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LNG a cost-saving alternative to truck diesel

Trucks could reap major savings switching from diesel to natural gas, despite high upfront costs for conversion, says a report from the Conference Board of Canada.


April 24, 2012
by PLANT STAFF

OTTAWA: Trucks could reap major savings switching from diesel to natural gas, despite high upfront costs for conversion, says a report from the Conference Board of Canada.

The Ottawa-based research firm estimates that converting fleets to natural gas could generate savings of approximately $150,000 per truck over a 10-year period: just under twice the cost of installing a natural gas engine at about $80,000 per vehicle.

“Our models indicate that while the capital costs are high, the savings from lower fuel costs make natural gas an economically viable fuel for the trucking sector,” said Vijay Gill, co-author of Cheap Enough? Making the Switch From Diesel Fuel to Natural Gas. “Trucking firms could reap significant net benefits in operating costs while also reducing their environmental impact.”

To become a viable transportation fuel, natural gas must be compressed or liquefied, which restricts a vehicle’s range or makes a larger fuel tank necessary, reducing the truck’s carrying capacity.

The report focuses primarily on modelling the impacts of trucks powered by liquefied natural gas, since it out-performs compressed natural gas (CNG) in terms of range.

The financial impact of converting trucking fleets to natural gas includes the expected operating cost savings over the life cycle of the vehicle, the additional upfront capital costs, and the impact of fuel taxes and capital cost allowances.

Historically, natural gas has traded about half the price of crude oil per unit of energy. The report notes the gap has steadily widened and continues to grow, which leaves room to cover the additional costs of compressing or liquefying gas for transportation fuel.

There would also be an environmental benefit. Greenhouse gas emissions would be expected to fall by more than 50 tonnes per truck per year, assuming no additional demand is generated as a result of the lower operating costs.

Potential challenges to the wholesale adoption of natural gas as a transportation fuel include tax policy and refuelling infrastructure. Since natural gas is currently exempt from the equivalent of a road diesel excise tax, nearly half of the estimated savings would come from fuel tax savings. If natural gas loses its tax exemption, the Conference Board said that would compound the disincentive created by the high capital cost of converting to natural gas engines.

A refuelling infrastructure that’s competitive with other fuels would also have to be developed to make LNG a viable energy source for vehicles.