Emissions regulation, urbanisation and CO2 reduction are all driving fleet operators and governments to look for fuel alternatives that not only save money, but lower emissions. Air pollution in Europe alone is estimated to contribute to around 406,000 deaths, and the loss of more than 100 million days of work due to illness annually – which, in economic terms, accounts for between €330bn and €940bn (US$449bn and US$1.28tr) per year. Thus, natural gas is becoming increasingly appealing, and new drilling techniques and pipelines are making it an even more competitive fuel alternative.
In its recent report, Natural Gas Trucks and Buses, Navigant Consulting identified the key forces in the global market which are now driving natural gas vehicle sales: the economic benefit, increased availability of vehicles, environmental benefits, government influence, and the growth of refuelling infrastructure. Like most aspects of the commercial vehicle industry, natural gas is captive to forces impacting the overall market – so as the economy recovers, demand for natural gas has increased. However, the refuse truck, day cab truck and transit bus markets have seen stronger overall growth, mainly due to the relatively short payback period.
These price and short payback factors are significant incentives. According to Navigant, on average, the price of compressed natural gas (CNG) is only 42% that of diesel. Although liquefied natural gas (LNG) is a little higher, it has more variability than CNG. With these figures, the payback period for heavy duty trucks can be as little as one and a half years in the US; storage tanks for both CNG and LNG account for 52.9%-75.9% of the total incremental costs. However, natural gas has so far been more appealing in the United States due to lower market prices – but move east from the US, all the way to Japan, and the price of natural gas changes dramatically from around US$2 to US$11.
Commenting on these seemingly great prospects, Sandeep Kar, Global Director of Commercial Vehicle Research at Frost & Sullivan warns, “There’s a huge price disparity for natural gas, and when North America starts to export shale gas to other parts of the world, the will price come down, further enhancing the applicability of natural gas as a global fuel for the transportation industry. Natural gas is one solution that is cleaner, greener, cheaper and is getting more and more abundant, especially in North America, and eventually other parts of the world.”
A hybrid competitor
Since 2005, the price of diesel in North America has been extremely volatile and has affected the operating costs of fleets, which have turned to other fuel solutions. The US has been a prime mover in terms of natural gas, with proactive OEMs and customers more willing to adopt natural gas.
“The problem with hybrid is that it has higher upfront costs and higher lifecycle costs, as the battery requires replacement every four to five years,” says Kar. “With natural gas, you don’t have that problem – but the problem hybrids don’t have is that they don’t require any infrastructure support – but natural gas does.” Last year, of all the 23,000 or so medium and heavy duty alternative power trucks sold globally, 71% were natural gas and 29% were powered by hybrid/electric.
As emissions regulations become increasingly tight, natural gas is looking ever more attractive across most markets. Similarly, emissions restrictions in urbanised areas are driving out diesel vehicles. While the price of diesel and gasoline has also helped the appeal of a simpler natural gas exhaust system.
Over the past few years, refuelling infrastructure has grown significantly in the US and Asia, as countries have stepped up natural gas usage in vehicles. Navigant predicts that natural gas refuelling will grow 30.2% between 2013 and 2022, which will result in 41,133 stations globally. While most of the growth is due to private industry, government incentives and promotions are having a positive impact. By 2022, of all the natural gas stations, 4,048 are expected to be LNG. The focus for these stations will be where the demand is, mainly China and the US, which accounted for around 96% of the global LNG in 2013.
Navigant also forecast a combination of factors leading to natural gas growth in most countries around the world, and predicted that the market for natural gas trucks and buses will continue to grow at a compound annual growth rate (CAGR) of 12.6% and 6.4% respectively, between now and 2022. This should result in the sales of 398,395 medium and heavy duty trucks and buses being sold in 2022 alone. Split into global markets, Asia Pacific will account for 76.2%, the US, 12.7%, and Eastern Europe, 8.6%. Because of higher fuel usage, heavy duty trucks and buses will outsell medium duty, and resulting in strong payback periods.
Kar comments, “What we are forecasting at Frost & Sullivan is, in North America by about 2020, 8-10% of all medium and heavy duty trucks sold in the US alone will feature a natural gas powertrain system. If you look at Europe, it’s interesting because a lot of OEMs have invested in NG technology in-house, whereas in North America, Cummins is the engine manufacturer offering natural gas engines and every other truck maker is buying. In Europe, we are forecasting that by 2018, 3.8% of all medium and heavy duty trucks and buses will feature natural gas engines.”
Blocked up
But there are still other, rarely discussed, barriers to the industry. Mark Sealy, Global Technical Director of the Commercial Vehicle Sector at Norgren, has witnessed challenges for the fluid control industry as the numbers of natural gas vehicles increase. It appears that infrastructure will not be the only difficulty when it comes to natural gas adoption: “Natural gas is a very significant challenge. It could be that a third of the world’s trucks are actually converted to gas in 15 years, so that’s a huge undertaking.”
Navigant concluded that by 2022, the number of natural gas vehicles will be around 1.9 million trucks and 1.8 million buses. To meet the demand for this, it is expected that 994,404 CNG cylinders will be sold the same year. The consulting firm further expects natural gas trucks and buses to consume 3.8 trillion cubic feet of natural gas in 2022, accounting for 69.8% of all natural gas used for transportation purposes.
Frost & Sullivan, meanwhile, predicts that sales of CNG, LNG, hybrid and electric enabled trucks will account for over 500,000 units by 2020. Natural gas will emerge as a key fuel of the future and, by 2022, will account for 8.5% of fuel globally. Kar believes that currently natural gas is most important in South America, Russia, China and India, and while it will not displace diesel, it will have the highest growth rate. Globally, around 86% of MCV and HCV trucks will continue to run on diesel by 2020, but 8.5% of trucks sold will feature natural gas engines, 3.8% hybrid-electric and 1.4% gasoline.
While the figures are not directly comparable, due to the inclusion of alternative powertrains, both point towards one thing: natural gas engines will see significant growth rate over the coming years and fast become one of the most important fuels of the future.
“The biggest segment in the CV trucking market is long-haul trucks and, unless you have fuelling infrastructure on a continental basis, we will not see rapid adoption of natural gas powered trucks,” Kar concludes. “That is changing slowly but surely, but we are not quite at a stage where we can say natural gas is a fuel that is widely adopted by the CV market. We are quite a few years away from there.”
