The Benefits of Shifting to CNG for Fuel

Includes: COSWF, MTR, SBR, SJT
by: Katta Murty

Below is a brief analysis of the beneficial effects of shifting to CNG (Compressed Natural  Gas) as fuel for vehicles, instead of of power generation plants:

1. Use of CNG as fuel for electric power generation: Since nuclear power plants have become unpopular (due to security fears after 3-Mile Island and Chernobyl nuclear power plant accidents), coal burning power plants also became unpopular (due to concerns about global warming), and hydro-electric power generation has almost reached its natural upper limit. 40 years ago the US decided to use CNG as fuel for power plants built in the future. CNG is mostly methane (CH4); when burnt, each molecule of it releases one CO2 molecule and two water (H2O) molecules, so generating power by CNG is  only about a third as damaging (in terms of CO2 releases) as generation from coal. Now a significant (about 20%) of our electricity comes from CNG.

2. The development of electric automobiles: We currently use over 15 million barrels/crude oil/day, over 70% of which is imported. Its price has surged dramatically to over $125/b, threatening to greatly increase our trade deficit and lowering our currency’s value. That’s why the search for alternate fuels for transportation vehicles has become very urgent and critical. In response, GM (NYSE:GM) and Ford (NYSE:F) have made massive efforts in developing electric vehicles. GM hopes its electric car Volt will hit market soon.

3. Is the electric car the solution to our problems?: Over 40% of the energy in natural gas is lost when it is burnt to produce electric power. Transmission of this electric power to your home loses another 10% or more. And finally, charging of the car’s batteries takes an additional bite out of the original energy in the natural gas that was burnt. The net result is that the efficiency of the  electric car in energy usage  is of the order of 25% or so. But natural gas itself is a highly portable fuel; it can be used as the power source for transportation vehicles directly. Many countries are already using natural gas as transportation fuel.

For example, in Delhi,  India, all public vehicles (buses, scooters, taxis, etc.) are required by law to run on CNG. Well over 20% of private automobiles also use CNG as fuel too due to its cost advantage. In Delhi, converting a vehicle to use CNG requires installing a ``conversion kit’’ which incurs a capital cost of about 35,000 Rs (about 800 US$).   At that time, they install a steel cylinder weighing about 55 kg by itself (normally kept in a corner of the trunk) that can hold  20 kg of CNG.  With this kit installed, the vehicle can run on both fuels (gasoline or CNG, there is a change-over switch on the dashboard of the  vehicle in front of the driver’s seat). Most drivers keep a few gallons of gasoline as reserve fuel to be used in emergencies.

Gasoline costs 50 Rs/liter (heavily subsidized by the government) and gives an average 15 km/liter  in an average car in Delhi. An equivalent liter of CNG costs only 22 Rs and gives an average of 19 km in the same type of car (for comparisons, the exchange rate now is 1 US$ = 42-5 Rs). A full cylinder of CNG has a driving range of 400 km for this average car (about 275 miles). Typically, both CNG and gasoline can be purchased in the same gas stations in Delhi.

Existing gas stations in the USA can be augmented to sell both gasoline and CNG. 

When we use CNG for transportation, almost 100% of the energy in it becomes available for transportation, instead of only 25% using natural gas generated electricity. We have adequate domestic resources to meet the increased demand for natural gas to switch over to CNG as fuel for vehicles, which will help to reduce our crude oil imports significantly.

4. Benefits to the US stock markets and economy: With increased demand, the price of natural gas stocks will go up. The opportunities of opening companies to manufacture conversion kits for vehicles to use both gasoline and CNG, and steel cylinders for storing CNG in vehicles, and the conversion of large numbers of gas stations to sell both  liquid fuels and CNG, are great economic opportunities to revitalize the US economy. Since the demand for these products is going to be huge, the stocks of these companies are going to be great investment opportunities for investors.


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