In the US, ethanol production for the week before last averaged 902,000 barrels per day, or 37.88 million gallons daily. The four-week average for ethanol production stood at 940,000 b/d for an annualized rate of 14.41 billion gallons.
An ethanol plant in Hopkinsville, Ky is leading the way for cleaner, more efficient gasoline. Commonwealth Agri-Energy is ran by Hopkinsville Elevator Company and Kentucky Corn Growers Association.
What would you say about an investment opportunity where your product is four times cheaper than the commodity it is trying to replace and there are 77 million potential customers waiting to use it?
Does that sound like something that you would like to put your money into? Well that’s the opportunity that awaits anyone willing to invest in the infrastructure and technical changes needed to substitute natural-gas-based ethanol for foreign-fuel-based gasoline in our cars.
A full-fledged prospectus was presented this month by Miles Light, professor at the Leeds School of Business at the University of Colorado Boulder, in a report called “Natural Gas Based Liquid Fuels: Potential Investment Opportunities in the United States,” written for the recent Goldman Sachs Energy Summit.
Professor Light lays out the situation in very clear terms: “Low natural gas prices and new technology present an opportunity to market and sell liquid fuels in the form of ethanol and methanol to U.S. consumers. Per unit of energy, oil is almost four times more expensive than natural gas. This implies a potential arbitrage opportunity to convert natural gas and natural gas liquids into a liquid fuel. In the U.S., 14.5 million vehicles can currently utilize ethanol fuels. These are the so-called ‘Flex Fuel’ vehicles. Another 16.1 million FFV ‘Twins’ can utilize ethanol with a software upgrade, and 46.9 million conventional fuel vehicles can potentially be converted for $150-$250 each. In all, this presents 77.75 million light duty vehicles, or 31.8% of the national light duty fleet, that would potentially purchase natural gas liquid fuel, if prices were attractive.”
You’ve undoubtedly heard the phrase, “If we can capture just 2 percent of this market…” Well, this is it. There are opportunities up and down the line, from auto mechanics performing flex-fuel conversions on conventional engines to major corporations building plants to convert natural gas to ethanol.
What Light is talking about here is the wholesale substitution of a portion of our natural gas resources for the oil we import in order to run our transportation sector. True, we’ve cut down on imports so they now make up less than half of our consumption for the first time since the early 1990s. But what people are missing is that we still pay the same amount for that oil because the price keeps rising. This continues to put a $380 billion dent in our trade balance every year — not to mention that much of this money goes to countries that actively support hostile actions against America and its friends and allies around the world.
So what would it take to make this transition? There’s certainly been a lot of activity to date. However, most of it has concentrated on utilizing compressed natural gas (CNG) and liquid natural gas (LNG). T. Boone Pickens’ Clean Energy Fuels is in the process of building a “CNG Highway” to service long-haul trucks from coast to coast. He’s already completed the first leg from Los Angeles to Houston. Those big 18-wheelers have room for the larger gas tanks and travel fixed routes along the Interstate Highway System that can be serviced by relatively few filling stations.
But passenger vehicles are a completely different matter. They travel everywhere and would require a whole new national infrastructure to fill their tanks. The auto companies have already offered a few CNG models but they haven’t sold well. It’s the chicken-and-egg problem — people won’t buy cars before the stations become common and the stations won’t be built until there are enough cars on the road.
With ethanol, however, there is already an infrastructure in place. The country is presently outfitted with 2,394 gas pumps dispensing E85, a mixture of 85% ethanol and 15% gasoline. (The gasoline is there just to start on cold mornings.) Most of these are concentrated in the farm belt but they’re starting to make their way into major cities on the East and West Coasts as well.
The point is this: these stations have been set up to handle corn ethanol. This is the result of the 35-year government effort to promote biofuels. But Light suggests that these stations could just as easily dispense ethanol made from natural gas. No new technology would be necessary, nor would it require any special permission from the government. (Methanol, which is a little easier to synthesize than ethanol, has a greater toxicity and would require some additional approval from the Environmental Protection Agency.)
So according to Light, this is where the investment opportunities lie. The conversion of natural gas to ethanol is the first and most important step, but Coskata, Inc. already has a working facility and Celanese Corporation is converting coal to ethanol in Indonesia. Light estimates that, at current and foreseeable prices, the return on investment could be as high as 46 percent.
Then there are all the intervening steps. “Alongside the core ethanol production opportunity, there are several related supply-chain developments projects, such as production facility development, ethanol fuel marketing, fueling station upgrades, blending facility expansions, and vehicle update kits,” he writes. All are well within the range of private investment. No government subsidies or mandates would be required.
In other words, the conversion of significant portions of our auto fleet to natural gas presents a whole world of opportunity just waiting for imaginative, ambitious investors to take advantage.
Anybody interested?
Perhaps nothing has enhanced America’s energy independence more over the last five years than the development of the Bakken shale.
Early on I wrote a column about an unanticipated Thanksgiving dinner conversation with a special operations soldier who had served in Iraq. His comment, in response to a question I asked about whether he and his buddies knew why they were sent to Iraq, was brief and blunt: “oil and U.S. security.” He would have none of what he thought was b.s. about “freedom and democracy” or “weapons of mass destruction.” Before I asked the question I actually already knew what his answer would be, but a glass of wine, a wonderful piece of turkey and good company suggested that my inquiry would lead to an opening for a longer repartee on the Middle East and U.S. policy. It did, and again oil and oil politics were the dominant theme.
I suspect that many of the writers of today’s headlines and op-ed articles anticipated Republican Eric Cantor would win. They are now arguing, in sometimes misleading reference terms concerning democracy, inter-sectarian harmony and morality, for a more aggressive U.S. policy toward the invasion by Sunni radicals of parts of what once on a map called the nation of Iraq.
But the real issue for many “experts,” I again suspect, is oil — a fear, whether factual or not, that if Iraq collapses, the world oil supply (already close to equilibrium concerning demand and supply) will relatively quickly reflect shortages and much higher prices per barrel of oil ($150 a barrel) and oil’s product, gasoline ($5 and more).
Should we be sending kids to fight for our apparent God-given right to Middle Eastern oil? Although I think a lot about the ethics of public decision making, I am not an ethicist. But as long as there are alternatives to supply, my hard-nosed policy advice would be against war or the steps that might lead to war. Iraq has not been the noble state that welcomed America in to rescue it ostensibly from Saddam Hussein. Its form of democracy has been limited, corrupt and sectarian.
What should our calculations be, concerning alternative supplies of oil? First, we ought to really think through whether a full or partial shutdown of Iraqi oil wells will mean a damn. Iraq alone supplies a small share of U.S. oil imports. Most of the often-shrill economic coverage of the radical Sunni invasion and its potential impact on U.S. oil seems to relate more to perceptions, not empirical evidence, about shortages and prices. Commentators “perceive” what the oil markets might or will do — really what oil speculators and investors will or will not do — based on what is currently happening in Iraq, not on facts on the ground. Neil Cavuto of Fox Business said, “Oil is a commodity, a global commodity, and like any stock in almost any market, it often trades on issues having little to do with basic fundamentals, and more to do with simple fear.”
Assuming, however, there is a real worldwide shortage of oil as a result of a closure of Iraqi wells, or that fear drives the prices up so much that there is a strain to the economy, the Saudis, probably, among all the OPEC nations, are the only ones with sufficient oil in the ground to make an immediate difference concerning supply. But will they? They have shown some flexibility in the past to U.S. petitioning. They have also, at times, despite their security relationship to the U.S., turned us down. This time around the Saudis could well be more than a bit sensitive, particularly if it looks like the radical Sunnis might win. The Kingdom is vulnerable with respect to a radical brand of Sunniism. I bet they also fear a potential Shiite effort to push the radicals back, particularly one led by Iran. Life is never simple for the House of Saud.
Okay, where are we? Oil is sold in an international marketplace. No matter which side you are on regarding the Keystone XL pipeline, if approved and completed, it will not have a major impact on U.S. gas supply or prices. Ask your friendly oil refinery or oil company executive where he or she believes Keystone-supplied oil will be going. Most of the assumed supply will be traded internationally for the highest global price. The predicted increased supply of U.S.-produced gasoline will probably help diminish price increases slightly, but don’t make a bet on how much. Today, a price of a gallon of regular unleaded gasoline is well over $4 in California and U.S. production is at a very high level.
What would likely help keep gasoline prices from spiking significantly and, at the same time, lessen the amplitude of the cycles is a commitment to competition in the fuel marketplace. Let Adam Smith reign! Allow safe, cheaper, environmentally better replacement fuels, particularly natural gas-based ethanol (and someday soon, methanol) to compete with gasoline. Encourage the conversion of older vehicles to flex-fuel vehicles! Push for renewable fuels and related vehicles that appeal to a larger market than at present, given costs and design constraints! Reduce our dependence on imported oil! Make love, not war! Drive (excuse the pun) for strategic solutions!
Remember when Japan’s Ministry of Economy, Trade and Industry (METI) used to sit atop the Japanese industrial complex, steering it like some giant Godzilla hovering over the entire world?
Those were the days when Japan’s government-industry partnership was supposed to represent the future, when Michael Crichton wrote a novel about how Japan would soon devour America, when pundits and scholars were warning that we had better do the same if we hoped to survive – before, that is, the whole thing collapsed and Japan went into a 20-year funk from which it has never really recovered.
Well those days may be returning in one small part as METI prepares to direct at least half the Japanese auto industry into the production of hydrogen-powered fuel-cell cars.
“Japanese Government Bets the Farm on Fuel Cell Vehicles” ran one headline earlier this month and indeed there’s plenty at stake for everyone. The tip-off came at the end of May when Jim Lentz, CEO of Toyota’s North American operations, told Automotive News that electric vehicles are only “short-range vehicles that take you that extra mile…But for long-range travel, we feel there are better alternatives, such as hybrids and plug-in hybrids, and, tomorrow, fuel cells.” The target here, of course, is Tesla, where Elon Musk appears to be making the first inroads against gasoline-powered vehicles with his $35,000 Model E, aimed at the average car buyer. Toyota was originally in on that deal and was scheduled to supply the batteries until it pulled out this spring, ceding the job to Panasonic.
But all that was only a preview of what was to come. In early June, METI announced it would orchestrate a government-private initiative to help Toyota and Honda market fuel-cell vehicles in Japan and then across the globe. Of course that leaves out the other half of Japan’s auto industry, Nissan and Mitsubishi, pursuing their version of the EV, but maybe the Japanese are learning to hedge their bets.
The hydrogen initiative will put the fuel-cell vehicle front-and-center in the race to transition to other forms of propulsion and reduce the world’s dependence on OPEC oil. Actually, hydrogen cars have been in the offering for more than twenty years. In the 1990s soft-energy guru Amory Lovins put forth his Hypercar, a carbon-fiber vehicle powered by hydrogen fuel cells. In 2005, California Gov. Arnold Schwarzenegger inaugurated the “Hydrogen Highway,” a proposed network of hydrogen filling stations that was supposed to blanket the Golden State. Unfortunately, only ten have been built so far, and there are still no more than a handful of FCVs (hydrogen fuel cell vehicles) on the road. Mercedes, BMW, Audi and VW all have small lines but none are marketed very aggressively in the United States.
This time, however, there may be a serious breakthrough. After all, Toyota, Honda and METI are not just in the business of putting out press releases. Toyota will begin production of its first mass-market model in December and Honda will follow with a 5-passenger sedan next year. Prices will start in the stratosphere — close to $100,000 — but both companies are hoping to bring them down to $30,000 by the 2020s. Meanwhile, GM is making noises about a fuel-cell model in 2016 and South Korea’s Hyundai is already unloading its hydrogen-powered Tucson on the docks of California.
What will METI’s role be? The supervising government ministry promises to relax safety standards, allowing on-board storage of hydrogen at 825 atmospheres instead of the current 750. This will increase the car’s range by 20 percent and bring it into the 350-mile territory of the internal combustion engine. Like the ICE, hydrogen cars can “gas up” in minutes, giving them a huge leg up on EVs, which can take anywhere from 20 minutes with superchargers to eight hours with household plugs. METI has also promised to loosen import controls so that foreign manufacturers such as Mercedes-Benz can find their way into Japan. And, of course, it will seek reciprocal agreements so Toyota and Honda can market their models across the globe.
So will the one-two punch of government-and-industry-working-together be able to break the ice for hydrogen vehicles? California seems to be a particularly ripe market. Toyota is already the best-selling car in the state and the California Energy Commission is promising to expand the Hydrogen Highway to 70 stations by 2016. Still, there will be stiff competition from Elon Musk if and when his proposed Gigafactory starts turning out batteries by the millions. Partisans of EVs and fuel-cell vehicles are already taking sides.
In the end, however, the most likely winners will be consumers who will now have a legitimate choice between hydrogen vehicles and EVs. It may be a decade or more before either of these technologies makes a significant dent in our oil consumption, but in the end it will be foreign oil providers that will be feeling the pain.
The electric car depends on batteries, and before EVs become a large chunk of our automotive fleet, there are probably going to be some changes.
Right now, Elon Musk is betting he can produce millions of small lithium-ion batteries not much bigger than the ones you put in your flashlight and string them together to power a $35,000 Tesla Model E over a range of 200 miles at speeds of up to 70-80 mph. The Model E also will also need an infrastructure of roadside “filling stations” and home chargers, although the best superchargers still take more than 20 minutes to achieve 80 percent capacity.
But there is another way to store electricity, long familiar to the designers of electrical circuits. It’s the capacitor, a device that stores a small current by static electricity rather than a chemical reaction. Capacitors sit in all of your electrical devices, from radio circuits to the most sophisticated laptops, and are essential to providing the steady electric current needed to run such electronics. But what if the concept of capacitors could be scaled up to the point where they could help power something as big as an electric vehicle? Granted, it’s a long, long way from the 1.5-volt capacitor in your iPad and powering a 4,500-pound Tesla along the Interstate, but researchers are out there probing and are already thinking in terms of a breakthrough.
Right now there’s a huge separation between the things that batteries can do and the things that capacitors can do. In a way they are complementary — the strengths of one are the weaknesses of the other. But researchers are working toward a convergence — or perhaps just a way of using them in tandem.
A battery employs chemistry by splitting ions in the electrolyte so that the negative ones gather on the cathode and the positive on the anode, building up a voltage potential. When they are connected externally an electric current flows. Batteries have a lot of energy density. They can store electricity up into the megawatt range and release a flow of electricity over long periods of time. The process can also be reversed, but, because the reaction is (once again) chemical, it can take a long time.
Capacitors store electrons as static electricity. A thundercloud is a great big capacitor with zillions of electrons clinging to the almost infinite surface area of individual raindrops. And as everyone knows, this huge stored capacity can be released in a “bolt of lightening.” Capacitors can be recharged almost instantly but also they release their energy almost instantly, rather than the even flow of a battery. One of their major uses is in flash photography. But their capacity for storing power is also limited. On a pound-for-pound basis, the best capacitors can only store one-fifth to one-tenth the equivalent of a chemical battery. On the other hand, batteries can start to wear out after five years, while supercapacitors last at least three times as long.
Back in the 1950s, engineers at General Electric, and later at Standard Oil, invented what have come to be called “supercapacitors.” Basically, a supercapacitor changes the surface material and adds another layer of insulating dielectric in order to increase storage capacity. Surface area is the key and engineers discovered that powdery, activated charcoal vastly increased the capacity of the storage plates. Dielectrics were also reduced to ultra-thin layers of carbon, paper or plastic, since the closer the plates can be brought together, the more intense the charge. Since then they have begun experimenting with graphene and other advanced materials that may be able to increase surface area by orders of magnitude. All of this means that much more electricity can be stored in a much smaller space.
But the problem of low energy density remains. Even supercapacitors can only operate at about 2.5 volts, which means they must be strung together in series in vast numbers in order to reach voltage levels required to power something like an electric car. This creates problems in maintaining voltage balance. Still, some supercapacitors are already being employed in gas-electric hybrids and electric buses in order to store the power siphoned off from braking.
Researchers in the field now see some possibility for convergence. Most exhilarating is the idea that the frame of the car itself could be transformed into a supercapacitor. Last month, researchers from Vanderbilt University published an online paper entitled, “A Multifunctional Load-Bearing Solid-State Supercapacitor,” in which they suggested that load-bearing materials such as the chassis of a car or even the walls of your house could be transformed into supercapacitors to store massive amounts of electricity on-site. Combined with advances in evening the flow of electrons from supercapacitors, this opens up whole new avenues of approach to the electric car.
All of these developments are a long way off, of course. Still, supercapacitors support the possibility of pulling out of your driveway in the morning and returning at night in your EV without needing to gas up with foreign oil at your nearest filling station.
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.
Correlation or causation, correlation or causation
Misleading numbers, mistaken assumptions. Who will be the joker?
Okay, I am neither poet nor composer. I can’t even sing. But Fiorello Laguardia was an early hero from the time I met him in my sixth grade history books, and the musical Fiorello! was good fun.
Mayor Laguardia would be amused and bemused by recent articles suggesting that the Monterey Shale isn’t what it was cracked up to be a year or two ago. The story lends itself to his famous encounters with comic books. Despite earlier media hype, its development will not lead to economic nirvana for California and could well lead to real environmental problems.
Why were the numbers that were put out by the oil industry just a couple of years ago wrong? Maybe because of a bit of politics and polka! The articulated slogan concerning oil independence from foreign countries mesmerized many who should have known better.
Similarly, why, while once accepted by relevant federal agencies, have the production numbers concerning the Monterey Shale been recently discounted by the same agencies (EIA) and independent non-partisan analysts? Quite simply, they now know more. Succinctly, it’s too expensive to get the oil out and the oil wells, once completed, will have a comparatively short production life.
Drilling an oil field that is located under flat land is easier than drilling for very tight oil — oil that lies underwater or under a combination of flat as well as hilly, rolling, developed, partially developed or undeveloped areas known for their pervasive, pristine, beautiful environment. Further, the geological formations in the Monterey Shale area are a victim of their youth. They are older than Mel Brooks, but at 6-16 million years, the Monterey Shale is significantly younger than The Bakken. Shale deposits, as a result, are much thicker and “more complex.” According to David Hughes (Post Carbon Institute, 2013), existing Monterey Shale fields are restricted to relatively small geographic areas. “The widespread regions of mature Monterey Shale source rock amendable to high tight oil production from dense drilling…likely do not exist…” “… While many oil and gas operators and energy analysts suggest that it is only a matter of time and technology before ‘the code is cracked’ and the Monterey produces at rates comparable to Bakken and Eagle Ford,” this result is likely is not in cards…the joker is not wild. “Owing to the fundamental geological differences between the Monterey and other tight oil plays and in light of actual Monterey oil production data,” valid comparisons with other tight oil areas are…wishful thinking. Apart from environmental opposition and the costs of related delays, the oil underwater or underground in the Monterey Shale is just not amenable to the opportunity costing dreams of oil company CEOs, unless the price of oil exceeds $150 a barrel. According to new studies from the EIA, the recoverable reserves, instead of being as it projected earlier from 13.7 to 15.4 barrels, will be closer to 0.6 barrels.
If you believe in “drill, baby, drill” as a policy and practice, the cost/price conundrums are real. Low costs per barrel for oil appear at least marginally helpful to consumers and increases in oil costs seem correlated with recessions. Increased production of tight oil depends on much higher per barrel prices and, in many instances, increased debt., Neither in the long term is s good for the economic health of the nation or its residents.
Breaking the strong link between transportation and oil (and its derivative, gasoline) would make it easier to weave wise policy and private-sector behavior through the perils of extended periods of high gasoline prices and oil-related debt. Expanding the number of flex-fuel vehicles (FFVs) through inexpensive conversion of older cars and extended production of flex-fuel vehicles by Detroit would provide a strong market for alternative transition fuels and put pressure on oil companies to open up their franchises and contracts with stations to a supposedly key element of the American creed-competition and free markets. The result, while we encourage and wait for renewable fuels to reach prime time status, would be good for America, good for the environment and good for consumers.
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:
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.
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:
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.
