3 Factors That Will Drive Natural Gas Vehicle Adoption in the U.S.

The new 2015 bi-fuel Chevy Impala. Source: General Motors.

Americans have lived in a world dominated by gasoline-powered vehicles for nearly 100 years. There are robust biofuels programs in place that attempt to lower gasoline consumption, but the nation's overwhelming dependency on gasoline fuel creates some scary risks, some of which showed their ugly heads in the summer of 2008. Luckily, there is increased investment and attention being paid to the development of alternative vehicles that run on electricity or natural gas fuels. They may sit at a distinct disadvantage when it comes to infrastructure today -- gasoline had a multi-generational head start -- but several companies are breaking down walls to lower costs and increase availability. That's especially true for natural gas vehicles, or NGVs.

For instance, natural gas driller EQT Corporation (NYSE: EQT  ) is shuttling natural gas from major resource basins to nearby cities that can catalyze NGV usage to grow the market from the bottom up, Clean Energy Fuels (NASDAQ: CLNE  ) is tackling a nationwide distribution network focusing on commercial trucking fleets, and General Motors (NYSE: GM  ) now offers a mass-market NGV in its 2015 Chevy Impala. The more investors look at the situation, the more it appears to be beyond mere hype. These three companies aren't forcing the issue, either. There are three major factors supporting the expansion and use of natural gas fuels for vehicles: price, energy content, and environmental footprint.

Driving force No. 1: Price
On a gasoline gallon equivalent (meaning equivalent energy to 1 gallon of gasoline), the average national selling price of compressed natural gas, or CNG, is just over $2 per gallon. The only fuel cheaper is electricity, but CNG remains well below diesel, biodiesel, and ethanol. If you ever wished you could turn back the clock to a time when gasoline prices were that low, then grab your flux capacitor and hop into a natural gas vehicle.

Price -- powered by the abundance of natural gas -- is the key reason commercial trucking fleets are turning in gasoline and diesel engines in favor of those powered by CNG, which is the underlying factor supporting the distribution network expansion at Clean Energy Fuels. Plenty of work needs to be done before NGVs comprise a representable share of the nation's commercial or household transportation fleet. In the past, change has come easier for more densely populated areas, but newly announced incentives by the U.S. Environmental Protection Agency aimed at developing biogas resources at landfills and wastewater treatments facilities should drive expansion even further.

Source: Clean Energy Fuels.

It's estimated that one in five transit buses in service today runs on natural gas. In fact, all buses in Los Angeles County -- more than 2,000 total -- use natural gas supplied by Clean Energy Fuels. The fleet saves the city over 300,000 pounds of greenhouse gas emissions every day, saves over 600,000 GGEs every year, and has reduced particulate matter by 80% compared with diesel buses.  

Driving force No. 2: Energy content
While abundance keeps prices low, boasting high energy content doesn't hurt, either. Consider that premium gasoline has an octane rating of 91, while CNG can be as high as 130. In other words, if natural gas had an octane rating equivalent to regular gasoline, current market prices would "surge" to nearly $3 per gasoline equivalent gallon.  

The high energy content of natural gas fuels makes it possible for automakers such as General Motors not to compromise on driving range with NGVs despite the early stages of technological development. In fact, CNG offers slightly better fuel economy than gasoline for bi-fuel vehicles (cars and trucks capable of using both gasoline and natural gas fuels). Take the 2015 bi-fuel Chevy Impala as an example. The vehicle's gasoline tank offers 18.9 miles per gallon, but its natural gas tank offers 19.5 miles per gallon. General Motors is also using NGVs to not only match, but also boost, driving ranges. The 2015 bi-fuel Chevrolet Silverado offers a combined driving range of 650 miles -- more than double the range of the previous year's gasoline-only model -- while the Impala offers nearly 500 miles combined. Drivers have to make only minor sacrifices when it comes to cargo space.

Driving force No. 3: Environmental footprint
It gets better. Higher energy content means increased engine compression, which means higher efficiency (thanks to the chemical makeup of natural gas) and a greatly improved environmental footprint. According to EQT Corporation, natural gas fuels offer the following emissions reductions over petroleum-based fuels:

  • Particulate matter emissions by as much as 77%.
  • Nitrogen oxide emissions by as much as 94%.
  • Volatile organic compound emissions by as much as 55%.
  • Carbon monoxide emissions by as much as 90%.
  • Greenhouse gas emissions by as much as 29%.

Couple reduced tailpipe emissions with natural gas fuels produced from biogas, and NGVs look substantially greener than gasoline vehicles.

Foolish bottom line
Let's be honest: It will take many years for NGVs to make a splash in the market. However, concerted commercial efforts and investments are being made throughout the value chain, from natural gas drillers to suppliers to automakers. Investors will have to endure the short-term ups and downs associated with any emerging market, but they should be comforted in the long-term opportunities being solidified with big, bullish bets made today. 

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Read/Post Comments (6) | Recommend This Article (7)

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  • Report this Comment On August 19, 2014, at 3:32 PM, motoman358 wrote:

    Octane does not equal energy content... BTU is a measure of energy content and since we are talking about a "gallon of gasoline equivalent" the BTU should be the same. An octane rating is a measure of a fuels resistance to ignition by compression (good for gasoline engines, but bad for a diesel engine). The Octane rating can help to increase fuel mileage as engines optimized for higher octane fuels will generally have a higher compression ratio and more aggressive ignition timing which allows them to be more efficient at turning the chemical energy into mechanical.

  • Report this Comment On August 19, 2014, at 3:33 PM, goneflyin wrote:

    Good article. Just to clarify, octane is not a rating of energy content, it's a measure of how resistant a fuel is to detonation (early combustion). High compression is not a requirement of high octane fuels. Rather, high octane fuel is a requirement for high compression engines.

    All that said, I have no doubt that CNG can also have higher energy content than gasoline.

  • Report this Comment On August 19, 2014, at 10:09 PM, TMFBlacknGold wrote:

    @motoman358 @goneflyin

    Ah, good points and something I overlooked. Thanks for pointing that out! #doh

    Maxxwell

  • Report this Comment On August 20, 2014, at 12:07 AM, dbhendrix wrote:

    The energy density of CNG is nowhere near that of gasoline or diesel fuel even at full pressure of 3500PSI The tanks are ultra expensive and have a lifespan of only ten years and must be recertified every 2 years, oops that one has a little ding in it, your inspector must drill a hole in it and you have a hunk of polyester junk. Did I mention that the refueling stations cost around a million dollars each and that is just for the compressors and storage tanks not the location, and they wear out pretty quick because they have to build so much pressure. T Boone forgot to mention all of that

  • Report this Comment On August 20, 2014, at 9:00 AM, TMFBlacknGold wrote:

    @dbhendrix

    "The tanks are ultra expensive and have a lifespan of only ten years and must be recertified every 2 years"

    That may be true for after market tanks from companies such as Westport, but Ford and GM are installing tanks at the factory that come with the same warranties as the rest of the vehicle.

    "Did I mention that the refueling stations cost around a million dollars each and that is just for the compressors and storage tanks not the location"

    That's inaccurate. General Electric sells the CNG In A Box that is much cheaper than $1 million.

    Maxxwell

  • Report this Comment On August 20, 2014, at 11:03 PM, dbhendrix wrote:

    CNG In A Box is for refueling your personal vehicle at home. It typically will refuel the average size tank overnight. If you are traveling any distance from home and need fuel then you must visit the million dollar service station that the rest of the motoring public uses .

    Tanks are subject to two standards:

    1. ANSI/CSI NGV2

    2. DOT/NHTSA FMVSS304

    Both require periodic visual inspections at 3 years and or 36,000 miles . I stand corrected on this point. The tanks still have a limited lifespan based on the number of cycles expected, and you would not want to stretch it because a catastrophic failure with 3500 psi will certainly be dangerous.

    NFPA 58 also applies to system components to assure safe installation

    Certainly CNG has its place but I do not think a cotton farmer in west Texas will be able to use it for his farm truck, on the other hand the city bus system in Ft. Worth seems to do pretty good with it

    The answer is all of the above. We need to develop and utilize all energy sources because there is safety in diversity and this nation and indeed the world cannot feed itself without vast amounts of energy, not to mention doing anything that would be fun.

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