2 2013 thaT LNG- trucks can’t hold the fuel for long periods at needed cold temperatures. As LNG thaws/warms, it reverts to a gaseous state that must be burned by the engine as energy or wasted (to our ever warming atmospehere?). 18-wheelers, are constantly on the move and can keep tanks cool with a running engine (idle land USA)....well-to-wheel studies, sponsored by the U.S. Department of Energy show that emissions from natural gas vehicles are O N L Y 6 -11% lower gasoline powered engines.

    Clean Energy Technologies had a quick rally the other day, but it turned to losses once folks figured out why-which was market driven that they can’t seem to be profitable.

    Here’s another O U C H ..In 2008, FT Worth rec’d 50 million in revenues from 44 shale gas wells. Four yrs later, they only rec’d 23 million from 397 wells.

  • Report this Comment On May 15, 2013, at 10:05 AM, KimFeil wrote:

    To make a correction to earlier post... Make that Clean Energy Fuels Corp (not Clean Energy Technologies). Ref Seeking Alpha article of “Clean Energy Turns Profits Into Stock Losses?"

  • Report this Comment On May 15, 2013, at 11:07 AM, TMFMarlowe wrote:

    I can tell you that CNG is going absolutely nowhere in the automotive mass market, at least in the near term. Most of the big automakers have some back-burner research going just in case things should shift, but it's not looking likely to gain traction over the rising green technology of the moment -- plug-in gasoline-powered hybrids.

    John Rosevear

  • Report this Comment On May 15, 2013, at 11:50 AM, TMFArcher wrote:

    Thanks for commenting, John. I tend to agree with you. What's your take on hydrogen fuel cell vehicles?

  • Report this Comment On May 15, 2013, at 1:19 PM, TMFMarlowe wrote:

    Same deal, though it may be somewhat more promising in the longer term. Honda occasionally shows off fuel cell test vehicles as I'm sure you know, and I know there's *some* work being done at TM and GM (and probably at most of the rest of the big names), but again it's largely about keeping options open and having some institutional expertise with the technology if the winds should happen to shift that way.

    John

  • Report this Comment On May 16, 2013, at 10:39 AM, stevedc2013 wrote:

    Okay, now here's what the international and U.S. energy and transportation officials have to say:

    - ExxonMobil: diesel will surpass gasoline as the number one global transportation fuel by 2020. Natural gas will remain only a small share of the global transportation fuel mix, at 4% by 2040, up from today’s 1%.

    - The World Energy Outlook says diesel fuel will remain the “dominant” growth fuel between now and 2035, according to the International Energy Agency. Globally, the report suggests the possibility of only a two percent share of natural gas in the heavy duty transport market by 2035.

    - The National Petroleum Council in its 2012 report “Advancing Technology for America’s Transportation Future” for the U.S. Department of Energy stated: “Diesel engines will remain the powertrain of choice for HD (heavy duty) vehicles for decades to come because of their power and efficiency."

  • Report this Comment On May 22, 2013, at 12:31 PM, mp1026 wrote:

    I have to totally disagree about CNG not becoming a significant part of the US automotive fuel solution. In Oklahoma we can fill up on CNG from $0.90 to $1.30. That’s $2.49 per gallon savings! Yes I agree that until large factory’s start kicking out CNG cars/trucks that we actually want to drive, it will be slow growth. But is just too good of a deal to pass up.

    One problem I have found it fuel tank sizes. It is almost impossible to put a cng tank in a car trunk. Yes it can be done, but you give up 100% of your trunk space.

    For a truck, you can get a 21 gallon tank in the bed, but you do sacrifice about 25% of your bed for it. For some not a big deal, for others, a deal breaker. But here in Oklahoma, trucks are prob more common than cars.

    For large SUV's, they are removing the spare tire underneath and installing a 9.2 gallon tank. You do have to fill up more, about twice a week, but a crazy savings.

    The conversion cost is still the biggest problem. Even with the 50% state tax credit (the conversion companies are charging about double what it should actually cost), it is still about $6k for the conversion. The ROI is about 32k miles at current prices.

    For me it was just a financial decision. It worked for me so I did it. It works great and am happy I did it.

    For the mass public, it may take a while. Conversion cost will come down, b/c it just doesn’t cost that much to buy the equipment and install it. The gov tax credit could be corrected from a tax credit to an on the spot rebate, so people would only have to write a $6k check instead of a $12k check and then wait till next tax time, or 2, to get the rebate back.

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