It seems like every day there’s a new headline about the dominance of America’s petroleum sector. Read more
Something we hear a lot is “It’d be nice if America could use more alternative fuels that are cleaner and American-made, but they’re just not affordable compared to oil.” It’s time to put that myth to bed. Read more
Americans love choice. Whether it’s deciding what kind of car we drive, what type of food we eat for dinner, or which smartphone we use, there’s an abundance of choices. In fact, our country was even built on the premise of being able to choose what religion you practiced.
I must admit I’ve always been a little skeptical about this idea that diesel can be a “clean-burning fuel.” Anyone who has ever gotten stuck sitting behind a bus in traffic is likely to agree. Read more
Things have always been a little easier in Europe when it comes to saving gas and adopting different kinds of vehicles. The distances are shorter, the roads narrower, and the cities built more for the 19th century than the 21st.
Europeans also have very few oil and gas resources, and have long paid gas taxes that would make Americans shudder. Three to four times what we pay in America is the norm in Europe.
Thus, Europeans have always been famous for their small, fuel-sipping cars. Renault was long famous for its Le Cheval (the horse), an-all grey bag of bones that’s barely powerful enough to shuttle people around Paris. The Citroën, Volkswagen and Audi were all developed in Europe. Ford and GM also produced models that were much smaller than their American counterparts. Gas mileage was fantastic — sometimes reaching the mid-40s. A big American car getting 15 miles per gallon and trying to negotiate the streets of Berlin or Madrid often looked like a river barge that had wandered off course.
More Europeans also opt for diesel engines instead of conventional gasoline — 40 percent by the latest count. The overall energy conversion in a diesel engine is over 50 percent and can cut fuel consumption by 40 percent. But diesel fuel is still a fossil fuel, which have a lot of pollution problems and don’t really offer a long-range solution. So, Europeans decided that it’s time to move on to the next generation.
Last week the European Union laid down new rules that will try to promote the implementation of all kinds of alternative means of transportation, making it easier for car buyers to switch to alternative fuels. The goal is to achieve 10 percent alternative vehicles by 2025 over a wide range of technologies, removing the impediments that are currently slowing the adoption of alternatives. If everything works out, tooling around Paris in an electric vehicle within a few years without suffering the slightest range anxiety would become a reality.
By the end of 2015, each of Europe’s 28 member states will be asked to build at least one recharging point per 10 electric vehicles. Since the U.K. is planning to have 1.55 million electric vehicles. That would require at least 155,000 recharging stations, which is a pretty tall order. But members of the commission are confident it can be done. “We can always call on Elon Musk,” said one official.
For compressed natural gas, the goal is to have one refueling station located every 150 kilometers (93 miles). This gives CNG a comfortable margin for range. With liquefied petroleum (LPG) it will be for one refueling station every 400 kilometers (248 miles). These stations can be further apart because they will mainly be used by long-haul trucks travelling the TEN-T Network, a network of road, water and rail transportation that the Europeans have been working on since 2006.
Interestingly, hydrogen refueling doesn’t get much attention beyond a sufficient number of stations for states that are trying to develop them. There is noticeably less enthusiasm for hydrogen-powered vehicles than is expressed for EVs and gas-powered vehicles. All this indicates how the hydrogen car has become a Japanese trend while not arousing much interest in either Europe or America.
At the same time, Europeans are planning very little in the way of ethanol and other biofuels (they also mandate 20 percent ethanol in fuel). Sweden is very advanced when it comes to flex-fuel cars. They have been getting notably nervous about the misconception that biofuels are competing with food resources around the world — Europe does not have its own land resources to grow corn or sugarcane the way it is being done in the United States and Brazil. Europe imports some ethanol from America but it is also now developing large sugar-cane-to-ethanol areas in West Africa.
Siim Kallas, vice president of the European Commission for TEN-T, told the press the new rules are designed to build up a critical mass of in order to whet investor appetites for these new markets. “Alternative fuels are key to improving the security of energy supply, reducing the impact of transport on the environment and boosting EU competitiveness,” he told Business Week. “With these new rules, the EU provides long-awaited legal certainty for companies to start investing, and the possibility for economies of scale.”
Is there any chance that the public is going to take an interest in all this? Well, one poll in Britain found last week that 65 percent would consider buying an alternative fuel car and 19 percent might do it within the next two years. Within a few years they find the infrastructure ready to meet their needs.
France currently grants new car buyers a credit of 6,300 euros ($8,400) if they purchase an electric vehicle. But if a new bill submitted to Parliament by France’s Minister for Ecology, Sustainable Development and Energy is approved, customers will be eligible for an additional bonus of 10,000 euros if they switch from a diesel powered vehicle to an electric one. That’s a total of 16,300 Euros or about $22,000.
If there’s an Achilles’ heel to the efforts being made to introduce compressed natural gas (CNG) into the country’s vehicles, it is that somebody is going to come along with a liquid fuel that works much better.
CNG has many things going for it. Natural gas is now abundant and promises to stay that way for a long time. That puts the price around $2 a gallon, which is a big savings when gas costs $3.50 and diesel costs $3.70 per gallon. Trucks — mid-sized delivery trucks and big 18-wheelers — are the target market. Delivery vans usually operate out of fleet centers where a central compressor can be installed to service many vehicles. Meanwhile, pioneering companies such as Clean Energy Fuels are busy building an infrastructure at truck stops along the Interstate Highway System to service long-hauling tractor-trailers on their cross-country routes.
But there is a weakness. As a gas, CNG requires a whole new infrastructure. Compression tanks must be built at gas stations, much stronger than ordinary gas tanks and tightly machined, so gas does not escape. Even under compression, CNG has a much lower energy density than gasoline. This requires special $6,000 tanks that must still take up more space. In passenger vehicles they will devour almost all the trunk space, which is why vendors are concentrating on long-distance tractor-trailers.
As a result, there always seems the chance that some liquid derivative of methane is going to come along and push CNG off the market. Methanol has been a prime candidate since it is already manufactured in commercial quantities for industrial purposes. M85, a mixture of 85 percent methanol and 15 percent gasoline, is legal in the United States, but has not been widely adopted.
Now a new candidate has emerged in the long-distance truck competition — dimethyl ether or “DME.” Two methane ions joined by a single oxygen molecule, DME is manufactured from natural gas and has many of the same properties as methanol. It is still a gas at room temperature but can be stored as a liquid at four atmospheres or -11o F. It can also be dissolved as a gasoline or propane additive at a 30-70 percent ratio. In 2009 a team of university students from Denmark won the Shell Eco Marathon with a vehicle running on 100 percent DME.
So is it practical? Well, we’ll soon find out. Volvo has just announced it will release a version of its D13 truck in 2014 that runs on DME. At the same time, Volvo pushed back the launch of its natural gas version of the same line, meaning it may be changing its mind about which way the technology is going to go. In case you haven’t been keeping abreast, Volvo is now the largest manufacturer of heavy trucks in the world, having acquired Mack, America’s oldest truck company, in 2000.
So does that mean that CNG may turn out to be a dead end and Clean Energy Fuels is going to get stuck with a lot of unused compressor pumps? Well, hold on a minute. Technology does not stand still.
Last week at the Alternative Clean Transportation Expo in Long Beach, Calif., Ford and BASF unveiled a new device for the Ford F-450 CNG fuel tank. It’s called a Metal Organic Framework (MOF), a complex of clustered metal ions built on a backbone of] rigid organic molecules that form one-, two-, or three-dimensional structures. Lots of surface area is created, making MOFs porous enough to hold large amounts of gaseous material such as methane.
MOFs create the possibility that on-board CNG tanks will not have to operate under extremely high pressure or extremely low temperatures. Like a metallic sponge the high-surface material soaks gas right up, where it can be easily dislodged as well. According to BASF and Ford, the same amount of natural gas that requires 3,600 pounds per square inch (PSI) can be stored in an MOF tank at close to 1,000 PSI. That makes a big difference when it comes to designing an automobile.
So does that mean natural gas is going to be able to hold its own against DME and other liquid competitors? Well, wait a minute, there’s still more. Not only is MOF technology good at storing methane, it also works with hydrogen! That means the hydrogen-fuel cell — still the favorite among Japanese manufacturers — may be able to work its way back in the game as well.
In fact, Ford isn’t playing any favorites. Equipped with its new MOF tanks, the F-450 will offer drivers a choice of seven — that’s right, seven — different fuel options using the same internal combustion engine. “Ford has no idea which of these fuels will make the most sense,” Ford’s Jon Coleman told Jason Hall of Motley Fool. “So we need to build vehicles that have the broadest capability and the broadest fuel types so our customers can choose for themselves.”
That’s the name of the game. It’s called Fuel Freedom.
Wall Street was abuzz last week as Clean Energy Fuels, the leading supplier of natural gas for use in delivery and heavy-duty trucks, jumped 11 percent in one day after a long slump in which investors were questioning its business model.
“We’re at the very beginning of a major shift to natural gas for trucking – a shift that could take a decade before the growth slows – and Clean Energy Fuels is the leader in the market,” added Jason Hall of Motley Fool, who had been skeptical of the company in the past but is now turning enthusiastic.
“Natural gas vehicles are here to stay,” added James E. Brumley on SmallCap Network, in one of the many enthusiastic endorsements the company received last week. “So Clean Energy Fuels is very much a right-time, right-place idea. It’s not just that the company is the biggest and the best at what it does. There’s a market of scale for what it has to offer.”
It hasn’t been easy. The company, the brainchild of legendary oilman T. Boone Pickens, seemed poised for growth last year but suddenly hit a sudden downdraft in January. Skepticism grew over whether compressed natural gas (CNG) or liquid natural gas (LNG) would be the best substitute for diesel in heavy-duty trucks. The debate is really inconsequential since the two are interchangeable – LNG for large-scale storage and transport with some use in the biggest rigs and CNG for fueling smaller commercial vehicles. Nevertheless, the controversy drove down CEF’s stock price 25 percent since the first of the year.
“Much of the conversation in the investor community over the past six months has been dominated by the false idea that CNG and LNG were competing fuels,” wrote Hall in a recent evaluation. “But while we’ve been arguing, Clean Energy Fuels has been opening stations for trucks across the country. And the company is a leader in both.”
Once again, it seems to have been a case of investors becoming absorbed in short-term focus while ignoring the long-term prospects of the company. True, Clean Energy Fuels has not yet delivered a profit but its progress in building infrastructure to enable us to use significant portions of our natural gas resources as a substitute for diesel fuel has been significant. Here’s what the company has accomplished so far:
- Clean Energy Fuels has delivered 800 million gallons of CNG and LNG to light and heavy-duty trucks.
- The company has built approximately 500 fueling stations across the country.
- It has installed over 1,500 compressors for delivering CNG to vehicles worldwide.
- It has two LNG production plants.
- It has 60 LNG tankers making 5,000 deliveries every year.
- It has two renewable natural gas plants producing bio-methane.
- It has 39 major airport fueling stations.
- It now fuels over 35,000 trucks, large and small, with CNG each day.
As you can see, this is no fly-by-night operation. Whether the company is profitable or not right now, Pickens is obviously in it for the long haul.
Clean Energy Fuels’ long-term goal is a “CNG superhighway” that will offer fueling stations to long-haul trucks along all the major interstates that crisscross the country. But its major success to date has been in servicing fleet vehicles for delivery companies and municipalities.
- CEF currently services 230 trucks a day for UPS with big plans for expansion.
- CEF has contracts with Owens-Corning, Lowe’s, Proctor & Gamble and other commercial establishments’ fleet owners for their delivery vehicles.
- Garden City Sanitation of San Jose has converted 23 refuse trucks to natural gas using CEF’s services.
- CEF will be fueling Kroger’s new 40-unit fleet of LNG trucks later this year.
Analysts believe that refuse and delivery fleets, especially those that are garaged overnight and can be refueled at a central CNG station, will become one of the company’s major markets.
CEO Andrew Littlefield just announced a loss in revenues for the first quarter of 2014 but said this was because of the expiration of the federal volumetric excise tax credit (VETC), which had provided $26 million in 2013. Overall, the trend is definitely upward:
- LNG fuel deliveries increased 22 percent to 16.7 million gasoline gallon equivalents.
- CNG deliveries increased 16 percent.
- When the VETC is excluded, overall revenues were up 43 percent.
- Sales of Redeem, the company’s renewable bio-methane product, increased 45 percent.
Sean Turner, COO for Gladstein, Neandross & Assoc., a leading consulting firm for the development of alternative fuels, notes that the NGV market in the United States is actually larger than in countries such as Argentina and Pakistan, which have been at it for a longer time. “While North America might lag behind in the adoption curve of other countries, natural gas usage per vehicle is actually near the top worldwide,” he said. “This is because other countries have tended to employ NGVs for passenger cars, whereas the U.S is now concentrating on medium-sized and heavy-duty trucks.” And as T. Boone Pickens likes to point out, natural gas will be unrivaled in this marketplace since electric vehicles cannot produce the torque needed to power those long-haul vehicles.
Whether all this makes Clean Energy Fuels a hot stock again is something Wall Street will have to decide. But in terms of moving America toward greater reliance on homegrown natural gas, the news is all favorable.