Propane autogas market set to take off

Nov. 22, 2011
Propane autogas might more appropriately be called propane vehicle fuel because it is just as capable of powering commercial trucks and buses as it is the family car. However, it has yet to reach widespread use in the U.S., even though it is tremendously popular elsewhere in the world. All that could change, however, according to a just-released study by ICF International for the National Propane Gas Assn

Propane autogas might more appropriately be called propane vehicle fuel because it is just as capable of powering commercial trucks and buses as it is the family car. However, it has yet to reach widespread use in the U.S., even though it is tremendously popular elsewhere in the world. All that could change, however, according to a just-released study by ICF International for the National Propane Gas Assn.

Congress is currently considering legislation to extend existing propane vehicle incentives (now scheduled to expire at the end of the year) through 2016. House Resolution. 2014, the “Propane Green Autogas Solutions Act of 2011,” and companion Senate Bill 1120 includes three provisions intended to give propane autogas a running start in the marketplace. These include the extension of:

  • The $0.50 per gallon alternative fuel excise tax credit for liquefied petroleum gas used in vehicles for five years, from Dec. 31, 2011 through Dec. 31, 2016.
  • The new qualified alternative fueled motor vehicle credit through Dec. 31, 2016.
  • The 30% tax credit on investments in alternative fuel vehicle refueling property through Dec. 31, 2016.

If Congress approves the extensions, the study projects sales of propane autogas-powered vehicles to jump to between 96,000 and 157,000 vehicle sales per year by 2016. In the absence of these incentives, the projections are for production of between 17,000 and 34,000 propane vehicles by 2016.

According to the study, propane autogas is, in many ways, “an ideal alternative vehicle fuel.” It is widely available and in sufficient supply; transportation and distribution infrastructure exists today to meet foreseeable demand; and there are no major technological challenges associated with developing propane-fueled vehicles or expanding the fueling infrastructure. What’s more, the study notes, “the current generation of vehicles powered with propane have nearly the same operational and performance characteristics as conventionally powered vehicles.” Not bad for starters.

Propane is also cleaner than gasoline and diesel with respect to most major pollutants, including carbon monoxide (CO), non-methane hydrocarbon (NMHC), and some particulate matter (PM). The study also notes that it provides a reduction in total carbon dioxide emissions from 18% to 20% relative to gasoline.

For truck fleets, however, the deal clincher might be cost. Propane is currently about half the cost of gasoline. According to the study, “the increase in crude oil prices, combined with growth in domestic propane supply associated with the growth of shale gas has reduced the wholesale price of propane relative to gasoline, and changes in propane fleet fueling business practices have changed the relationship between propane and gasoline prices for fleet customers. As a result, current delivered propane prices are typically well below gasoline prices for fleet vehicles after adjusting for differences in fuel efficiency. Given the current energy price outlook, propane prices are expected to remain well below gasoline prices for the foreseeable future”

Fleet Owner had the opportunity to talk with Tucker Perkins, president of CleanFUEL USA, a provider of propane autogas infrastructure equipment and management software, about the proposed legislation, the ICF study and the future of propane autogas in the United States.

“Propane makes me think of the lyrics from that song by Taylor Swift,” Perkins said, “what you were looking for was here the whole time.” It is inexpensive to build out the propane fueling infrastructure, easy to transport, burns as a liquid fuel and doesn’t compromise performance when it comes to range, power, torque or towing ability, he noted. Plus, it is domestically available in abundance and significantly cheaper than gasoline.

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“We have never suggested that propane autogas was the only solution,” Perkins added, “but it is certainly a part of the solution.” He explained that about 70% of domestic propane is a by- or bonus-product of natural gas drilling, while about 30% comes from oil. “Most of the natural gas wells are just saturated with propane,” he said. “In fact, today we have a huge propane surplus, so much that it has made the U.S. a major exporter of propane to the rest of the world.”

It is that exporting of propane that troubles Perkins. “Why are we importing foreign oil and turning away from domestically produced propane?” he asked. “Propane is very clean, as clean as natural gas, especially when it comes to greenhouse gases. And it can cut most fuel bills almost in half [if you count the current fuel credits.] If no fuels were subsidized, propane would probably be the only fuel that would stand on its own. Even without the current incentives, propane autogas can still undersell gasoline, sometimes by as much as $1 to $1.25 per gallon.”

Perkins is also bullish about propane as a vehicle fuel because of the jobs an increased use of propane would create in the U.S. “I am a strong [propane autogas] industry insider, but even I was surprised by the figures the study reported concerning job growth tied to propane,” he told Fleet Owner. “It says that 30,000 to 42,000 new jobs would be created if the Propane Green Autogas Solutions Act passes. When you think about it, though, that number makes sense. Think about the engineers, designers, suppliers and service people, plus all the people it would take to refine, process, and deliver the fuel.

“It is a brand new element for us here,” he added. “To a large degree, we would be replacing jobs in foreign countries with jobs here. Think of what we spend just to preserve the ability to import oil.”

Propane autogas is generally compared to gasoline rather than diesel when it comes to performance and emissions, but Perkins said there is still a strong case to be made for choosing propane over diesel for some applications. “Clean diesel is very clean, but a lot of exhaust aftertreatment is required to get there and that adds cost and complexity and maintenance,” he observed.

When it comes to infrastructure, propane also has a big lead over its popular cousin natural gas, according to Perkins. “Natural gas is an important part of the alternative fuel picture,” he said, “and large fleets can justify the major investment required for natural gas fueling stations. However, even a small plumbing fleet with three or four trucks can afford to install propane fueling right on their own property. The cost is well under $50,000.”

Whether or not Congress decides to extend the incentives for propane, Perkins is optimistic about its future as a commercial vehicle fuel for the U.S. The company has been working with Daimler Trucks North America, for example, to introduce an 8L, medium-duty propane engine and General Motors is already offering an OEM-provided cut-away van powered by propane, which can be purchased directly through GM and is warranted by the company.

“Our industry has been reluctant to ask for any subsidies,” he noted, “but other alternative fuels are already subsidized, so we are asking Congress just to treat us equally. If we have a five-year window [until 2016] we believe that will enable fleets to make decisions, to act.”

After that, Perkins adds, he believes propane can stand on its own merits.

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