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Natural Gas Truck Costs Outpaced by Savings

(April 24, 2012) — Despite higher upfront technology costs, natural gas could be a viable fuel for the trucking industry in the not too distant future, according to the Conference Board of Canada.

In a new report, titled Cheap Enough? Making the Switch From Diesel Fuel to Natural Gas, the Board estimates that converting fleets to natural gas could generate savings of approximately $150,000 per truck over a 10-year period — nearly twice what it costs to install a natural gas engine, which is estimated at $80,000.

“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 the report. “Trucking firms could reap significant net benefits in operating costs while also reducing their environmental impact.”

The report considers the potential for natural gas as an alternative to diesel as transportation fuel for heavy-duty trucks in particular.

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 (which reduces the truck’s carrying capacity). The report focuses primarily on modelling the impacts of trucks powered by liquefied natural gas (LNG), since it out-performs compressed natural gas (CNG) in terms of range.

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

As well, GHG 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.

Other than the additional cost of the trucks themselves, potential hurdles to the wholesale adoption of natural gas as a transportation fuel include tax policy and refueling infrastructure. Nearly half of the estimated savings from natural gas vehicles are in the form of fuel tax savings, since natural gas is currently exempt from the equivalent of a road diesel excise tax.

Uncertainty over whether natural gas could lose its tax exemption compounds the disincentive created by the high capital cost of converting to natural gas engines, the report states.

To read the full report, click here.