Exploring the Total Cost of CNG

March 2013, Government Fleet - Cover Story

by Shelley Mika - Also by this author

Controlling the Costs

Even though there can be unexpected costs associated with CNG, there are ways to better anticipate — and even control — them. 

Research: Take a global look at all that goes into a CNG program. Gather data first, then begin to estimate costs. Drake suggests looking at vehicle counts, expected fuel usage, gas and power availability, as well as site factors dictated by the municipality. Relford suggests asking the following key questions as well, to determine the scope of the project:

● What is the fleet’s ultimate goal? 

● Would slow-fill or fast-fill fueling systems better suit your needs? (Fast-fill stations are more expensive to operate, but slow-fill stations can only fuel vehicles outside regular hours of operation, as it takes several hours to complete fueling.)

● How many vehicles are realistically eligible for conversion? 

● Do you want to replace older units with new CNG vehicles as part of your fleet replacement program? (This can result in a $6,000-$13,000 increase per vehicle).

Future costs should be considered, too. “Like any budget process, make sure you have anticipated future costs of the equipment and covered all aspects of installing a station,” Stevens said. “The purchase of the equipment, compressors, storage vessels, dryers, dispensers, installation costs, permit fees, electrical drawings signed and sealed by a professional engineer, electrical contractor, CNG plumbing costs including the stainless steel lines, site preparation and concrete pad installation, proper security and fencing, overhead protective structure, and more should all be considered. Make sure to include a contingency amount, too, as there will be unexpected costs, as with all construction projects.”

Once the costs are well understood, calculate the ROI to determine the true feasibility of the program.

Despite all these costs, Drake said a close look at fuel costs can help determine if it’s worthwhile. “The single greatest operational expense our clients incur is fuel — when they can cut these costs by 30-40% or more, they find the capital expenditure returned in most cases under four years, and often much sooner, depending on the size of the fleet,” he said.

Calculate Conversion Costs: As part of the ROI analysis, fleets should take a close look at what the wiser investment would be: conversion or buying new. If considering conversion, it’s important to evaluate whether the vehicle’s lifecycle will be long enough to see the value of conversion.

“Make sure those vehicles aren’t aged to a point where you won’t realize an advantage to the conversion,” Riley said. “There is a point at which time the lower costs of CNG will break even over the life expectancy of the operational use of the vehicle, depending on how many miles it travels a day, per month, per year. When you compare that to the costs of the equipment to the cost of regular gasoline — the offset between those two, you start to calculate ROI.”

However, Relford underscores how it isn’t difficult to get value out of converted vehicles.

“The EPA only certifies vehicles within the last two years. So unless you are completely rebuilding a diesel engine, you would not be able to convert vehicles older than 2010, which is why there is value in considering CNG as part of a fleet replacement program,” she said. “With CNG, you will realize an extended vehicle maintenance life, so you could replace these vehicles years beyond gasoline vehicles due to improved maintenance. By extending the vehicle life by even just one year, you will see cost savings in your program.”

Resale of CNG vehicles should be considered, too. If no infrastructure exists for public use, Riley says you’ll be hard-pressed to sell the vehicle — or get the resale value desired.

Talk to Others: Part and parcel to doing your homework is talking to others and learning from their experiences.

“Due diligence of contacting agencies already utilizing CNG is a great start to understand all facets of what was expected and unexpected during their installation and startup along with the vehicle conversion process,” Stevens said. “Contact other governmental agencies that have installed stations, and talk with the necessary personnel to find out what their costs, problems, and solutions were in the installation process. Contact CNG station manufacturers and automobile and truck manufacturers to get estimates.” 

Fleets can benefit from working with a construction partner experienced in designing and building CNG systems — and who knows how to avoid unexpected costs. Communication with an exhaust system manufacturer can also help provide realistic costs.

Plan for the Long Term: Because the size of storage tanks determines how many vehicles can be fueled, it’s important to plan for the number of CNG units you’ll have in the long term, not the short term, when building a fueling station. “The worst thing you can do is undersize your station and not properly anticipate the demand and usage of your product,” Stevens said.

One method is to think about where the program will be in 10 years — then build infrastructure that supports that goal. “If you want 10% of the fleet to be CNG in 10 years, you need to size the compressor to support that plan,” Riley explained. “Otherwise you’ll have people sitting around waiting to fill their cars, wasting time and money.”

Know the Drivable Range: For CNG vehicles, Drake offers the important reminder: measurements of diesel gallon equivalents (DGEs) or gasoline gallon equivalents (GGEs) may not be exact. And, fuel economy is often slightly less on a CNG vehicle than on a diesel one. So where a vehicle may have driven 8 miles per gallon when powered by diesel, it may only drive 7.5 miles per gallon once converted to CNG.

However, Relford added, “Fortunately, when evaluating the drivable range of CNG compared to gasoline, it can be seen as a more equivalent comparison. In a passenger vehicle, for example, if you get 30 miles to the gallon, you will get the comparable mile equivalent on CNG.”

These factors could ultimately alter the drivable range of the vehicle — and for the purposes of route planning and infrastructure development, it’s very important to know the drivable range.

“Fleets should carefully consider the logistics of fueling their vehicles and how fueling with CNG will differ from their current fueling methods,” Drake said. “For instance, the mileage range for a CNG vehicle may differ from their existing fleet vehicles. This situation may dictate that regular routes be altered to avoid vehicles running out of fuel.”

Riley also suggests using vehicles’ drivable range to develop an infrastructure strategy. “When you choose where to place a station…it’s important to make sure it’s an acceptable range from the area of operation compared to the CNG vehicles’ range, and make sure vehicles stay in close proximity to your ­infrastructure,” he said. “If you’re in a large city, you don’t want to put infrastructure in areas you know are prone to traffic jams. Spread out CNG stations so drivers have more than one option to choose from. Remember, if you build only one centralized station, then everyone has to come in from outlying areas to get fuel. In essence you’re spending CNG to get CNG.”

To avoid problems related to the drivable range of the vehicle, Riley suggests only converting/­purchasing vehicles that remain and operate within the local area. Vehicles that remain on a set route, like garbage trucks or parking enforcement cars, make good candidates for CNG use.

Another option is to opt for bi-fuel vehicles. “Drivers of dedicated CNG vehicles have to be more mindful of fueling locations, as dedicated vehicles run solely on natural gas,” Relford said. “But bi-fuel vehicles can run on both gasoline and CNG. Therefore, you’ve just increased your range by adding CNG to your vehicle.” 

The Benefits Pay Off

Even though the costs of converting to and operating CNG vehicles are a reality, fleets continue to see benefits, both in terms of budget and the environment.

“As far as I am concerned, the benefits absolutely outweigh the costs, especially when looking at savings of the cost of fuel itself,” Stevens said. “We are also proud of the fact that our City Council mandates a 4% reduction in our carbon footprint, and this is just one way to achieve that goal. The more [CNG] vehicles we operate, the cleaner our environment is and the more we save on fuel costs.”

Relford says fleets that put a greater number of miles on their vehicles have the most to gain. “They will recoup the upfront costs quicker,” she said. “On average if you put 30,000 miles a year on your half-ton, you could pay off the conversion in less than three years … quicker if you have federal or state incentives.”

Beyond the budgetary and environmental benefits, fleets will also likely see the benefit of expanded CNG programs in the future. As the popularity of CNG grows, accessibility to fueling sites and access to more advanced technology will grow, too.  

“CNG is not new,” Drake said. “Its popularity fluctuates with the price of petroleum fuels in the U.S. today; however, the expected, sustained price differential seems to assure longevity. In addition, CNG-­fueled engine technology has advanced. All these factors mean CNG is here to stay. With proper planning and an experienced partner, [managers] of small, medium, and large fleets can all take advantage of the cost savings that CNG has to offer.”  

● Rich Cunningham, national sales manager, Masterduct
● Richard Drake, P.E., vice president – engineering, ET Environmental
● Elizabeth Relford, transportation planner, Weld County, Colo.
● Steve Riley, automotive director, City of Coral Gables, Fla.
● Mark Stevens, fleet manager, City of Asheville, N.C.

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  1. 1. Bob Stanton [ September 21, 2013 @ 03:00PM ]

    One factor as yet unmentioned is the residual value of the CNG units. The higher acquisition cost impacts both depreciation and the residual value calculations. If you're in a market where CNG is readily and publicly available the market for used CNG vehicles will be more attractive. Conversely, CNG availab


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