Having followed the U.S "Natural Gas Revolution" closely for the last 2-3 years, I continue to be amazed by people accepting statements by Clean Energy Fuels (CLNE) and statements by Westport Innovations (WPRT), seemingly without critical analysis, that Liquefied Natural Gas, or LNG, will become the preferred fuel for high-mileage heavy duty natural gas vehicles instead of Compressed Natural Gas (CNG).
Before people accuse me of bashing CLNE and WPRT, I can assure you that my objective with this article is purely to highlight some relatively solid facts that seem to suggest a different market development than what CLNE and WPRT are postulating. I have no intention of shorting their stock and at some point in time I might even consider taking a long position.
CLNE and WPRT as investment cases are pretty closely linked. They both rely on natural gas engines achieving a significant penetration rate in the heavy trucking market and both companies are betting that LNG will become the preferred fuel for high-mileage heavy duty natural gas vehicles. CLNE is building its network of LNG fuelling stations called "America's Natural Gas Highway" and WPRT is hoping their iCE PACK™ LNG Tank System will become the preferred fuel tank system in North America for heavy duty natural gas vehicles.
CNG is made by taking natural gas from a pipeline that is routed to the site of the CNG station, compressing it and fuelling natural gas vehicles, either directly or via temporary storage. CNG remains in gaseous form all the way.
LNG is produced at (large) liquefaction plants, where impurities such as CO2 are removed before the natural gas is cooled down to −161 °C (−258 °F). At this temperature the natural gas condenses into a liquid, and as we all know, liquid is denser than gas. This means an LNG fuel tank can typically hold approx. 2.4 times as much natural gas as a similar sized CNG tank. The Achilles' heel of LNG is the production and distribution cost. This adds substantial cost compared to CNG, which is also why CNG is generally sold at a $0.4 - $0.5/DGE discount compared to LNG.
By compiling data from both sides of the debate and using my own professional experience from the natural gas industry, I have arrived at the following CNG vs. LNG pros & cons:
CNG Pros & LNG Cons
- According to the Alternative Fuels Data Center 618 public access CNG refueling stations are available as of 14 Nov 2013, although the majority of these currently cannot accommodate Class 8 trucks. Only 42 public access LNG stations are available on the same date.
- According to various reports approx. 8 - 10 new CNG stations are being built for every new LNG station.
- CNG is generally $0.4 - $0.5/DGE cheaper than LNG.
- CNG does not evaporate if not used and can stay in fuel tanks for an unlimited amount of time. LNG evaporates after 5+ days if not used.
- CNG does not require personal protective equipment when refueling. LNG refueling does.
- Maintenance of heavy duty CNG vehicles can be carried out at any facility that is trained to handle natural gas trucks. LNG trucks can only be serviced at facilities that have got additional equipment and certification.
CNG Cons & LNG Pros
- CNG fuel tank packages usually weigh more than comparable LNG packages and are also slightly more expensive assuming equal range requirements.
- LNG is denser than CNG, which also means greater range can be achieved before refueling.
- CNG fuel tank capacity cannot be fully utilized, so effectively 20-30% of the design capacity is unavailable under normal operating circumstances. Close to 100% percent of LNG tank capacity is available.
When watching this CLNE video, it seems apparent that CLNE's decision to go with LNG as the primary fuel for "America's Natural Gas Highway" was based on a view that heavy duty vehicles simply cannot travel far enough on CNG without refueling and 10 DGE/minute fast-fill CNG refueling stations are too costly to build and operate. These views, which I am sure made sense some years ago, seem ripe for revision as:
- CNG fuel tank modules are becoming lighter and have greater capacity, so the effective range is increasing to 500-600 miles per refueling, which is deemed adequate by many carriers as this is the maximum distance that can anyway be covered by a driver in one day.
- Cost of CNG tanks is being driven down pretty quickly by product innovation and increased competition which reduces the price differential to LNG tanks
- Public fast-fill CNG refueling stations for heavy duty vehicles are popping up all across the U.S. at a phenomenal pace, so a lot of people obviously disagree with CLNE and actually think large fast-fill CNG stations can make money
Based on the summary above it seems reasonable to conclude that a Class 8 truck running an assumed 100,000 miles in a year saves $10,000 - $20,000 by running on CNG instead of LNG. In addition carriers that have tested both CNG and LNG trucks report that drivers prefer CNG's simplicity and increased safety. When also taking into account that CNG stations are being rolled out at a much greater pace than LNG stations, it becomes hard to agree with CLNE and WPRT that LNG is going to be the dominant fuel for high-mileage heavy duty natural gas vehicles going forward.
I am sure LNG will take a meaningful part of the heavy duty natural gas trucking market, but claiming it will be the dominant fuel is, in my opinion, wishful thinking and misleading as the facts so far indicate a different story.