The Momentum Behind Natural Gas Vehicles in the U.S. and Canada

"The recently released Pan Canadian Framework on Climate Change and Growth recognizes natural gas as a fuel for transportation.” Photo courtesy of: Agility Fuels Solutions.

“The recently released Pan Canadian Framework on Climate Change and Growth recognizes natural gas as a fuel for transportation.” Photo courtesy of Agility Fuels Solutions.

The natural gas vehicle industry in the United States has swung full circle, say experts, largely as a result of environmental objectives and a modest recovery in oil prices from a low of $28 in January 2016 to $50 in December 2016. And even the advent of a new government in the White House won’t stop the momentum that has spread across North America.

Volatile oil markets and a desire to address poor air quality helped drive forward the natural gas vehicle industry in the U.S. where the once-alternate fuel now is a mainstay of municipal waste disposal and fixed-route fleets. Today more than 165,000 vehicles and more than 40,000 heavy duty fleet trucks ply the roads and highways of the U.S. with more than half of all new city garbage trucks running on natural gas.

In its third decade, the Washington, D.C.-based Natural Gas Vehicles for America (NGVA) has seen the sector spring from promoting natural gas as a fuel to combat smog, to highlighting the economic benefits of the abundant and affordable fuel and back again, this time addressing greenhouse gas emissions. NGVA represents more than 200 companies, environmental groups, and government organizations interested in the promotion and use of natural gas and biomethane as transportation fuels.

The natural gas vehicle industry in the U.S. responded on an environmental value proposition, explains Matt Godlewski, president of the NGVA. “You had urban areas that had severe smog and air quality problems, so their natural gas industry was really founded on ways to put natural gas transit buses in urban areas to help clean up air quality issues. That’s how it really started and began to grow.”

Then the price of oil shot up and the economics of natural gas came more to the forefront, particularly as it decoupled from crude prices during the shale gas revolution. “Now what’s happened over the last two years is that oil prices have been lower, the economic piece of our value proposition hasn’t been quite as important as the environmental piece again,” he says. “We’ve gone relatively full circle in how people view the values and benefits of using natural gas as a transportation fuel.”

With increased awareness of the benefits, both environmental and economic, of natural gas as a fuel, the association is currently working towards a wider-ranging goal. “Our focus now is really on how we level the playing field for transportation fuels in the U.S., in particular, among alternative fuels, and how to do that with fiscal policies both at the federal government level and at the state level, and regulatory policies to help continue to grow the market place,” Godlewski says.

Since 2010, the number of CNG fueling stations in the U.S. jumped from 947 to 1,626, while LNG fueling stations went from 43 to 122. California saw the bulk of the growth, with 306 public and private CNG stations, followed by Texas with 119.

Canada has about 80 CNG stations in British Columbia, Alberta, Saskatchewan, Ontario and Quebec. Some public stations are co-located with existing gasoline retailers, while many of the new stations are private and are supported by fleets, gas distribution utilities and municipalities.

"Canada has about 80 CNG stations in British Columbia, Alberta, Saskatchewan, Ontario and Quebec." Photo courtesy of Gain Clean Fuel

“Canada has about 80 CNG stations in British Columbia, Alberta, Saskatchewan, Ontario and Quebec.” Photo courtesy of Gain Clean Fuel

In Canada, the on road industry has seen a measured pace of growth, versus the pronounced uptick in the U.S. which saw more natural gas vehicles deployed in response to tax incentives and other credits. In 2016, Ontario launched a five-year Climate Change Action Plan including incentives for greener commercial vehicles. The plan includes funding of up to $250 million to help offset vehicle costs and to support building a province-wide natural gas fueling network, developed with input from the Ontario Trucking Association, Union Gas, Enbridge Gas Distribution, and others. This funding recognizes the opportunity that natural gas vehicles can play in supporting emissions reductions objectives, and in offering a lower-cost fueling option for fleet operators, says Bruce Winchester, Executive Director of the Canadian Natural Gas Vehicle Alliance (CNGVA).

Godlewski notes that in the U.S. as demand for natural gas vehicles has grown, it has made it easier to put stations in the right place. A number of station builders approached the challenge in an entrepreneurial way, opening private refueling stations, while others put fueling stations in existing sites like truck stops that have space to add a CNG or LNG refueling station, making it more mainstream.

“The infrastructure problem of the past has in many ways been solved,” Godlweski says. “I think our biggest challenge right now is on the economics – low oil prices have put many who were considering natural gas vehicles on the sidelines. We are waiting it out: history has shown us that oil prices are cyclical and that we’ll return to another period of higher oil prices. With natural gas, we know we have decades of very affordable natural gas reserves in the county.”

Although the incremental costs to invest in natural gas vehicles are 30-40 per cent higher than the average vehicle, companies can save on fuel, at around 75 cents per litre, and recoup their investment quicker if they find additional savings on fuel compression costs, Winchester notes. Tax credits, infrastructure support, and revenues from carbon pricing could be a way to work with partners to help de-risk up-front costs and build out infrastructure, which is essential to further promote fuel switching in the Canadian market, he says.

“Since 2010, the number of CNG fueling stations in the U.S. jumped from 947 to 1,626, while LNG fueling stations went from 43 to 122.”

The Canadian federal government is showcasing leadership by providing co-funding to construct nine new public natural gas refueling stations in Canada.  This is a significant first step says Winchester.  CNGVA and its members are actively working to build on this initial support from Canada’s federal government and we remain bullish on the future for natural gas as a fuel to address freight transportation emissions – from trucking to rail to marine.  The recently released Pan Canadian Framework on Climate Change and Growth recognizes natural gas as a fuel for transportation.  We see this as a vote of confidence for the industry and the affordable GHG emission reductions that it can deliver for Canada.

In the U.S., NGVA is looking at the new U.S. administration “with optimism” and as an opportunity to drive the domestic energy use as a value proposition. “We certainly are going to have to be more aware of the cost-effective arguments when it comes to supporting different industries and different transportation fuels,” Godlewski says. “And that goes back to what I was saying before; we know we can compete when we have a level playing field, when there is an opportunity to compete fairly with other transportation fuels. That’s the piece that we are most excited about. How that relates to tax credits and other supports remains to be seen.”

"The recently released Pan Canadian Framework on Climate Change and Growth recognizes natural gas as a fuel for transportation.” Photo courtesy of Union Gas.

“The recently released Pan Canadian Framework on Climate Change and Growth recognizes natural gas as a fuel for transportation.” Photo courtesy of Union Gas.

He believes that the environmentally positive benefit of natural gas as a fuel will continue to play a role in developing the sector, regardless of who is in office.

“I don’t think that’s going to change. When it comes to policy makers, governments and corporations, the importance of reducing emissions as cost-effectively as possible, none of that is going to change, so I think that aligns perfectly with the value proposition of using natural gas in transportation. That is why I am confident we have a strong future in transportation.”

The NGVA’s advice to Canada? To keep focused and keep up the momentum. “That’s what we’ve seen in the U.S. market; we’ve proven the engine technology, proven we can meet the infrastructure demands, that’s through a lot of hard work by a lot of companies, so you have to stay the course. That’s what we are going to do.”

Dina O’Meara is a former business writer with the Calgary Herald and is now a communications consultant.