The economics for U.S. truck fleet owners to switch to compressed natural gas (CNG) from diesel have weakened from several years ago when oil prices were near the $100/bbl level, but potential financial benefits for CNG truck owners remain compelling today and for the foreseeable future, Adam Comora, CEO of TruStar Energy, told OPIS in an interview.

The market outlook for CNG expansion in the U.S. trucking industry remains bright as domestic natural gas production is projected to grow significantly and the country continues to make its gradual transition to a cleaner energy, he said.

TruStar, a subsidiary of Fortistar, is a New York-based developer of CNG fueling solutions and CNG fueling stations in the U.S. In April, TruStar reached its milestone for completing the construction of its 250th CNG station, which is a United Parcel Service station in Plainfield, Ind.

Comora said TruStar, which was founded in 2009, aims to build 35% of the new U.S. CNG stations. The market is expected to build approximately 90-100 stations in 2019.

According to NGVAmerica, there are about 185,000 natural gas vehicles on the U.S. roads, and they are served by nearly 2,000 CNG and LNG fueling stations.

The company's accelerated expansion for 2019 is in line with the rapidly growing CNG commercial truck market, he said. "The market is not growing as fast as TruStar. We are continuing to take market share." TruStar expects a 20% growth in the CNG truck fleet for 2020, based on new orders in the industry, Comora said, adding that the existing fleet will grow by another 10,000 trucks this year.

Comora said that the CNG expansion in the U.S. transportation sector is fueled by favorable economics and clean energy regulations and corporations desiring to lower their carbon footprint.

California Beckons

While TruStar builds new CNG stations across the country, California may offer the strongest economic incentives for constructing new CNG stations, he said.

Out of the 250 TruStar CNG stations built, approximately 25 are in California.

The Low Carbon Fuel Standard (LCFS) in California helps to put more money into the pockets of companies that operate CNG trucks, he said. Also, the price comparison between CNG and diesel in California is the widest in the country after factoring hefty LCFS savings and the more than $4/gal diesel retail price versus $1.50-$2.00 per gal of RNG.

The return on investment (ROI) for CNG in California is two to three years, but the ROI for renewable natural gas (RNG) is only one to two years, thanks to the LCFS, Comora said, and only three to four months with truck incentives.

However, biogas or renewable gas credits could also be passed on to consumers across the country as CNG and RNG fueling stations benefit from the vast natural gas infrastructure across the country. The large gas supply network is essential in passing renewable gas credits to customers anywhere in the country. Fueling stations do not have to be close to natural gas supply sources, he said.

For RNG, there is a "first movers' advantage," Comora said. There is not enough RNG supply to replace all fuel demand, he added.  Customers who choose to switch now will have a competitive advantage to those customers that wait and may not be able to secure the advantages of RNG.

Apart from biogas credits, natural gas as transportation fuel is still significantly cheaper than diesel in a price comparison, Comora said. This is despite oil prices having fallen from the highs seen a few years ago and natural gas demand rising rapidly.

The average CNG price in the U.S. is pegged at about $1.50-$2.00/gal, compared with an average diesel price of $2.80-$3.00/gal, he said. It is noted that this price gap was much larger when diesel was $4-5/gal several years ago.

After taking into consideration the fuel cost savings and CNG truck investments, Comora said that the average ROI for a truck company with at least 10,000 gallons per year fuel requirement is about two to three years.

CNG truck investment is estimated at $30,000 to $60,000 per truck. He noted that the ROI could be faster if the company has higher fuel volume requirement, which would translate to higher savings.

Other CNG advantages include rebates, waiver stickers and no state tax, depending on individual states, he said. This is compared with diesel prices, which include a substantial state tax.

In the longer term, Comora expects natural gas prices to maintain a tight range of $3-$4/MMBtu for the foreseeable future as there is more than enough gas to meet all rising market requirements from LNG export terminals and utilities.

He said that CNG truck owners are relatively insulated from sharp price hikes. For every $1/MMBtu gas price increase, CNG's price would go up by only $0.15/gal.

In response to an OPIS question on some truck fleet owners remaining hesitant about adopting a new fuel for their fleets because of the emerging electric vehicle technology, Comora said the EV market would take a while to develop even though some first adopters have placed orders for electric trucks for testing purposes.  

He said that there are still many unsolved issues surrounding electric trucks, including battery weight, charging infrastructure, battery heat, range, total cost of ownership, safety and battery storage.

--Edgar Ang, eang@opisnet.com

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