Compressed Natural Gas

Compressed Natural Gas

          
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Compressed Natural Gas

A Potential Bridge Technology?

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    • Compressed natural gas (CNG) offers several key advantages. Foremost among them are its low cost at the pump compared with gasoline and its favorable emissions profile.

    • But CNG also faces significant hurdles to adoption, including high up-front vehicle costs and uncertainties related to the establishment of the required fueling infrastructure.

    • Vehicle fleets are potentially attractive targets for makers of CNG-fueled vehicles.

     

    As OEMs wrestle with advanced ICEs and EVs, they will have to remain aware of the opportunities and challenges presented by a compelling alternative-fuel source—compressed natural gas (CNG).

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    CNG has several key advantages. One is its large reserves, which give CNG a cost advantage at the pump over gasoline and make it appealing from an energy independence perspective. A second major advantage of CNG is its favorable emissions profile. Well-to-wheel CO2 emissions of CNG-fueled vehicles are 15 to 25 percent lower than those of gasoline-fueled vehicles.



    But CNG also poses challenges for OEMs that are similar to the challenges associated with EVs—for example, high up-front vehicle costs. A CNG passenger car costs $4,000 more than its gasoline equivalent, even when CNG cars are manufactured at scale. The biggest hurdle to widespread CNG adoption, however, will be establishing the required fueling infrastructure. Despite a tax credit of $0.50 per gasoline gallon equivalent (GGE) in the U.S., the business case for investments in CNG fueling stations is not clear for utilities and infrastructure providers.

    Overall, CNG offers emissions reduction potential similar to that of hybrids at similar cost. Hybrids face less of an uphill battle, however, as they are more widely accepted by consumers and do not require additional infrastructure. Although CNG may struggle to reach widespread adoption among individual consumers, it is the ideal choice for certain vehicle fleets. For investors, there can be significant scale advantage in CNG fueling stations—a high-throughput station (that is, one that dispenses more than 30,000 GGE per month) requires a $1.5 million investment but has an attractive ROI. And for fleet owners, as mileage rises due to CNG’s low cost, CNG becomes an increasingly attractive alternative to hybrids. For these reasons, CNG could expand beyond its current strongholds with transit buses and airport shuttles and see growing adoption by delivery vehicles, government fleets, and taxis—all vehicles that, because they build up high mileage, make frequent short trips, and employ centralized refueling, are ideally suited to CNG deployment. By targeting selected fleet segments, CNG could garner 0.5 to 1.0 percent of passenger car and light-truck sales in the U.S. and China, with potentially higher penetration for buses and midsize trucks. In Europe, where the appeal of CNG could extend beyond the fleet segment, penetration could reach 2 percent of passenger car sales. Italy already has a significant fleet of CNG-powered vehicles and a good fueling infrastructure in place—the result of a concerted effort by the government, Fiat, and Eni (Italy’s national energy company) since 1999.

    Governments can spur CNG adoption by mandating its use by fleet vehicles and by establishing inner-city emissions targets. The governments of India and Pakistan, for instance, have been able to mandate such adoption for public transportation, including buses and taxis, in major metropolitan areas. Similar legislation in the U.S. could drive CNG adoption there, leading to emissions reduction at a lower cost to consumers and the government than that associated with EVs.

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