Truckers May Soon be Stepping on the LNG

GE and Clean Energy Fuels Partner to Build out Infrastructure

Ken Silverstein | Nov 13, 2012

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Truckers will soon be stepping on the gas, or the liquefied natural gas (LNG,) that is. General Electric and Clean Energy Fuels Corp. are partnering to build a series of fueling stations across the country -- a phenomenon that they say is demanded by the automotive manufacturers.

The selling point is that natural gas used for transportation cost 25 percent less than petroleum. It’s also cleaner. And when the two factors are combined, it is potentially a better deal for truckers that would use the LNG. But the kicker is that converting or building those 18-wheeler trucks that run on such specialized engines is an expensive proposition.

The LNG equipment market is potentially huge, or as much as $1 billion in five years, says GE. To start things out, Clean Energy says that it bought a few hundred trucks. “Today, every original equipment manufacturer has announced a natural gas product,” says Andrew Littlefair, chief executive of the Seal Beach, Calif.-based company, in response to this reporter’s question during a conference call today.

Altogether, Littlefair says that buying LNG would cost about $1.50 less per gallon than traditional gasoline. He adds that the company now has about 75 current fueling stations and that it is in the process of doubling that.

Enter GE. Clean Energy is buying two LNG plants from GE Oil and Gas. GE is also financing the deal, providing about $200 million. The facilities, which will super-cool the natural gas so that it can be transported to the filling stations, are expected to be operational by 2015. They will supply 250,000 gallons per day, or enough to fill 28,000 trucks, says GE.

“It is truly a partnership,” says Mike Hosford, general manager of unconventional resources at GE Oil & Gas, during the conference call. In other words, Clean Energy is building out the infrastructure and GE is supplying the expertise to convert the natural gas to LNG, while financing it.

“We’ve seen huge increases in (alternatively-fueled) vehicles,” says Hosford. “It comes back to emissions and to economics. It is so compelling.”

Momentum Slow

Both Clean Energy and GE say that the existing market provides a gauge. They point to Fed Ex and to UPS, which are using increasing amounts of compressed natural gas (CNG). They also note that Waste Management has announced that it will use CNG for 80 percent of its new trucks that haul trash. Once those entities start saving money, the partners argue that their competition would have no choice but to make similar business choices.

While CNG is primarily used in cars, buses and smaller trucks, the LNG that is getting rolled out at Clean Energy’s fueling stations is targeted at long-haul, heavy-duty trucks, which will have the advantage of longer driving ranges while not impacting tractor weight and incremental costs, says the company’s release. In 2013, four major manufacturers will introduce a 12-liter LNG engine, which is the optimum size for heavy-duty 18-wheeler trucks.

“As the long-haul trucking industry begins its transition to natural gas, it will be critical to have a reliable supply of LNG,” says Littlefair. He says that Clean Energy has signed non-disclosure agreements to expand the infrastructure if the trucks are produced.

Cost, of course, is the primary obstacle. Here, the American Trucking Association is working with U.S. lawmakers to help subsidize this conversion. President Obama is in favor of using government’s levers to help make the transition to cleaner burning fuels but the fiscal hawks say that taxpayers cannot afford it.

What else may block the road? Manufacturers and chemical makers are concerned that an increased demand for natural gas would drive up their energy costs. That would make them less competitive. The oil companies, meanwhile, also have a financial stake. While some are accusing them of impeding progress, Big Oil says that it can supply both oil and natural gas.

“I’m not going get out my crystal ball and say when this will move into the passenger vehicle market will occur,” says Littlefair. “It starts with fleets. The same thing will happen in trucking. But it will take a while to filter through the system. It will be very manageable. So, you can build both power plants and supply transport without significantly affecting prices.”

The tea leaves would tend to indicate that the transportation sector will increasingly fill up with both CNG and LNG. But the momentum is slow and it is not likely to gather steam until the existing buses and trucks become outdated and need to be replaced.


EnergyBiz Insider has been awarded the Gold for Original Web Commentary presented by the American Society of Business Press Editors. The column is also the Winner of the 2011 Online Column category awarded by Media Industry News, MIN. Ken Silverstein has been honored as one of MIN’s Most Intriguing People in Media.

Twitter: @Ken_Silverstein

energybizinsider@energycentral.com



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Comments

Convert Existing Trucks to Dual Fuel with CNG

    Existing Diesel engines can be converted to use 50% to 70% natural gas.  (Natural gas will not self-ignite in a Diesel engine,so a certain portion of Diesel fuel is necessary.)  This conversion does not change the internals of the engine.  It would seem that conversion to dual fuel would be much more cost effective than buying new, much more expensive natural gas-fueled trucks.  Conversion would more quickly enable natural gas to become a more important part of transportaton fuel.  I don't see why more attention is not being given to converting existing trucks.

$1.50 a gallon cheaper now, but how about afterwardwards?

As I've mentioned before here in the comments section of your articles, the switch to NG in the transportation sector, particularly in long haul trucking, is very likely to happen.  As this article points out, it's already starting to happen.

Now, do the math....If any significant portion of the nation's transportation fleet is switched to NG, the "discount" mentioned will evaporate.  As will the benefits of cheap natural gas to the utility industry and to consumers in general.  Add to that the upward pressure on prices that exporting our natural gas will cause and I don't see NG prices staying low.

So, at the point where NG becomes more expensive than coal again, what is going to happen?

Not that I think that using NG for transportation is a bad thing.  It's not, but it is going to have an affect on electrical generation and people don't need to think that shale gas is a panacia. 

 

Bob "The Clean Energy Guy" Mitchell

Can GE Explain

If the economics is so compelling, why do the truckers need federal help to change out or switch over to LNG engines? Could GE get into greater detail as to why this is a strong case and does it favor the government buying down the LNG engines? Thank you.

All Without Government Directives and Subsidies

Excellent example of how the private market can see an opportunity and move on it -- all without the Federal Government mandating the move. Maybe it's the answer, maybe not: but the likelihood of success is far higher if private companies are willing to assume the risk than if the Government decides to pick the winner.