Phil Biggs covers the automotive industry for NewsTalk 1340 WJRW
May 19, 2014 – 11:30 am ET
NASHVILLE, Tennessee. – With gasoline prices soaring over the past several years, many American car buyers are looking at available powertrain alternatives for relief, and chief among those options is compressed natural gas (CNG). The private commercial drilling phenomenon in this country has propelled the U.S. to overtake Russia as the world’s largest natural gas producer. Fracking, the primary natural gas extraction method, while controversial with environmentalists and others, has built our supplies enough to meet current U.S. consumption for 100 years. What happens next could have a revolutionary impact on American business and influence our economy and job growth positively if we seize the opportunity in front of us today.
As noted recently in Bloomberg News, “To truly upend the global energy balance, the U.S. must also revolutionize demand. And the only way to do that is to get natural gas into what has always been the greatest prize: light trucks, 18-wheelers, government and delivery fleets, and, of course, private (passenger) cars…”
How does compressed natural gas work in a passenger vehicle? Natural gas is a mixture of hydrocarbons consisting mainly of methane. The natural gas used in passenger vehicles is typically operated in compressed form at 3600 PSI and stored very safely in a high pressure tank in the vehicle’s trunk. Many of today’s natural gas vehicles are “dedicated” systems designed to run only on natural gas. Previously, some bi-fuel natural gas vehicles were designed to have two separate fueling systems that allow the vehicle to use either natural gas or gasoline. Retro-fitting existing vehicle engines has increased as enabling technology has improved, and we are now seeing a proliferation of natural gas fueling stations and residential re-fueling systems.
Cost and infrastructure investment are the main hurdles to CNG commercial acceptance. As infrastructure investment becomes more commonplace, there are likely to be more converts to CNG than EV or hydrogen cell alternatives.Last decade T. Boone Pickens and others in the natural gas industry predicted the commercial arrival of CNG as a powertrain choice. Now there are thousands of CNG investors and start-up operators flooding the market. Industrial giants such as General Electric and 3M are getting into the hardware arena, with 3M already prototyping fiber-carbon storage tanks that are over 50% smaller, thus optimizing much-demanded vehicle load space.
Energy multi-nationals such as BP and Royal Dutch Shell are investing billions to support the industry conversion to CNG, while segment-leader Honda, General Motors and other automotive OEMs make serious commitments to dual-fuel alternatives in their pick-up and sedan lineups.
The key to market success, besides much-needed infrastructure investment, is controlling product development costs, always the constant delta in how and where to apply technology. Cost of ownership is mostly what is hindering the penetration of natural gas-fueled passenger vehicles, as demonstrated when comparing the Honda Civic GX with comparably equipped conventional and hybrid Civics. Without a subsidy, the natural gas Civic costs $26,240—modestly more expensive than the $24,700 hybrid but substantially more expensive than the $19,905 gasoline version. Its maintenance and repair costs are also considerably more expensive.
Alan Krupnick, Director of the Center for Energy Economics & Policy notes, “The fuel economy for the natural gas Civic is about the same as that of the gasoline alternative. But fuel tanks for compressed natural gas are large and heavy, decreasing cargo space dramatically when compared with the gasoline version. Also, its range is lowered to only 218 miles, compared with 383 miles for the comparable gasoline vehicle and 504 miles for the hybrid.”
Although the cost to innovate can at times outstrip the economic value of the product itself, the trajectory of new technology adoption in the automobile remains steep. As more retrofit options increase and technology improves, as natural gas fueling stations spread, and as automakers begin offering more natural gas cars, costs will come down and performance will improve.
Consumer confidence and product safety will further drive rapid adoption. The inescapable danger in any vehicle is the presence of fire hazard. It may surprise most consumers that CNG is believed to be safer to operate than the traditional internal combustion engine. If a tank does spring a leak, natural gas is lighter than air and dissipates into the atmosphere, greatly diminishing fire or explosion risks. As technical and consumer acceptance moves ahead, there will be a need to address CNG regulatory and warranty concerns. As OEMs continue product and systems integration prove-outs, more safety requirements will emerge. Safety and regulation have always been serious hallmarks of the auto business, and recalls are nothing new. But as evidenced by the current GM ignition switch recall, urgent go-to-market plans can never compromise engineering testing standards, especially when few CNG safety benchmarks exist today.
What can we expect next? As CNG makes its broader entry into the auto space, we should expect to see good economic news. Most of the natural gas consumed in the United States is domestically produced, and the resulting effect will be the reduction of our overall dependence on foreign oil. We have the natural gas resources to grow supply and lower overall cost of oil production and delivery, but what’s really needed is a consistent sustainable energy policy from Washington and the willingness to let private markets operate more unfettered. This alone solves not only many automotive industry problems but would create dynamic paths of growth for our entire U.S. economy.
Phil Biggs is Executive Vice President for the Nashville, TN-based technology company, NeXovation.
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