Thursday, November 15, 2012

LNG Highway

So, for a few years Clean Energy Fuels has slowly built a network of buses and local truck fleets that run on natural gas, demonstrating lower costs and reliable service. But now the company is setting its sights on a much larger prize, a nationwide natural gas highway.

Clean Energy Fuels is building what it calls America's Natural Gas Highway in an effort to move liquefied natural gas (LNG) and compressed natural gas (CNG) forward. Through October the company has built 48 LNG stations, primarily at Flying J stations around the country, in an effort to build over 100 stations to serve the heavy duty trucking market. By the middle of next year it thinks there will be enough infrastructure to support this new market.

That's about the same time that an 11.9-liter engine built by Cummins, based on technology from Westport Innovations, will hit the road.

To serve this growing market, Clean Energy Fuels just signed a deal with GE to build two ecomagination MicroLNG plants that GE will finance for up to $200 million. These two plants will add 500,000 gallons of LNG capacity with the ability to expand to 1-million gallons each, adding to the 260,000 gallons of capacity the company currently has.

GE and Chesapeake Energy have a partnership that will install 250 CNG stations around the country as well, adding to the more than 300 CNG stations for Clean Energy Fuels. Chesapeake is even working on a home fueling "appliance" with the help of GE and Whirlpool. Imagine fueling your car before you leave for working the morning.

All of this build-out is meaningless for Clean Energy Fuels, GE, Chesapeake, and others unless there are vehicles on the road that use their fuel. So this is the next big step.

As I mentioned above, the heavy duty Cummins Westport engine is coming to the market next year and will be the big driver of future domestic LNG demand. According to Clean Energy Fuels, LNG is currently priced up to $1.50 cheaper than gasoline or diesel -- for trucking fleets that becomes a huge cost savings tool.

The passenger market is less likely to be a driver of LNG or CNG demand in the near future, but we're seeing some progress. Honda makes a natural gas version of the Civic. GM offers Chevy Silverado and GMC Sierra in CNG options as well.

If the trucking fleet makes a quick conversion to natural gas in 2013 you can expect a steady trickle of passenger vehicles to follow. Fueling stations are clearly influencing adoption rates, and if natural gas remains a significantly less expensive fuel source, then there's a big incentive to make the switch.

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