A few years ago, Clean Energy Fuels Corp (NASDAQ:CLNE) was leading the charge of alternative fuels, pushing natural gas as a cheaper, cleaner fuel source than gasoline or diesel. Particularly for large trucks, natural gas could provide cost savings for customers and allow for a cleaner, domestic energy source for the industry. The biggest challenge was building out the fueling infrastructure, which is where Clean Energy Fuels came in.
But the transition to natural gas never quite became a reality and with batter costs falling, the opportunity may have passed Clean Energy Fuels by.
Oil prices were Clean Energy Fuels first problem
The biggest obstacle to Clean Energy Fuels' growth was plunging oil prices in late 2014 and the low prices ever since. One of the justifications for trucks using natural gas was essentially an arbitrage between the high cost of oil/diesel and the low cost of natural gas. Once oil prices fell, the arbitrage opportunity diminished.
Trucking fleets didn't make the transition to natural gas as quickly as Clean Energy Fuels needed and didn't give it the consistent fuel sales or cash flow that would have funded a larger number of fueling stations, which could have driven more adoption. But the large truck adoption of natural gas never materialized.
EVs will be Clean Energy Fuels' downfall
The fact that trucking fleets didn't make a transition to natural gas a few years ago is important because the opportunity may now be gone. Battery prices, which once made large electric vehicles too expensive to be economical, are coming down rapidly and may already make EV semis, buses, and trucks attractive to consumers.
As I'm writing, Tesla (NASDAQ:TSLA) is preparing to unveil its all-electric semi to the public, Toyota (NYSE:TM) is testing hydrogen trucks in Los Angeles, Proterra is selling electric buses around the U.S., and Nikola Corporation and General Motors (NYSE:GM) are developing their own hydrogen and electric truck options.
If a truck can hold the charge needed to travel 300 miles to 500 miles and be recharged in a reasonable amount of time, it makes more sense for fleets to use cheap, abundant electricity rather than convert to natural gas. It already looks like electric technology is cheap enough and offers the capability to make natural gas irrelevant for truck fleets.
I'll never buy into the natural gas fuel hype
Given the fact that electric technology is advancing quickly and the infrastructure is readily available for fleets, I don't think there will ever be a significant growth business for Clean Energy Fuels outside of a small niche of locations. That's why I'm making a thumb down CAPS call on my CAPS page. The opportunity has simply passed the company by.