Did you know that a Kiwi is not just a fruit? It is New Zealand’s native flightless bird and a slang term for a New Zealander. Did you also know that alternative (or replacement fuels) can be substituted for or used in combination with gasoline fuels to power our cars? Natural gas, alcohol fuels (such as ethanol and methanol) and electricity are examples of replacement fuels. Research and demonstrations of replacement motor fuels have been taking place and continue to take place in New Zealand and around the world.
The oil crisis in the early 1970s, which accompanied an increase in gasoline prices and supply shortages, prompted governments, like New Zealand, to look for opportunities to produce and use domestic fuels to reduce their dependence on imported oil (the cost of oil imports increased from $52 million in 1972 to $709 million by 1980). With private-sector involvement, the government developed New Zealand’s natural gas fields, influenced production and prices and owned the pipeline system connected to the gas utilities – all in an effort to become transportation fuel self-sufficient.
New Zealand’s approach provides an example of an organized effort to encourage the use of replacement fuels.
Characteristics of New Zealand’s Alternative Fuel Program
The island country began its alternative-fuels program in 1979. Financial incentives given by the New Zealand government to citizens for converting their cars to run on replacement fuels, combined with incentives to industry for developing a fueling network, enabled 140,000 vehicles to be converted to CNG or propane through 1985. Unlike Brazil’s alternative fuel program, which placed an emphasis on newly manufactured vehicles, New Zealand relied on vehicle conversions. In preparation for this change, New Zealand’s government established groups to evaluate alternative fuels and use of domestic natural resources which lead its recommendation of CNG and propane fuels. Industry faced a limited distribution network in developing a CNG fueling infrastructure. Not surprisingly, New Zealand oil companies were unwilling to invest in fuel alternatives that they did not control and competed with gasoline, even when government grants, loans and tax incentives were offered to install CNG equipment. In addition, because existing gas stations were owned by independent retailers, they were generally reluctant to take the risk of installing costly natural gas compressors and pumps. At the start of the program, the propane industry consisted primarily of small distributors selling propane for other uses. Again, government funding, along with financial support from industry players, helped establish a propane-fueling infrastructure. According to New Zealand government and industry officials, saving money on fuel prices was the most important draw for consumers to convert their vehicles and use replacement fuels. Another important factor was reducing the perceived risks associated with alternative fuels and vehicles.
New Zealand currently imports most of its transportation fuels, which are responsible for 20% of the country’s greenhouse gas emissions. Recently, the country has made big investments and impressive progress in terms of diversifying their fuel market to become less reliant on imports. Its “Stump to Pump” program is being awarded NZD$6.75 million in government co-funding to create a new market pathway that links low-value forestry and wood-processing residuals to renewable fuel markets.
Government cooperation, together with industry and consumers, can build a consensus to overcome the technological, financial and consumer perception barriers involved in initiating an alternative fuels program. This is not to say that the U.S. or any other government must introduce costly and unreasonable incentives to drive the transition to alternative fuels and gain consumer acceptance. Rather, the government’s role is to enable an open fuel market — one in which new businesses will compete, prices will fall and innovation will drive efficiency and quality.
It’s clear that expensive car conversions are a turn off to consumers. For personal vehicles, liquid fuel conversions are far more cost-effective than CNG or LNG. Providing consumers a choice between fuels when filling up their gas tanks will ignite competition that will bring down fuel prices. The safe and efficient use of fuels, such as ethanol and methanol, can be used to expand consumer choice and would require slight modifications to existing vehicles, necessitating reasonable capital investment. Barriers must be overcome and outdated regulations must be updated in order to have a truly open fuel market. The abundant supply of natural gas provides an opportunity for the U.S. to become self-sufficient.
Originally published on oilprice.com.