Natural Gas Vehicles: A Feasibility Study

Steven C. Agee, Ph.D. Shouro Dasgupta, B.S.B. Alexis Caron, B.S.B.

Introduction: Natural Gas Vehicles

Dedicated natural gas vehicles are designed to run on natural gas only, while dual-fuel or bi-fuel vehicles can also run on gasoline or diesel.

Dual-fuel vehicles allow users to take advantage of the widespread availability of gasoline or diesel but also uses a cleaner, more economical alternative when natural gas is available.
Natural gas used as a transportation fuel is called compressed natural gas because the gas is compressed to a pressure of about 3,600 pounds per square inch (psi) and stored in a fuel cylinder aboard the vehicle. CNG flows into the engine's combustion chamber and is ignited to create power to drive the vehicle. It is estimated that there are 9.6 million natural gas operated vehicles in the world (December 2009)

Advantages and Disadvantages of Natural Gas Vehicles

Advantages
Nearly 87% of U.S. natural gas used is domestically produced, while in 2008 53% of the petroleum/crude oil consumed in US was imported

Disadvantage
Limited vehicle availability Filling stations are less readily available than gasoline and diesel Fewer miles on a tank of fuel Less trunk space for dual-fuel autos.

60-90% less smog-producing pollutants*

30-40% less greenhouse gas emissions Less expensive than gasoline Using CNG is also considered to be better for engines, as cylinder wear and oil contamination is reduced. Also, spark plugs stay cleaner for longer.
* Depending on the type of vehicle

Worldwide Natural Gas Vehicle Statistics

Table 1: Number of Natural Gas Vehicles by Country
Rank Country Natural Gas Vehicles Refueling Stations

1 2 3 4 5

Pakistan Argentina Brazil Iran India

2,000,000 1,745,677 1,588,331 1,000,000 650,000

2,941 1,801 1,688 500 463

6
7 8 9 10 11 12

Italy
China Colombia Bangladesh Thailand Ukraine USA

580,000
400,000 280,340 190,381 127,735 120,000 110,000

700
1,000 401 502 303 224 224

Source: International Association of Natural Gas Vehicles, 2009

The Technology
Typical CNG Components in a Natural Gas Vehicle

The Technology (cont.)

4th Generation CNG System

Conversion Costs (Gasoline to Natural Gas)

A specially designed Conversion Kit is required consisting of cylinders
to be fixed in the trunk of the car with associated equipment to allow the natural gas to flow into the engine and all cars can be converted irrespective of make or model.
Table 2: Conversion Cost Comparison by Country
Country Conversion Cost (50 liter tank) Conversion Cost (90 liter tank)

Bangladesh Pakistan Argentina Brazil Iran

$750 - $800 $ 200 - $230 $ 200 - $400* $100- $175 $50*

$850 - $ 900 $ 245 - $285 $420 - $515* $ 200 - $400 $80*

India
Thailand Malaysia USA

$700 - $800
$1170 - $1400 $875 - $1100 $1450-$3000

$950 - $1,000
-

*Government subsidized

Fuel Price Comparison

Table 3: Fuel Price Comparison
Average Price in Gasoline Gallon Equivalents ($) Average Price in Diesel Gallon Equivalents ($) Average price in Dollars per Million Btu ($)

Gasoline

2.65

2.96

22.99

Diesel CNG Ethanol (E85) Propane

Biodiesel (B20) Biodiesel (B99-B100)

2.57 1.85 3.36 4.13

2.70 3.54

2.87 2.07 3.75 4.61

3.02 3.95

22.26 16.07 29.13 35.81

23.44 30.67

Source: US Department of Energy (January 2010)

CNG is about 80 cents less than gasoline on an energy-equivalent basis, while E85 is about 28 cents less per gallon than gasoline.

Emission Standards
Light-Duty Vehicle Emissions: CNG vs. Gasoline

Reduces carbon monoxide emissions 90%-97%

Reduces carbon dioxide emissions 25%

Reduces nitrogen oxide emissions 35%-60% Potentially reduces non-methane hydrocarbon emissions 50%75% Emits fewer toxic and carcinogenic pollutants Emits little or no particulate matter Eliminates evaporative emissions
Source: U.S. Environmental Protection Agency

Savings from CNG Vehicles

As a vehicle fuel it is about 30-50% cheaper than gasoline. This is due to a combination of: The cost of natural gas on an energy equivalent basis relative to

petroleum fuels and

fuel taxes, the current pre-tax price of Russian H-gas (the assumed marginal source for NG used in Europe) delivered in the form of CNG is, per lower heating value energy unit, only 63 % of the current price of petrol.
Table 4: Saving Chart between CNG and Gasoline (Asia)
CNG Gasoline

Rate
Average Running cost/km Save/100km

1.91/kg
16.80 km/kg $ 0.114 $ 7.82 ($12.59/100 miles)

$2.67/liter
12 km/liter $0.225 Nil

Source: International Association of Natural Gas Vehicles, 2009

Savings (cont.)
Table 5: Saving Chart between CNG and Gasoline (Europe)

Natural Gas
Price per kg Consumption/100 km Cost per 100 km

Rate
0.79 ($1.02 USD) 7 kg (15.4 pounds) 5.53 ($7.17 USD)

Regular Gasoline Price per liter Consumption/100 km Cost per 100 km

Savings

Rate 1.23 ($1.59 USD) 10 liters (2.6 gallons) 12.30 ($15.95 USD)
6.77 /100 km ($14.13/100 miles) or 55 percent

Source: International Association of Natural Gas Vehicles, 2009

Predicted Savings in USA

Table 6: Savings in USA Gasoline MPG (City) MPG (Highway) Requirement for 100 miles (City) Requirement for 100 miles (Highway) Cost per 100 miles (City) Cost per 100 miles (Highway) Savings from using CNG (City) Savings from using CNG (Highway)
Source: US Department of Energy (April 2010)

CNG 30 34 3.33 gallons 2.94 gallons $4.41 $4.70 $3.71 $2.14

32 38 3.12 gallons 2.63 gallons $8.12 $6.84

Based on the mileage information from a 2005 Honda Civic and gasoline and CNG prices data from the Midwest region (CNG-$1.41* & Gasoline $2.73), it is projected that for a 100 miles trip a CNG run vehicle will save;

$3.71 in the city area and

$2.14 in the highway Estimates do not include additional savings from lower maintenance costs from reduced wear and tear of the engine, less frequent oil changes and tune-ups.
* Average price as of 3rd May 2010 in OKC

Savings from Maintenance and Performance

Some fleet operators have reduced maintenance costs by as much as 40 percent by converting their vehicles to CNG. Intervals between tune-ups for natural gas vehicles are extended 30,000 to 50,000 miles. Intervals between oil changes for natural gas vehicles are dramatically extended--anywhere from 10,000 to 25,000 additional miles depending on how the vehicle is used. CNG has an octane rating of 130 and has a slight efficiency advantage over gasoline. Because CNG is already in a gaseous state, NGVs have superior starting and drivability, even under severe hot and cold weather conditions

Tax Rate Comparison

Country Germany India Pakistan Italy Oklahoma
*

Tax on Gasoline 68.7 % + 19.0 % VAT 52.0% 38.57% 63.1% 12.93%

Tax on CNG 0.0% 8.0%* 0.0% 0 5%** 11.48%

Currently only in the states of Maharashtra and Uttar Pradesh Depending on the size of the vehicle Federal tax of 18.4 cents/gallon plus state tax of 17 cents/gallon as a percentage of average gasoline price in Federal tax of 18.3 cents/gallon plus state tax of 16 cents as a percentage of average CNG prices in OKC of

**

OKC of $2.737 (04/29/2010)

$1.41 (05/03/2010). However, a state tax waiver permit for CNG can be purchased from Oklahoma Tax Commission at a cost of $ 100 per year.

In order to recover the $100, a person would have to purchase ($100/0.16) 625 gallons of CNG. At an average tank size of 23 gallons, a person would have to fill up their car approximately 27 times a year or drive approximately 17,500 miles a year. Otherwise it is better off to pay taxes during CNG purchase.

Incentives for Natural Gas Vehicles

For Consumers: Oklahoma

The state of Oklahoma offers the following incentives

a one-time income tax credit for 50% of the cost of converting a vehicle to operate on an alternative fuel or for 50% of the incremental cost of purchasing a new Original Equipment Manufacturer AFV The state also provides a tax credit for 10% of the total vehicle cost, up to $1,500

Federal Qualifying vehicles are also eligible for a federal income tax credit of up to $4,000.

Incentives for Natural Gas Vehicles

For Fuel Retailers : Oklahoma Oklahoma provides a tax credit for up to 75% of the cost of installing alternative fueling infrastructure. Beginning January 1, 2010, a tax credit is also available for up to 50% of the cost of installing a residential CNG fueling system (not to exceed $2,500). Federal A 30% tax credit (not to exceed $30,000) is available for equipment placed into service before January 1, 2009. For equipment placed into service after January 1, 2009, the credit amount is up to 50% (not to exceed $50,000).

Contact Information

Steven C. Agee, Ph.D. Professor of Economics and Director Economic Research & Policy Institute Meinders School of Business Oklahoma City University 2501 N. Blackwelder Oklahoma City, Oklahoma 73106 USA sagee@okcu.edu (405) 208-6111