Natural gas vehicles will need “strong regulatory support” to provide a meaningful boost to US gas demand in this decade, owing in part to a dearth of refueling infrastructure, says Barclays analyst Shiyang Wang.
Natural gas is far cheaper on an energy-equivalent basis than diesel, offering an obvious incentive to make the switch from a diesel- to a natural gas-fueled vehicle. Compressed natural gas (CNG) costs around $2.34 per gallon of diesel equivalent, compared to almost $4.00/gallon for diesel, said Wang in a note to clients.
The Energy Information Administration reference case projections from its 2013 Annual Energy Outlook show natural gas demand from the transportation sector, both as CNG and LNG, rising to 63.6 trillion Btu in 2017 – around 170 million cubic feet per day – from around 136 million cubic feet per day this year.
“Diesel-fueled commercial vehicles – buses, freight trucks, commercial light trucks – are the largest potential market for NGV penetration,” Wang said. In 2010, diesel-fueled commercial vehicles used the equivalent of 13 billion cubic feet per day of gas. This would equate to nearly 19% of the EIA’s projected US gas consumption this year.
But the infrastructure that would allow the US vehicle fleet to quickly adapt to price conditions is not yet in place.
“Despite the economic advantage, there is not yet enough refueling infrastructure for NGVs to flourish,” Wang said. The Department of Energy’s Alternative Fuels Data Center (AFDC) shows that of 1,166 CNG and LNG stations in the US last year – down from 1,497 in 1997 – only 618 were open to the public for refueling.
New stations are on the way. Companies such as Clean Energy Fuels, which builds and operates CNG- and LNG-fueling stations, and provides conversion services for automobiles, are investing in substantial additions to NGV refueling infrastructure. Several states are also pushing to incorporate more NGVs into state, county and municipal fleets.
Wang noted that trade group NGVAmerica has floated projections that gas could displace anywhere from 6 to 20% of the US diesel commercial vehicle market by 2017, provided that there is strong regulatory support behind NGVs. But hitting that target would require a massive rise in the number of CNG-or LNG-fuelled cars in the US fleet, she said.
“The number of NGVs on the road would have to grow 12-fold between 2011 and 2017, on our estimates,” Wang said.
The most recent count offered by the ADFC is 232,020 NGVs, with some data based on 2011 statistics. Even a ten-fold increase from those levels would require adding more than 2.5 million NGVs to the US auto fleet.
