Natural Gas Vehicles: A Feasibility Study

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Natural Gas VehiclesA Feasibility Study

• Steven C. Agee, Ph.D.
• Shouro Dasgupta, B.S.B.
• Alexis Caron, B.S.B.

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Introduction Natural Gas Vehicles

• Dedicated natural gas vehicles are designed to
  run on natural gas only, while dual-fuel or bi-fue
  l vehicles can also run on gasoline or diesel.
• Dual-fuel vehicles allow users to take advantage
  of the wide-spread availability of gasoline or
  diesel but also uses a cleaner, more economical
  alternative when natural gas is available.
• Natural gas used as a transportation fuel is
  called compressed natural gas because the gas is
  compressed to a pressure of about 3,600 pounds
  per square inch (psi) and stored in a fuel
  cylinder aboard the vehicle. CNG flows into the
  engine's combustion chamber and is ignited to
  create power to drive the vehicle.
• It is estimated that there are 9.6 million
  natural gas operated vehicles in the world
  (December 2009)

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Advantages and Disadvantages of Natural Gas
Vehicles
Depending on the type of vehicle
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Worldwide Natural Gas Vehicle Statistics
Table 1 Number of Natural Gas Vehicles by Country
Source International Association of Natural Gas
Vehicles, 2009
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The Technology
Typical CNG Components in a Natural Gas Vehicle
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The Technology (cont.)
4th Generation CNG System
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Conversion Costs (Gasoline to Natural Gas)

• A specially designed Conversion Kit is required
  consisting of cylinders to be fixed in the trunk
  of the car with associated equipment to allow the
  natural gas to flow into the engine and all cars
  can be converted irrespective of make or model.

Table 2 Conversion Cost Comparison by Country
Government subsidized
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Fuel Price Comparison
Table 3 Fuel Price Comparison
Source US Department of Energy (January 2010)

• CNG is about 80 cents less than gasoline on an
  energy-equivalent basis, while E85 is about 28
  cents less per gallon than gasoline.

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Emission Standards

• Light-Duty Vehicle Emissions CNG vs. Gasoline
• Reduces carbon monoxide emissions 90-97
• Reduces carbon dioxide emissions 25
• Reduces nitrogen oxide emissions 35-60
• Potentially reduces non-methane hydrocarbon
  emissions 50-75
• Emits fewer toxic and carcinogenic pollutants
• Emits little or no particulate matter
• Eliminates evaporative emissions

Source U.S. Environmental Protection Agency
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Savings from CNG Vehicles

• As a vehicle fuel it is about 30-50 cheaper than
  gasoline. This is due to a combination of
• The cost of natural gas on an energy equivalent
  basis relative to petroleum fuels and
• fuel taxes, the current pre-tax price of Russian
  H-gas (the assumed marginal source for NG used in
  Europe) delivered in the form of CNG is, per
  lower heating value energy unit, only 63 of the
  current price of petrol.

Table 4 Saving Chart between CNG and Gasoline
(Asia)
Source International Association of Natural Gas
Vehicles, 2009
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Savings (cont.)
Table 5 Saving Chart between CNG and Gasoline
(Europe)
Source International Association of Natural Gas
Vehicles, 2009
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Predicted Savings in USA
Table 6 Savings in USA
Source US Department of Energy (April 2010)

• Based on the mileage information from a 2005
  Honda Civic and gasoline and CNG prices data from
  the Midwest region (CNG-1.41 Gasoline 2.73),
  it is projected that for a 100 miles trip a CNG
  run vehicle will save
• 3.71 in the city area and
• 2.14 in the highway
• Estimates do not include additional savings from
  lower maintenance costs from reduced wear and
  tear of the engine, less frequent oil changes and
  tune-ups.
• Average price as of 3rd May 2010 in OKC

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Savings from Maintenance and Performance

• Some fleet operators have reduced maintenance
  costs by as much as 40 percent by converting
  their vehicles to CNG.
• Intervals between tune-ups for natural gas
  vehicles are extended 30,000 to 50,000 miles.
• Intervals between oil changes for natural gas
  vehicles are dramatically extended--anywhere from
  10,000 to 25,000 additional miles depending on
  how the vehicle is used.
• CNG has an octane rating of 130 and has a slight
  efficiency advantage over gasoline.
• Because CNG is already in a gaseous state, NGVs
  have superior starting and drivability, even
  under severe hot and cold weather conditions

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Tax Rate Comparison
Currently only in the states of Maharashtra and
Uttar Pradesh Depending on the size of the
vehicle Federal tax of 18.4 cents/gallon plus
state tax of 17 cents/gallon as a percentage of
average gasoline price in OKC of 2.737
(04/29/2010) Federal tax of 18.3 cents/gallon
plus state tax of 16 cents as a percentage of
average CNG prices in OKC of 1.41 (05/03/2010).
However, a state tax waiver permit for CNG can be
purchased from Oklahoma Tax Commission at a cost
of 100 per year.

• In order to recover the 100, a person would
  have to purchase (100/0.16) 625 gallons of CNG.
• At an average tank size of 23 gallons, a person
  would have to fill up their car approximately 27
  times a year or drive approximately 17,500 miles
  a year.
• Otherwise it is better off to pay taxes during
  CNG purchase.

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Incentives for Natural Gas Vehicles
For Consumers Oklahoma

• The state of Oklahoma offers the following
  incentives
• a one-time income tax credit for 50 of the cost
  of converting a vehicle to operate on an
  alternative fuel or
• for 50 of the incremental cost of purchasing a
  new Original Equipment Manufacturer AFV
• The state also provides a tax credit for 10 of
  the total vehicle cost, up to 1,500
• Federal
• Qualifying vehicles are also eligible for a
  federal income tax credit of up to 4,000.

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Incentives for Natural Gas Vehicles
For Fuel Retailers Oklahoma

• Oklahoma provides a tax credit for up to 75 of
  the cost of installing alternative fueling
  infrastructure.
• Beginning January 1, 2010, a tax credit is also
  available for up to 50 of the cost of installing
  a residential CNG fueling system (not to exceed
  2,500).
• Federal
• A 30 tax credit (not to exceed 30,000) is
  available for equipment placed into service
  before January 1, 2009.
• For equipment placed into service after January
  1, 2009, the credit amount is up to 50 (not to
  exceed 50,000).

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Contact Information

• Steven C. Agee, Ph.D.
• Professor of Economics and Director
• Economic Research Policy Institute
• Meinders School of Business
• Oklahoma City University
• 2501 N. Blackwelder
• Oklahoma City, Oklahoma 73106 USA
• sagee_at_okcu.edu
• [phone]