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By AutoObserver Staff September 30, 2011
It's cheap, relatively green, and commercial fleet managers like it, but natural gas hasn't caught on as a passenger cars fuel in the U.S. as it has in other parts of the world. That could be changing, though. While some analysts voice doubt about widespread popular adoption of natural gas passenger cars, others in the fuel and auto industry say that growing concerns about carbon emissions and energy security can make this the decade of natural gas. Richard Kolodziej, president of NGVAmerica, the trade and lobbying group for the natural gas vehicle industry, maintains that the question isn't "if" but "when."
For now, Honda remains the only company making factory produced natural gas cars for the U.S. market. And it sells only about 1,200 of is Civic GX model (top) annually, many to fleet operators. That’s far below the annual demand threshold of 10,000 to 15,000 models that U.S. automakers like to see before ramping up for production of a new model. One stumbling block is that natural gas conversions are expensive. The factory-built Honda costs almost $7,000 more than its gasoline counterpart, and aftermarket conversions can easily add $10,000 or more to the price of a new vehicle.
Interest Rising
But a variety of factors have reignited interest in natural gas as a passenger vehicle fuel, including rising gasoline prices and new studies showing the U.S. has large reserves. One potential drawback is that most exist in difficult to develop conditions, and controversy exists about the environmental impact of the most popular recovery method. Known as fracking, it involves injecting chemicals and steam underground to fracture the rock that taps the gas. Opponents fear the process endangers underground drinking water supplies. Still, with big states like Ohio and Pennsylvania working hard to exploit their natural gas deposits, there seems to be consensus that natural gas fuel is here to stay.
The governor of Ohio recently called on the governors of Indiana, Michigan and Pennsylvania to join him in an initiative to replace their states’ fleet vehicles – a total of 41,000 cars and trucks – with natural gas models over time. That alone would represent a 36 percent increase in the number of compressed natural gas vehicles on the road today. A recent survey of 1,000 consumers by America’s Research Group found that 11-14 percent of respondents, depending on the region, were interested in the idea of natural-gas vehicles. But of the people who loved the idea, 75 percent said they were worried about how to find natural gas fuel, said ARG Chairman Britt Beemer.
Few And Far Between
At the end of 2010 there were only 1,000 natural-gas filling stations in the U.S, compared to about 159,000 public retail gasoline stations. Natural-gas producers and distributors, businesses and state and local governments a all have stepped up to try to solve the problem, motivated by the desire to make money, save money, and meet federal and state clean car mandates. While the focus largely has been on natural gas-powered commercial trucks and vans, industry insiders say the construction of more stations for these larger vehicles ultimately will open the market for natural-gas passenger vehicles.
Chesapeake Energy Corp., one of the nation's largest natural gas producers, announced in July that it had formed a subsidiary to help transform the U.S. transportation fuel market by pumping at least $1 billion into investments to boost demand for natural gas over the next decade. A national fueling network would cost $1.5- to $2-billion. Installing modern CNG fueling equipment at an already existing retail site generally costs about $500,000, while a new station for commercial trucks that use liquefied natural gas (LNG) costs appropriately $1.5 million, said Chesapeake development director Taylor Shinn. Chesapeake's first investment, $150 million, is being directed to Clean Energy Fuels Corp., a Seal Beach, Calif. company launched by natural-gas proponent T. Boone Pickens. The funds from Chesapeake will finance about 150 LNG fueling stations (below) at commercial truck stops and all will be designed for installation of CNG pumps to serve passenger vehicles as the demand develops.
Potential, But...
“The next five years are going to be very telling.” said Tim Carmichael, president of the California Natural Gas Vehicle Coalition, a trade group that promotes natural gas as a transportation fuel. He expects that at least one U.S. automaker will bring a CNG passenger car into the market to compete with Honda by the end of 2012. But that's not sufficient to persuade him that we'll eventually see a proliferation on America's roadways. "I think there's tremendous potential, we just don't know if that potential is going to be realized," he said. Pike Research predicted earlier this year that annual CNG passenger vehicle sales would hit only about 3,000 by 2016. Pike analyst Dave Hurst cited the cost of the vehicles, the big lead hybrids have in the market, and the improving fuel efficiency of gasoline and diesel engines as reasons CNG cars will be “a hard sell.”
It hasn't been so difficult in some other countries. Worldwide, almost 12.7 million NGVs were roaming the roads by the end of last year, an 11.6 percent jump over the year before, according to the International Association for Natural Gas Vehicles. In the U.S., there were just 112,000 - a scant 1 percent rise from 2009. "This is the only fuel technology where the U.S. is behind the rest of the world in deployment," Carmichael said. In some countries where the use of natural gas for transportation is high, the government creates an incentive by setting the price of fuel, Kolodziej said.
Congress Holds Key
In the U.S., the federal government and many states have been considering ways to encourage consumers to buy cars that run on alternative fuels of one sort or another. About 250 bills have been introduced in state houses since January that would provide incentives for alternative fuel vehicles, said Kolodziej. Most of the measures include cars and trucks fueled by natural gas. A bill pending in Congress, the New Alternative Transportation to Give Americans Solutions (NATGAS) Act, would be a major stimulus for the U.S. market if it passes, he added. The bipartisan measure would provide tax credits over a five-year period to manufacturers and purchasers of natural gas vehicles and to developers of natural gas fueling stations
If passed -- and there are doubts, given the nation’s debt and budget woes -- it could cut in half the time it takes to recoup the higher cost of a CNG vehicle, Kolodziej said. Supporters say rejection of the Nat Gas Act wouldn't spell an end to things, given the momentum they see building. One example is the Drive Natural Gas Initiative, formed in April to play "matchmaker" between fleet operators who would like to convert to natural gas and natural gas fuel suppliers who’d like to supply them, said Kathryn Clay, its executive director.
Home Fueled
In one of the group's business models, a commercial fleet operator would agree to covert a certain percentage of its vehicles to natural gas and the fuel supplier would agree to build a local station and supply the fleet’s fuel at a reduced price. Other entities are using similar models to expand the natural gas refueling network in various parts of the U.S. Clay’s group also is taking on the issue of home refueling, something that can make buying a CNG car more appealing to consumers. The goal is to drive down the price of gassing up by increasing the number of companies that make home refueling devices.
Currently, the only option for most consumers is the wall-mounted Phill home natural gas pump (left) made by BRC FuelMaker, an Italian unit of Southern California-based Fuel Systems Solutions. The U.S. cost for the Phill, before installation, is about $4,500. With competition, Clay said, the cost for a home refueling device could eventually shrink to $1,500 to $2,000. The home pump might make sense to a lot of commuters at that price because it can cut the cost of natural gas fuel by 50-60 percent form the price at retail pumps. Clay said 11 companies that make natural gas compressors have voiced interest in entering the home CNG pump market.
Increasing Production
The low price of CNG compared to gasoline or diesel fuel is a major selling point for natural gas vehicles. But the cost of converting a light duty car or truck to CNG can be a big deterrent. Honda's nearly $7,000 premium for the CNG Civic covers the increased cost of the car’s pressurized fuel system and extensive engine modifications required by the higher compression demanded by CNG’s higher octane content. The Civic and other dedicated natural gas vehicles built by aftermarket conversion companies qualify for various federal and local incentives, which can help offset the cost, but the jury’s out on how long lawmakers will continue funding them. Without incentives, fuel savings alone generally won’t recover the extra cost of a CNG vehicle over the 5-7 years that most people keep a car. With natural gas fuel retailing at $1.90 a gallon and gasoline at $3.65, the average consumer driving 15,000 miles a year in a 30-mpg natural gas car would save only about $875 a year. Still, with gasoline prices on the rise over the past year and all the news about new natural gas reserves, Honda earlier this year said it would double production of the Civic CNG model to 2,000 units for the 2012 model year and will go higher if demand develops.
"We wouldn't be expanding sales if we didn't see a future in it," said Honda spokeswoman Jessica Fini. The redesigned 2012 model will carry a new, more market-savvy name -- Civic Natural Gas, a 10 percent increase in fuel economy to 31 mpg (combined) and a base price of $26,155 -- $27,655 with navigation system. This is the first time Honda has offered a navigation system with the natural gas model, which also will be available for the first time with Bluetooth connectivity and a premium stereo. Further, instead of selling in only four states, as has been the case, the 2012 cars -- set to go on sale in September -- will be rolled out in 38 states over the next year.
Testing The Waters
Toyota, the leader in the U.S. hybrid market, built and marketed a handful of natural gas Camrys to fleet operators in Southern California in 2000 and 2001, developing a unique rear suspension for them to facilitate their cylindrical fuel tanks, said Bill Reinert, national manager of Toyota's advanced technology group. But only about 300 were built ad sold before Toyota decided to push its hybrid technology instead. Still, the idea of using CNG fuel hasn’t ben abandoned at Toyota, which has shown a CNG-electric Camry hybrid concept car at trade shows in recent years.
While General Motors, Ford and Chrysler haven't jumped into the natural-gas passenger car market, all three made CNG trucks and vans until 1998, mainly for fleet buyers and to meet government clean car mandates. They stopped production after changing emissions rules and market conditions began favoring hybrids and flex-fuel vehicles that run on a mixture of gasoline and ethanol. But Ford and General Motors this year have both begun manufacturing some vehicles, aimed at fleet buyers, that are ready for conversion to natural gas. The two companies also make natural gas vehicles for use in other countries.
In the U.S., Ford has full size and light duty vans and heavy-duty pickup trucks that can be converted, and plans more “in the near future," a company spokesman said. General Motors announced this summer it has reached agreement with Canadian company Westport Innovations Inc. to develop natural-gas engine components for GM’s light-duty vehicles. Westport also this week announced a new bi-fuel conversion system for Ford’s heavy-duty F-250 and F-350 pickups. Chrysler Group also has voiced interest in adding CNG options to some vehicles in its lineup. One possibility would be CNG powertrains for the Ram truck. Chrysler's Italian parent company, Fiat, is the world's largest maker of natural gas vehicles. "The technology is very clearly transferable between Europe and the U.S., said Bob Lee, a Chrysler executive who handles engine and propulsion systems.
The recently announced Corporate Average Fuel Economy (CAFE) standards expected to be approved for the 2017-2025 period add another incentive for increased use of natural gas as a fuel, Lee said. The White House and U.S. automakers agreed on a proposal for requiring a fleet average of 54.5 miles per gallon by 2025 in order to cut oil use and reduce greenhouse gas emissions. While CNG doesn’t offer a big improvement in fuel economy over gasoline or diesel, it has 25-30 percent less carbon content than those fuels and can help satisfy the new requirements. "I don't think it will be even five years before you'll see the increase in offerings in CNG," Lee said.
AutoObserver Staff: reporting and story by contributor Leslie Earnest.
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