Updated 12/15/2010

Compressed Natural Gas (CNG) Vehicles

Since T. Boone Pickens has been strongly advocating a shift to the use of natural gas (NG) in vehicles, it’s important to look a little more closely at its implications.

Natural Gas Prices:
The primary motivation today for reconsidering NG vehicles (NGVs) is that the U.S. is currently not expected to need to import much Liquefied NG (LNG) for the next decade. Moreover, the well-head price of NG in the U.S. near the end of the summer has often been little more than one-third the price of oil per unit energy (even less yet in 2009), though most of that disparity usually vanishes near the end of winter.

We have a brief summary of the long-term costs and cost considerations for LNG. The current wellhead costs of natural gas are not the issue, in the same way that the current costs to extract a barrel of conventional crude oil are not reflected in its eventual sale price. The combination of continued growth in Asian and European demand, and the announced intentions of Russia, Iran, and Qatar (as well as others) forming a national gas cartel similar to OPEC, will keep the spot price of LNG at most ports similar to the price of oil in the future. That high price will motivate more U.S. gas producers to begin exporting LNG from Gulf LNG ports that were built in anticipation of a need for imported LNG. The global LNG trade is growing rapidly, and that trade will steadily reduce the differences in gas prices around the world.

Vehicle Costs:
Another factor in the marketability of CNG vehicles will be the cost and convenience of the vehicle itself. Right now, the only mass market CNG vehicle available in the U.S. is the Honda Civic GX. The Honda Civic sedan (sale price starting at $15,405) runs on gasoline, while the Civic GX (sale price starting at $25,090) burns natural gas. The GX has less horsepower, less torque, slightly lower miles/gallon of gas equivalent (gge), only 60% of the driving range, half the trunk volume, and can only be fueled at home. The home fueling process may take all night to fill the entire tank volume by a system which must be purchased separately for $3000-$4000 dollars.

The average U.S. residential retail price for natural gas in the fall of 2010 was about $15/1000 ft³. Assuming ~121 ft³ per gallon of gas equivalent (GGE), the GX owner who fills his/her tank at home would pay $1.80/GGE for the gas, plus an additional ~$0.30/GGE for the electricity powering the compressor. The average price for gasoline at the pump in 2010 was about $3.00/gal. If one drives 15,000 miles, gets 26 miles/gge, and saves $0.90/gge, the annual savings is $500. That doesn’t justify the initial capital premium for the NG vehicle, much less the time and inconvenience associated with filling the tank several times a week, along with the other disadvantages mentioned earlier. We expect interest in this option to remain low for at least several years. In 2014, the average price of gasoline at the pump will probably be $5.00/gal, and the mean residential price for natural gas will probably be $20. The annual savings then could be $1200 (unless the government determines a road tax is required on natural gas). . That will start to look attractive to a few more buyers, most will strongly prefer staying with liquid fuels– especially for convenience.

Distribution:
In the mid-1980s, unique conditions in Canada favored the adoption of CNG as an alternate transportation fuel. Still, the rate of adoption stayed well below the critical level that would enable suppliers to survive in a competitive market. The main barrier was a lack of infrastructure to support converted vehicles. Lack of refueling facilities was particularly critical, which depressed sales of vehicle conversions.

CNG has made small inroads into fleets of trucks and buses in the U.S, where their ranges stay close to central re-fueling stations. LNG is also making inroads into some fleets of very heavy equipment and trucks. The original motivation was that it was much easier to meet emissions standards with available large engines burning NG than low-grade diesel. (As ultra-low-sulfur diesel has become standard and major progress has been made in reducing other emissions from diesel engines that original advantage of NG has greatly diminished.)

It seems that certain fleets, which have limited range but do a lot of driving, would continue to benefit from converting to CNG for at least the next decade. Taxi companies, port fleets, airport shuttles, post office vehicles, etc… would all be able to benefit in the near term from the price advantage of natural gas, without suffering the penalty of severely reduced refueling options.

However, expanding the national fuel distribution infrastructure to accommodate natural gas is far more complicated and expensive than most appreciate. While the exact costs vary depending on the amount of traffic a fueling station would receive, the low-end estimate for a single CNG pump at a fueling station is about $400,000/fueling station. Right now there are ~200,000 gas stations in the U.S, or roughly 1 station (averaging 8 pumps) per 1000 vehicles. In order to be viable for the average American, a car must be able to fulfill more than the singular role of commuting to and from work. The option to use the vehicle for travel or longer round-trips is vital, so until a minimum network of filling stations is available, the public will not be very interested. Moreover, it is highly doubtful that individual station owners would be willing to pay for a pump that may have 5-50 cars that could utilize the fuel within 50 miles for the first 5 years.

Environmental considerations:
With respect to GHGs, the effects of methane leaks during tank filling could outweigh the advantage of the CO₂ reduction from an NG engine. Methane is a gas that is ~20 times more efficient at trapping heat than CO₂, so reducing CO₂ emissions by 30% (burning methane emitts ~30% less CO₂ than burning gasoline or diesel per unit energy) would be offset by having only 1.5% of the methane gas leak into the atmosphere.

It needs to be understood that the new fuel being discussed is mostly methane, as most of the other fuel components of NG (ethane, propane, and butane) would be separated for other markets that would be happy to pay a premium for those components. Methane is a much better fuel for automobiles than hydrogen because much lower tank pressures are required. The fuel energy in a methane tank at 200 bar (3000 psi) at 27^oC is 67% more than that in a hydrogen tank of the same volume at 700 bar (10,000 psi). Still, the hazards associated with consumers refueling 3000 psi tanks should not be minimized. They are far greater than those associated with propane tanks (10 bar).

Many consumers have experience filling propane tanks and appreciate that some leakage is unavoidable. Also, it takes about as much time to fill a 20-lb (4.7 gal) propane tank as it takes to fill a 15-gallon gasoline tank. It will take at least twice as long to fill a methane tank, as there will be additional complications dealing with pressures 20 times higher, and the density of methane (gas) at 200 bar is less than one-third the density of (liquid) propane at 10 bar.

Availability:
Current US annual NG consumption is about 23 trillion cu ft (tcf), or about 750 billion m3, or about 500 MMT. The proven NG reserves in the US stayed at about a 10-year supply for most of the past decade, primarily for tax and business reasons (the producers didn’t want to report more than that, and the amount recoverable depends on the price). However, there have been a number of large new finds of unconventional NG in the US (gas shale) over the last five years, and much of this will now be economical to develop. Hence, recent estimates are that economically recoverable natural gas in the US exceeds a 90-year supply at our current production level, where 23.8% of our energy comes from NG.

However, there is strong interest in transitioning several other power sources to natural gas, which will significantly increase the rate of consumption.

The most economically feasible fuel switch would be to replace existing home heating that uses fuel oil with natural gas. Currently ~16% of home heating is done via heating oil. Replacing these furnaces with natural gas is economical and would result in a reasonably short payback period, and would require an additional 1.6 tcf/year.

There is strong interest in replacing coal power plants with natural gas, which would be the second most cost effective means of utilizing our increased natural gas reserves. Currently we consume ~6.7 tcf in natural gas to provide ~17% of the nation’s electricity, while coal provides ~50% of the nation’s electricity. To convert the coal power plants with natural gas would require an additional ~13.3 tcf/year.

Industrial energy needs involving heating requirements that use coal and heat oil may also be effectively transitioned to natural gas as reasonable economic penalty, which would require an additional ~3.9 tcf/year.

To achieve the above energy goals – which have some economic merit, would reduce our current 90-year supply to only ~49.5 years. However, to then transition our transportation energy needs from petroleum to natural gas (as shown above this has absolutely no economic justification) would require an additional 32.8 tcf/year, which would reduce our known reserves to only a 27 year supply. Such a transition would cost trillions, and would require more time to build out the infrastructure for than we be able to utilize the fuel that it requires.

The growth in the global LNG market means that (even without a greater dependence on imports) the US NG market is not insulated from the steadily rising price of LNG in Asian markets. LNG will soon be exported from some US Gulf ports, and the US may even become a net exporter of LNG for several years. In the free market that we advocate, our government will not likely pass legislation that would convince domestic producers to sell much of their gas to U.S. customers at a price much below what they could get for it in the Asian LNG market. Hence, the mean price of gas in the US (following its recent correction) will increase steadily.

Summary:
There will be some increase in vehicle conversion to NG in specific localized fleets over the next decade. However, the investments needed for infrastructure upgrades to allow re-fueling options for large-scale consumer conversion are not likely to be made, partly because the gas resource is too limited to supply a major fraction of our domestic energy needs for more than a few decades.

WindFuels will begin to limit the rise in the price of both oil and gas in 8 to 12 years (depending on the rate at which it is funded), and eventually carbon-neutral WindFuels will supply most of our oil and gas. In the meantime, all energy prices – oil, gas, nuclear, hydro, and coal – will get very ugly.

Reference on NG Vehicles:
http://www.sciencedirect.com/science/article/B6V2W-44B6TJ8-4/2/2cc43e8bd0fd740ccf60609af1746042

See also our pages on LNG and crude oil.