In July, Brazilian airline GOL became the first airline to use a new type of biofuel to power a commercial flight. The fuel in question was farnesene, which is made from sugar cane. And like the ethanol in your gasoline, 10% of the Florida to São Paulo flight’s jet fuel was made of this biofuel. But this isn’t the only biofuel you could see taking flight in the future.
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If there’s an Achilles’ heel to the efforts being made to introduce compressed natural gas (CNG) into the country’s vehicles, it is that somebody is going to come along with a liquid fuel that works much better.
CNG has many things going for it. Natural gas is now abundant and promises to stay that way for a long time. That puts the price around $2 a gallon, which is a big savings when gas costs $3.50 and diesel costs $3.70 per gallon. Trucks — mid-sized delivery trucks and big 18-wheelers — are the target market. Delivery vans usually operate out of fleet centers where a central compressor can be installed to service many vehicles. Meanwhile, pioneering companies such as Clean Energy Fuels are busy building an infrastructure at truck stops along the Interstate Highway System to service long-hauling tractor-trailers on their cross-country routes.
But there is a weakness. As a gas, CNG requires a whole new infrastructure. Compression tanks must be built at gas stations, much stronger than ordinary gas tanks and tightly machined, so gas does not escape. Even under compression, CNG has a much lower energy density than gasoline. This requires special $6,000 tanks that must still take up more space. In passenger vehicles they will devour almost all the trunk space, which is why vendors are concentrating on long-distance tractor-trailers.
As a result, there always seems the chance that some liquid derivative of methane is going to come along and push CNG off the market. Methanol has been a prime candidate since it is already manufactured in commercial quantities for industrial purposes. M85, a mixture of 85 percent methanol and 15 percent gasoline, is legal in the United States, but has not been widely adopted.
Now a new candidate has emerged in the long-distance truck competition — dimethyl ether or “DME.” Two methane ions joined by a single oxygen molecule, DME is manufactured from natural gas and has many of the same properties as methanol. It is still a gas at room temperature but can be stored as a liquid at four atmospheres or -11o F. It can also be dissolved as a gasoline or propane additive at a 30-70 percent ratio. In 2009 a team of university students from Denmark won the Shell Eco Marathon with a vehicle running on 100 percent DME.
So is it practical? Well, we’ll soon find out. Volvo has just announced it will release a version of its D13 truck in 2014 that runs on DME. At the same time, Volvo pushed back the launch of its natural gas version of the same line, meaning it may be changing its mind about which way the technology is going to go. In case you haven’t been keeping abreast, Volvo is now the largest manufacturer of heavy trucks in the world, having acquired Mack, America’s oldest truck company, in 2000.
So does that mean that CNG may turn out to be a dead end and Clean Energy Fuels is going to get stuck with a lot of unused compressor pumps? Well, hold on a minute. Technology does not stand still.
Last week at the Alternative Clean Transportation Expo in Long Beach, Calif., Ford and BASF unveiled a new device for the Ford F-450 CNG fuel tank. It’s called a Metal Organic Framework (MOF), a complex of clustered metal ions built on a backbone of] rigid organic molecules that form one-, two-, or three-dimensional structures. Lots of surface area is created, making MOFs porous enough to hold large amounts of gaseous material such as methane.
MOFs create the possibility that on-board CNG tanks will not have to operate under extremely high pressure or extremely low temperatures. Like a metallic sponge the high-surface material soaks gas right up, where it can be easily dislodged as well. According to BASF and Ford, the same amount of natural gas that requires 3,600 pounds per square inch (PSI) can be stored in an MOF tank at close to 1,000 PSI. That makes a big difference when it comes to designing an automobile.
So does that mean natural gas is going to be able to hold its own against DME and other liquid competitors? Well, wait a minute, there’s still more. Not only is MOF technology good at storing methane, it also works with hydrogen! That means the hydrogen-fuel cell — still the favorite among Japanese manufacturers — may be able to work its way back in the game as well.
In fact, Ford isn’t playing any favorites. Equipped with its new MOF tanks, the F-450 will offer drivers a choice of seven — that’s right, seven — different fuel options using the same internal combustion engine. “Ford has no idea which of these fuels will make the most sense,” Ford’s Jon Coleman told Jason Hall of Motley Fool. “So we need to build vehicles that have the broadest capability and the broadest fuel types so our customers can choose for themselves.”
That’s the name of the game. It’s called Fuel Freedom.
Wall Street was abuzz last week as Clean Energy Fuels, the leading supplier of natural gas for use in delivery and heavy-duty trucks, jumped 11 percent in one day after a long slump in which investors were questioning its business model.
“We’re at the very beginning of a major shift to natural gas for trucking – a shift that could take a decade before the growth slows – and Clean Energy Fuels is the leader in the market,” added Jason Hall of Motley Fool, who had been skeptical of the company in the past but is now turning enthusiastic.
“Natural gas vehicles are here to stay,” added James E. Brumley on SmallCap Network, in one of the many enthusiastic endorsements the company received last week. “So Clean Energy Fuels is very much a right-time, right-place idea. It’s not just that the company is the biggest and the best at what it does. There’s a market of scale for what it has to offer.”
It hasn’t been easy. The company, the brainchild of legendary oilman T. Boone Pickens, seemed poised for growth last year but suddenly hit a sudden downdraft in January. Skepticism grew over whether compressed natural gas (CNG) or liquid natural gas (LNG) would be the best substitute for diesel in heavy-duty trucks. The debate is really inconsequential since the two are interchangeable – LNG for large-scale storage and transport with some use in the biggest rigs and CNG for fueling smaller commercial vehicles. Nevertheless, the controversy drove down CEF’s stock price 25 percent since the first of the year.
“Much of the conversation in the investor community over the past six months has been dominated by the false idea that CNG and LNG were competing fuels,” wrote Hall in a recent evaluation. “But while we’ve been arguing, Clean Energy Fuels has been opening stations for trucks across the country. And the company is a leader in both.”
Once again, it seems to have been a case of investors becoming absorbed in short-term focus while ignoring the long-term prospects of the company. True, Clean Energy Fuels has not yet delivered a profit but its progress in building infrastructure to enable us to use significant portions of our natural gas resources as a substitute for diesel fuel has been significant. Here’s what the company has accomplished so far:
As you can see, this is no fly-by-night operation. Whether the company is profitable or not right now, Pickens is obviously in it for the long haul.
Clean Energy Fuels’ long-term goal is a “CNG superhighway” that will offer fueling stations to long-haul trucks along all the major interstates that crisscross the country. But its major success to date has been in servicing fleet vehicles for delivery companies and municipalities.
Analysts believe that refuse and delivery fleets, especially those that are garaged overnight and can be refueled at a central CNG station, will become one of the company’s major markets.
CEO Andrew Littlefield just announced a loss in revenues for the first quarter of 2014 but said this was because of the expiration of the federal volumetric excise tax credit (VETC), which had provided $26 million in 2013. Overall, the trend is definitely upward:
Sean Turner, COO for Gladstein, Neandross & Assoc., a leading consulting firm for the development of alternative fuels, notes that the NGV market in the United States is actually larger than in countries such as Argentina and Pakistan, which have been at it for a longer time. “While North America might lag behind in the adoption curve of other countries, natural gas usage per vehicle is actually near the top worldwide,” he said. “This is because other countries have tended to employ NGVs for passenger cars, whereas the U.S is now concentrating on medium-sized and heavy-duty trucks.” And as T. Boone Pickens likes to point out, natural gas will be unrivaled in this marketplace since electric vehicles cannot produce the torque needed to power those long-haul vehicles.
Whether all this makes Clean Energy Fuels a hot stock again is something Wall Street will have to decide. But in terms of moving America toward greater reliance on homegrown natural gas, the news is all favorable.
The effort to substitute compressed natural gas for foreign oil in our gas tanks is moving ahead on all fronts across the country, in scores of municipal departments that are converting their fleets, in new gas stations that are opening and with entrepreneurs who are looking for ways to speed up the conversion.
Leading the pack is Clean Energy Fuels, T. Boone Pickens’ effort to put the nation’s natural gas resources to work in the transport sector. Clean Energy Fuels has targeted long-distance, heavy-duty trucks, which tend to stay on the Interstate Highway System and can be services at massive truck stops. In Pennsylvania, for instance, Clean Energy Fuels is building stations in Pittston and Pottsville that will serve trucks on heavily the traveled I-81 and I-476. They are scheduled to open later this year.
But much of Clean Energy Fuels’ real success is coming from the fleet conversion for major shipping firms that rely heavily on truck transportation. The company has had particular success with UPS. Fueling depots were recently opened in Oklahoma City and Amarillo, Texas. The carrier E.J. Madison, LLC has deployed a fleet of 20 long-haul LNG trucks that will utilize a CEF network of stations that stretches from Los Angeles to Jacksonville, Florida. Jacksonville is emerging as a hub of CEF activity as the company has opened a liquid natural gas (LNG) terminal there as well. LNG is more difficult to handle than compressed natural gas but has much greater energy density.
Rapidly expanding in Florida, CEF has just announced a grand opening of a CNG filling station that will service the Hillsborough Area Regional Transit Authority (HART), which provides public transportation throughout the Tampa metropolitan area. The opening kicks off a plan to convert HART’s entire fleet of public services buses and vans to compressed gas.
Just last week Clean Energy Fuels CEO Andrew Littlefair was in the news telling The Motley Fool that Tesla’s electric cars will not be in competition with CEF’s efforts. “Tesla and electric vehicles are really great for certain applications,” he told interviewer Josh Hall. “But hauling 80,000 pounds of cargo, natural gas is really well suited for that.”
However, even if Clean Energy Fuels doesn’t think CNG can compete with electric at the passenger-car level, others do. Last week the Wawa convenience store chain announced it will partner with South Jersey Gas to open CNG fueling stations in southern New Jersey. “Compressed natural gas gives us an opportunity to increase the convenience we offer our customers and positions us for the future as well,” Brian Schaller, vice president of fuel for Wawa told the press. “We’re excited about the growth potential.” With 600 stores on the East Coast from New Jersey to Florida, Wawa has plenty of room to grow.
Pennsylvania is becoming a hotbed of compressed gas progress as the state seeks to take advantage of the Marcellus Shale. The state has adopted a funding program to help businesses convert. One of the first to take advantage is Houston-based Waste Management, which received an $806,000 grant from the State Department of Community & Economic Development to switch 25 of its waste and recycling collection vehicles to CNG. Pennsylvania-American Water Company has also announced plans to convert its fleet with a $315,000 state grant. American Water, the largest water utility in the state, operates out of Scranton.
Nebraska is a long way from any natural gas drilling but the Uribe Refuse Services company of Lincoln has announced it will convert its entire fleet of 17 trucks to natural gas over the next few years. The first trucks were displayed in the city last week on Earth Day.
Oklahoma is a big oil-and-gas producing state and is making a major effort to convert state vehicles to natural gas. In 2011 Gov. Mary Fallin joined 15 other states in a multi-state memorandum of understanding committing them to purchase NGVs for the state fleet. The state now has 400 CNG vehicles and is pushing the federal government to convert its fleet in the state as well. Oklahoma is building CNG gas stations to match and now stands third in the nation behind California and New York.
The natural gas industry is putting its shoulder to the wheel on this effort. The American Gas Association and America’s Natural Gas Alliance (ANGA) have teamed up to sponsor “Add Natural Gas (+NG),” an effort that is encouraging entrepreneurs and mechanics to convert ordinary passenger cars already on the road to CNG. “Fleets across the country are already using natural gas vehicles to save money and reduce emissions,” says the group’s website. “However, natural gas can be used to fuel any vehicle. To demonstrate this, we worked with automotive engineers to add natural gas as a fueling option for some of the most popular vehicles on the market today.”
Performance CNG LLC is a Michigan startup that has been inspired to take up the initiative. The company recently had a hybridized 2012 Ford Mustang GT demonstrated as part of +NG’s campaign and is currently trying to raise $55,000 in capital on Indiegogo, an international crowd funding site. More than half the money would go to EPA emissions testing.
Not everyone is convinced that CNG is the way to go. Clean Energy Fuel’s stock has done poorly since January, based on investor skepticism that its market is not that big and that some liquid natural-gas based fuel – methanol of butanol – will prove easier to handl
