By REBECCA SMITH
Wall Street Journal
May 23, 2012
Rising diesel costs last year forced Waste
Management Inc. to charge customers an extra $169 million, just to
keep its garbage trucks fueled. This year, the nation's biggest trash hauler
has a new defensive strategy: it is buying trucks that will run on cheaper
natural gas.
In fact, the company says 80% of the trucks it purchases
during the next five years will be fueled by natural gas. Though the vehicles
cost about $30,000 more than conventional diesel models, each will save
$27,000-a-year or more in fuel, says Eric Woods, head of fleet logistics for
Waste Management. By 2017, the company expects to burn more natural gas than
diesel.
"The economics favoring natural gas are
overwhelming," says Scott Perry, a vice president at Ryder
Systems Inc., one of the nation's largest truck-leasing companies and a
transporter for the grocery, automotive, electronics and retail industries.
The shale gas revolution, which cut the price of natural gas
by about 45% over the past year, already has triggered a shift by the utility
industry to natural gas from coal. Vast amounts of natural gas in shale rock
formations have been unlocked by improved drilling techniques, making the fuel
cheap and plentiful across the U.S.
Now the shale-gas boom is rippling through transportation.
Never before has the price gap between natural gas and diesel been so large,
suddenly making natural-gas-powered trucks an alluring option for company
fleets, rather than an impractical idea pushed mainly by natural-gas boosters
like T. Boone Pickens, the Texas oilman. Railroad operators also are being affected
as coal shipments declining.
Many fleet operators, particularly long-haul truckers,
remain concerned about a scarcity of refueling stations. Other challenges
include the bulky tanks for compressed gas and the hazards of handling
liquefied gas. In the past, the volatility of natural-gas prices also hampered
wider use.
But today, truck manufacturers are embracing natural gas for
everything from bi-fuel pickup trucks like the Chevy Silverado HD to eighteen-wheelers
that can burn natural gas either compressed, called CNG, or super-chilled,
called LNG. Navistar International Corp., Cummins Inc. and General
Motors Co. all are courting the market with new natural-gas powered
trucks or engines.
Navistar's goal is to "expand to a full range of
products using natural gas in the next 18 months," says Eric Tech,
president of Navistar's engine business. This year, the Illinois company is
introducing delivery trucks burning natural gas. Next year, it is adding long-haul
trucks with its biggest engines.
Mr. Tech says in a couple of years, one in three Navistar
trucks sold will burn natural gas. "This is not a subsidy-driven
market," Mr. Tech says. "It's developing on its own because the
economics are compelling."
Companies like United Parcel Service Inc. and AT&T Inc. are
buying the vehicles. AT&T recently ordered 1,200 Chevrolet Express cargo
vans equipped to run on compressed natural gas, which GM said was its largest
CNG vehicle order ever.
Ryder Systems began renting out natural gas trucks in
California last yea. The response has been so strong Ryder is expanding the
program to Michigan and Arizona. And it is introducing them in truck clusters
it operates for big box retailers like Staples Inc. and
manufacturers including carpet-maker Mohawk Industries Inc.
For years, a barrel of oil cost about as much as six units
of natural gas and their prices moved in tandem, notes Don Mason, a
gas-industry consultant in Ohio. Today, a barrel of West Texas Intermediate
crude costs more than 33 times as much as a unit of natural gas in the U.S. At
the pump, a gallon of diesel often costs more than twice as much as CNG, on a
diesel-gallon-equivalent basis.
"I think we're at a turning point, even if it's a slow,
wide turn," Mr. Mason says.
Although the U.S. has loads of natural gas, adoption of
natural gas vehicles has been spotty. Less than 0.1% of vehicles on American
roads burn the fuel today and the percentage sagged slightly from 2005 to 2010,
when federal policies encouraging their use waned. The number began edging up
last year, lifted by market forces.
Meanwhile, in the Asia-Pacific region, natural gas vehicle
sales have grown at an average annual clip of 42% during the past decade,
according to NGV Global, a trade group formed in 1986 to promote gas-friendly
policies. Pakistan led the list in 2010 with 2.7 million natural gas vehicles,
though many are tiny tuk-tuks, out of a total of 13 million natural gas
vehicles worldwide. The U.S. came in 14th with 112,000 natural gas vehicles.
Many people are trying to figure out whether natural gas
really has legs as a transportation fuel. Greg Burns, chairman and chief
executive of PLS Logistics Services Inc. in Pittsburgh decided this year to ask
100 trucking company executives. The result: eight in 10 respondents said
natural gas in its densest form, as LNG, has potential for highway use. Nearly
a third said they were actively researching it for their own companies. But 54%
said current infrastructure is inadequate and 23% worried about the higher cost
of the trucks.
Mr. Burns' conclusion: "If you have a long-enough time
frame, it's a pretty bullish picture."
Some truckers soon will have the ability to hedge their
bets. That is because the Environmental Protection Agency recently approved
retrofit technology for big rigs that lets them burn LNG and diesel. Kathryn Clay, executive director of the
Drive Natural Gas initiative of the American Gas Association, says "the
new technology is really game changing because the trucker can run on either
fuel, eliminating refueling anxiety."
The potential market is enormous. The 3.2 million big rigs
on U.S. roads today burn some 25 billion gallons of diesel annually. Almost 7
million single-unit trucks, such as UPS or FedEx Corp. trucks,
consume another 10 billion gallons of diesel.
Converting even a modest number of these trucks, which often
get 5 to 8 miles a gallon, to natural gas could save significant amounts of
money. Tailpipe emissions also would drop, since natural gas burns cleaner than
diesel or gasoline.
If large numbers of fleet operators decided to embrace
natural gas, it could rev up truck manufacturing, which slowed dramatically
during the recession. North American heavy duty truck sales peaked in 2006 with
360,000 units, just ahead of tighter emission standards, and plunged to 110,000
units in 2009.
Noel Perry, principal at Transport Fundamentals Inc., a
trucking research company in Lebanon, Penn., says one disadvantage of natural
gas is that it isn't as dense as diesel. CNG is only 25% as dense and LNG is
60% as dense. That means trucks need more tanks or bigger tanks to go as far,
or they must refuel more often. That's not a big deal for city buses or
delivery trucks that go back to home base each night, where they can refuel.
But it's a problem for trucks that drive unpredictable routes or venture out
into the hinterland.
Ann Duignan, managing director at J.P. Morgan Equity
Research, says "there's huge excitement" about natural gas but
infrastructure immaturity will depress truck sales. She expects fastest
adoption among fleets that can run on CNG and return home each night but is
skeptical about long-haul trucking. "It will be slow, steady,
one-fleet-at-a-time type growth," she says.
No comments:
Post a Comment