Natural Gas Quarterly U.S. Class 8 NG Trends, Forecast, Analysis & Insight Q1 2015 Natural Gas Quarterly is published monthly by Americas Commercial Transportation Research Company, LLC (ACT), 4400 Ray Boll B lvd., Columbus, IN 47203. Phone: 812-379-2085, Fax: 812-378-5997, e-mail: [email protected]Copyright 2015 by ACT with all rights reserved. Reproduction, copying, or publication of this report in whole or part is not permit- ted without prior approval. This document is for internal use only. Questions and subscription requests should be directed to K.W. Vieth, Publisher. www.actresearch.net Diesel price drop continues in Q1’15 Fuel price spread narrows $1.50 to $0.71 NG payback length- ens from 3 to 7 years NG Indicator Gauge Key A neutral position on the indicator gauges above indicates that current conditions do not favor either option (diesel or natural gas, CNG or LNG). If the needle points to one side or the other, it should be interpreted as current market conditions support that side of the respective continuum rather than the other. NOTE: Click on the respective gauge or key points above for detailed explanations supporting the position of each variable in the report. To return to the front cover, click on the footer of any page. FUEL PRICE SPREAD NG EQUIPMENT NG FUELING INFRASTRUCTURE NA Class 8 NG RS NG equipment price premium remains >$50K Costs do not stop with truck purchase Challenge: Tank life is longer than chassis life Not all stations can accommodate HD vehicles CNG outpacing LNG 8:1 New stations planned, but many in limbo YTD March volume down 23% y/y 2014 sales slightly higher y/y 2015 Class 8 NG RS forecasts falling short of expectations NG Truck Payback Index 28.8 (>10 years)
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Natural Gas Quarterly
U.S. Class 8 NG Trends, Forecast, Analysis & Insight
Q1 2015
Natural Gas Quarterly is published monthly by Americas Commercial Transportation Research Company, LLC (ACT), 4400 Ray Boll B lvd., Columbus, IN 47203. Phone: 812-379-2085,
Fax: 812-378-5997, e-mail: [email protected] Copyright 2015 by ACT with all rights reserved. Reproduction, copying, or pub lication of this report in whole or part is not permit-
ted without prior approval. This document is for internal use only. Questions and subscription requests should be directed to K.W. Vieth, Publisher. www.actresearch.net
Diesel price drop continues in Q1’15
Fuel price spread narrows $1.50 to $0.71
NG payback length-ens from 3 to 7 years
NG Indicator Gauge Key
A neutral position on the indicator gauges above indicates that current conditions do not favor either option (diesel or natural gas, CNG or LNG). If the needle points to one side or the other, it should be interpreted as current market conditions support that side of the respective continuum rather than the other.
NOTE: Click on the respective gauge or key points above for detailed explanations supporting the position of each variable in the report. To return to the front cover, click on the footer of any page.
FUEL PRICE SPREAD NG EQUIPMENT
NG FUELING INFRASTRUCTURE NA Class 8 NG RS
NG equipment price premium
remains >$50K
Costs do not stop with truck purchase
Challenge: Tank life is longer than chassis life
Not all stations can accommodate HD vehicles
CNG outpacing LNG 8:1
New stations planned, but many in limbo
YTD March volume down
23% y/y
2014 sales slightly higher y/y
2015 Class 8 NG RS forecasts falling short of expectations
NOT ALL STATIONS CAN ACCOMMODATE HD VEHICLES: LNG stations
are new to the fuel supply landscape in the U.S.; therefore they all are being
designed to accommodate class 8 tractor trailer combinations. Similarly, the
new CNG stations or fueling islands at existing diesel stations being built are
designed to handle class 8 vehicles and provide diesel fueling expectations
(or faster). It should be noted, however, that not all CNG stations are class 8
friendly with many of the earlier and/or older stations more attuned to light ve-
hicles and cars. There are currently 570 CNG stations (70% of all CNG sta-
tions) that can handle class 8 vehicles. The LNG station count is 70.
CNG OUTPACING LNG 8:1: The ratio of existing public HD CNG to LNG
fueling stations was near 9:1 in January 2015, but dropped to 8:1 in March. In
Q1’15, six more HD LNG public stations became active, while only two HD
CNG public stations were added. Today there are no active HPDI NG engines
being produced that require LNG as a fuel. The new LNG stations are primari-
ly in the west to southwest supporting existing LNG truck populations as well
as servicing off-road applications and the oil patch. Spark-ignited (SI) natural
gas engines are the only new engines available. Although SI natural gas en-
gines can use a dedicated CNG or LNG fuel supply system, CNG is a lower
cost fuel. LNG requires the same base cost of the CNG plus the cost for lique-
faction and transportation. LNG is a purer form of methane (better engine per-
formance) and minimizes the risk of CNG contamination due to potential pro-
pane and water ingress, but it costs approximately $.50 more per gallon.
When conversion to natural gas fuel is considered, the added cost is a major
consideration over the life of the vehicle and ROI needs.
NEW STATIONS PLANNED, BUT MANY IN LIMBO: Although ACT has not
seen a fall in the number of planned new CNG stations since the first of the
year, there are about ten fewer LNG stations planned. Seen from a different
perspective, however, the analysis is more opaque. The same number of pub-
lic HD CNG stations are planned y/y, while 20 more public LNG stations are
on the planned list. Note that most of those plans were announced before die-
sel fuel prices plunged. It is not known if the pulled plans were put on hold for
a future date or scrapped altogether.
U.S. PUBLIC HD NG STATIONS BY REGION: March 2015
CNG Active = 47
CNG Planned = 20
LNG Active = 2
LNG Planned = 6
CNG Active = 61
CNG Planned = 17
LNG Active = 7
LNG Planned = 11
CNG Active = 197
CNG Planned = 25
LNG Active = 11
LNG Planned = 21
CNG Active = 81
CNG Planned = 23
LNG Active = 14
LNG Planned = 13
CNG Active = 61
CNG Planned = 4
LNG Active = 14
LNG Planned = 6
CNG Active = 123
CNG Planned = 9
LNG Active = 22
LNG Planned = 9
GRAND TOTALS
CNG Active = 570 LNG Active = 70
CNG Planned = 98 LNG Planned = 66
Source: US DOE Alternative Fuels Data Center, geology.com, ACT Research Co., LLC Copyright 2015
0
100
200
300
400
500
600
Jan Feb Mar
Q1'15 U.S. Public HD NG Stations
Active LNG Planned LNG Active CNG Planned CNG
Source: US DOE Alternative Fuels Data Center, ACT Research Co., LLC Copyright 2015
SALES DATA
YTD MARCH VOLUME DOWN 23% Y/Y:
U.S. and Canadian natural gas Class 8 truck
retail sales for these select OEMs started the
year a little slower, but showed sequential
gains in February and March. Despite the
improvement, year-to-date volume is 23%
below 2014’s level.
2014 SALES SLIGHTLY HIGHER Y/Y: Be-
cause there are additional units not record-
ed, as some lower volume OEMs do not re-
port sales, this number falls short of the total
number of Cummins Westport (CWI) natural
gas engine shipments (including the 320
horsepower ISL G, which is not a true Class
8 line haul engine). CWI shipments totaled
just over 10,500 units in 2014, up 200 units
from 2013. Note: There is a time lag between
the shipment of the natural gas engines and
the retail sale of the trucks they are being
placed into. In addition, a portion of natural
gas engines are destined for export markets.
2015 CLASS 8 NG RS FORECASTS FALL-
ING SHORT OF EXPECTATIONS: Original
ACT projections were that 2015 would see a
5% penetration of natural gas heavy duty
trucks. Based upon the actual results from
2014 and the sharp drop in oil prices at the
end of last year, that projection seems opti-
mistic.
Q1 2015 • Natural Gas Quarterly • Page 4
-
100
200
300
400
500
600
700
800
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Un
its
U.S. & Canada Natural Gas On-Highway Class 8 Truck Retail Sales
2013 2014 2015
Includes all US and Canada Class 8 units for Freightliner, International, Kenworth, Mack, Peterbilt, and Volvo.
Excludes transit bus and refuse units not manufactured by OEMs above.
12 liter introduced in August 2013.
ADOPTION FORECASTS
CURRENT HD NG FUELED TRUCK MARKET IN NEUTRAL: NG powered Class 8 truck and bus sales have slowed when calculated as a percentage of the total market. Looking at 2014, their share of the total market was 4%, while in 2015 expectations are for lower penetration. The total U.S. Class 8 market (including NG buses) is forecast at 268,000 units in 2015, or almost 19% higher than 2014. With the significant decline in diesel fuel prices to under $3.00 per gallon and the subsequent narrowing of price spread between CNG and diesel, as well as the high NG vehicle price premium, payback times have lengthened significantly. These facts along with diesel truck operators’ uncertainty about NG vehicles has slowed the conversion to NG. Annualized Q1’15 NG Class 8 sales total about 4,200 units. Assuming recent high profile class 8 NG truck orders encourage others, a duplication of 2014 sales is a reasonable assumption for 2015 at this point. Adding these units to bus and vocational sales suggests a volume of 9,000 to 10,000 units resulting in an NG penetration of 3.3% to 3.7%. Note: The adoption forecasts presented in the table above were all prepared before the decline in diesel fuel prices started in the Q4’14. These formal forecasts will be revisited and adjusted appropriately when the direction of diesel fuel prices and the evolving relationship between oil and natural gas are more clear.
Q1 2015 • Natural Gas Quarterly • Page 5
Additional forecasts and NG transportation fuel details can be found in other ACT publications. For details: http://www.actresearch.net/products-for-natural-gas/
2013e 2014e 2015 F 2016 F 2017 FFOR HIRE:
TL 1% 2% 3% 4% 5%
LTL 0% 4% 2% 2% 3%
Expedited 1% 4% 6% 9% 11%
Owner Operator 0% 0% 0% 1% 1%
PRIVATE 1% 2% 4% 5% 6%
VOCATIONAL:
Refuse 40% 43% 46% 51% 53%
Municipial 1% 2% 5% 6% 10%
Construction 1% 1% 1% 2% 3%
Other 0% 0% 0% 0% 0%
TRANSIT BUS 30% 30% 33% 35% 35%
NG SHARE OF CLASS 8
TRUCK AND BUS SALES 3% 4% 5% 6% 7%
SALES OF NG TRUCKS
AND BUSES (000) 6 9 13 15 16
Memo: 2009e 2010e 2011e 2012e
Total NG Vehicles 2009-12 (000) 3 4 5 6
U.S. Class 8 Natural Gas Adoption Rates--Most Likely/Base Case Scenario
2013e 2014e2015 F 2016 F 2017 F
TOTAL SALES 187,610 224,030 267,000 246,000 212,000 FOR HIRE
DIESEL ENGINE EVOLUTION: Why is it that all of today’s diesel engines
for heavy duty trucks are pretty much the same whether they are manufac-
tured by Volvo, Mack, Detroit Diesel, PACCAR, Navistar or Cummins? They
are all six cylinder in-line configurations with turbo-charging and after-cooling,
use diesel particulate filters (DPF) and selective catalyst reduction (SCR) sys-
tems with diesel exhaust fluid (DEF) for aftertreatment and are electronically
controlled. There are minor variations of displacement and hardware mount-
ing but, over time, the diesel engines have evolved to look much the same.
Gone are the V6, V8 and V12 cylinder configurations, superchargers, air
cooled, two stroke cycle and other variations. Because trucking is a “lowest
total cost wins” business, engines have evolved to be built, maintained, and
overhauled in a configuration that will deliver that lowest total cost.
NG ENGINES HAVE ROOM TO IMPROVE: What about natural gas en-
gines for heavy duty trucks? Are they at the end of their development? Cur-
rently available natural gas engines for heavy duty trucks and their predeces-
sors are/were all of the six cylinder in-line configuration. Today’s Cummins
Westport designs are very similar to John Deere and Detroit Diesel natural
gas engines that are no longer produced. Does this mean that natural gas
engines are nearing the end of their development and they will always be at a
disadvantage on fuel economy, or is there room for improvement? Fortunate-
ly, there is room for improvement; although they will probably remain as six
cylinder in-line configurations. The fact that 80% of the natural gas engine is
based upon the diesel engine design will probably not change, but the fuel
delivery system will change, making the natural gas engine for heavy duty
trucks more fuel efficient.
A spark-ignited natural gas engine uses a modern spark plug ignition system
adapted from today’s efficient gasoline passenger cars. The fuel delivery sys-
tems on today’s natural gas engines for heavy duty trucks have a number of
successive changes that can increase efficiency. The path of changes has
already been adopted on passenger car gasoline engines. Passenger car en-
gines have evolved from carbureted engines to throttle body fuel injection sys-
tems. Next, individual injectors in the intake manifold for each cylinder were
adopted. Today’s most modern design is GDI, Gas (meaning gasoline) Direct
Injection. As emissions became a central focus for passenger cars, more effi-
cient systems were required. The technology moved away from increasingly
complex two barrel and four barrel carburetors to throttle body fuel injection,
keeping the best parts of the carburetor and adding a fuel injection nozzle.
From throttle body, engineers moved to individual injectors mounted in the
intake manifold for each cylinder. The traditional throttle plate was used to
control the amount of air entering the engine. The fuel injectors and “brain
box” on the engine (the ECM or electronic control module) controlled the fuel
mixture. The next step was to keep all of the electronics and inject the fuel
directly into the combustion chamber, a difficult task given the higher pres-
sures encountered directly in the combustion chamber compared with the
vacuum of the intake manifold.
LEARNING FROM THE PASS CAR MARKET: Today’s heavy duty natural
gas truck engines use a system that is old compared with today’s passenger
cars. Compressed air, EGR (Exhaust Gas Recirculation) and natural gas are
all being mixed behind the throttle plate. As the throttle plate is opened (the
operator pushes on the pedal), the mixture moves to the combustion chamber
where the spark plug ignites it. A more efficient way would be to inject the fuel
and/or EGR after the throttle plate, closer to the combustion chamber. Similar-
ly, if the natural gas could be injected directly into the combustion chamber
and ignited with a spark plug, the engine would be that much more efficient
while at the same time reducing emissions. This is an oversimplification, and
there is still engineering work to be done, but as the demand for natural gas
engines increases and more are built, there are more sales to underwrite the
engineering costs involved. The point is that there is a clear path already es-
tablished with the progression of the spark-ignited gasoline engine.
THE NEXT STEP, NEW FUEL SYSTEM TECHNOLOGY: The natural gas
engine will continue to mirror the basic configuration of the diesel engine, and
there are some clearly defined next steps in the development of the natural
gas fuel system. With increased demand and expanded volumes, new fuel
system technology will be adopted. The race for comparative fuel economy
advantage will continue between the diesel and natural gas engine, but the
differential will begin to narrow with the introduction of the next advancements
on natural gas engines. As technology changes the differential between diesel
and natural gas fuel costs, the ACT Fuel Payback Calculator can be used to
measure the impact on the return on investment.
Q1 2015 • Natural Gas Quarterly • Page 10
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Q1 2015 • Natural Gas Quarterly • Page 11
OTHER ACT PRODUCTS & SERVICES
FULL RANGE OF REPORTS ANALYZING & FORECASTING THE NORTH AMERICAN COMMERCIAL VEHICLE INDUSTRY
OTHER SERVICES INCLUDE: SPECIAL CV WHITE PAPERS REPORTS ON NG AS A CV FUEL CONSULTING SPEAKERS BUREAU REPORTS ON CHINA’S CV MARKET, AND FREE NATURAL GAS PAYBACK CALCULATOR
Contact us at [email protected] for more information on any of these services