Posted: February 04, 2013

New hope for natural gas autos

Eric Peterson

Natural gas is domestic and cheap and clean, so the story goes. So why are we still guzzling gasoline in our cars instead of sipping natural gas?

There are no easy answers, but Colorado Gov. John Hickenlooper has reached across party and state lines in search of one.

To push for the adoption of natural gas as a transportation fuel, Hickenlooper, a Democrat, signed a November 2011 memorandum of understanding (MOU) with Oklahoma Gov. Mary Fallin, Wyoming Gov. Matt Mead, and Pennsylvania Gov. Tom Corbett – all Republicans. The MOU has a stated goal "to attract automobile manufacturers in the U.S. to develop a functional and affordable original equipment manufacturer (OEM) fleet natural gas vehicle (NGV) that will also meet public demand."

The states committed to buy NGVs for their state fleets to buoy local natural gas producers and give the broader market a boost. Hickenlooper traveled to Detroit last July to discuss the issue with the auto industry’s leaders, and the conversation continued when manufacturer representatives visited Colorado in August.

"This bipartisan effort demonstrates the ability of government to work together to secure energy independence for the U.S.," says Tracee Bentley, the Hickenlooper administration’s director of policy and legislation. "Vehicle procurements on this scale provide economic development, promote jobs and utilize a lower-cost, cleaner burning fuel. The MOU is moving the transportation industry in a good direction."

Early Rewards of the MOU

Since the MOU’s genesis, 18 additional states have signed on, bringing the grand total to 22 states stretching from Maine to Utah. In 2013, the strategy is starting to bear fruit.

Oklahoma’s bid prices for NGVs and bifuel vehicles that can run on either natural gas or gasoline dropped by about 10 percent to 20 percent in 2013. The Sooner State’s price tag on the Honda Civic GX, the only OEM-made light-duty NGV on the U.S. market, fell from about $31,000 to $25,000. The bifuel Dodge Ram 2500 Crew Cab fell from $36,000 to just under $30,000.

In Colorado, the early results of the MOU have been less pronounced, but the state bids for the bifuel Ford F-250s were down more than 15 percent, while the bid for the Civic GX remained the same at $25,557.

But incremental cost dropped by much higher percentages, making NGVs an easier sell for high-mileage fleet operations. Also important for fleets, the breadth of options has widened: Colorado can choose from two light-duty NGVs and 15 bifuel trucks and vans in 2013, up from only five in 2012.

Thanks to historically low natural gas prices, the payback for fleet vehicles could be as little as two or three years. Estimates hold that Colorado would save $20,000 in fuel over five years with the compressed natural gas (CNG) Dodge Ram, but it costs about $10,000 more than a gasoline Ram.

"Natural gas is attractive because it’s cheap," says Alex Schroeder, senior manager for transportation fuels at the Colorado Energy Office. "Fleets and businesses are doing this for economic reasons." The volatile economics of petroleum-based fuel "is lifting all boats" in the uncharted alternative-fuel waters.

California and Utah are ahead of the curve, but "Colorado is catching up," Schroeder says. But if 22 states start aggressively buying NGVs for their fleets, he adds, "Now you’re talking numbers the manufacturers can respond to. It starts with the fleets. The big step now is implementation."

Broader consumer adoption will take longer, Schroeder says. "That’s not something that’s going to happen overnight. We’ve been using petroleum for 100 years." A five-year development cycle is the norm for the auto industry, and volume will help drive the price of NGVs closer to that of their petroleum-fueled peers.

Rich Kolodziej, president of NGVAmerica, a pro-NGV trade association in Washington, D.C., calls the MOU "a big deal" but laments that more OEMs have not responded. Instead, American automakers are largely working with aftermarket partners to offer conversions. "It’s slow because only a few states have gone through the bid process," Kolodziej says. "I think it’s going to pick up, because I think more states are going to sign on (to the MOU)."

Manufacturers "should be coming out with additional models," Kolodziej says. "That’s what we want to see. Right now, we’ve just got the Honda Civic."

Beyond the MOU, increased federal funding for natural-gas vehicle R&D and EPA policies would be the biggest catalysts for the industry, he adds. "The federal government could do a lot of different things. The MOU has provided an impetus at the state level. The automakers have to see demand. If they see demand, they’ll build it. It’s all about volume."

If this sounds like déjà vu, that’s because this played out over the course of the last decade. Light-duty NGV availability peaked in the U.S. in 2002 when buyers could choose from 18 models from American automakers. That dropped to five models in 2005 and dwindled to one – American Honda’s Civic GX – by 2007. Excluding aftermarket conversions, the light-duty NGV catalog hasn’t changed in the six years since: Beyond the Civic GX, no automaker currently has a light-duty NGV rolling off its assembly lines with the U.S. market in mind.

It follows that the domestic market penetration has likewise been minimal. Of the 14.8 million NGVs in operation worldwide – mostly in Latin America and the Middle East – only about 120,000 are in the U.S. Total U.S. NGV volume was about 8,400 vehicles in 2012, according to Pike Research. Pike analysts project that number will quadruple to more than 30,000 by 2016.

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Denver-based writer Eric Peterson is the author of Frommer's Colorado, Frommer's Montana & Wyoming, Frommer's Yellowstone & Grand Teton National Parks and the Ramble series of guidebooks, featuring first-person travelogues covering everything from atomic landmarks in New Mexico to celebrity gone wrong in Hollywood. Peterson has also recently written about backpacking in Yosemite, cross-country skiing in Yellowstone and downhill skiing in Colorado for such publications as Denver's Westword and The New York Daily News. He can be reached at Eptcb126@msn.com

Enjoy this article? Sign up to get ColoradoBiz Exclusives. The opinions expressed in this article are solely that of the author and do not represent ColoradoBiz magazine. Comments on articles will be removed if they include personal attacks.

Readers Respond

I was resident in Japan for 12 years and now visit regularly. The entire taxi fleet and all police vehicles in Japan's major cities run on natural gas. This has a huge positive impact on air quality. I certainly know the culture here is radically different; however, what could we do to create a tipping point? In Japan it literally was people dying from air polution related pulmonary illnesses that caused the coalition of business and government to act. We would save so much tax money, improve our environment, be less dependent on imported oil and businesses (Fedex and UPS come to mind) would improve profits. By Robert on 2013 02 04
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