For Natural Gas-Fueled Cars, Long Road Looms Ahead

The natural gas boom that fracking wrought has shaken up the global energy landscape. Now its effects are rippling toward the fuel tanks of U.S. cars and trucks, although a few leaps may be required for natural gas vehicles to go mainstream.

The natural gas industry is making a big push for passenger vehicles that can run on either natural gas or gasoline. As a demonstration, the industry group America's Natural Gas Alliance this summer unveiled six vehicle models retrofitted with these fuel systems for less than $3,000 apiece. And starting next year, Ford plans to equip a version of its best-selling pickup truck, the F-150, to run on either gasoline or compressed natural gas (CNG). (See related quiz: "What You Don't Know About Natural Gas.")

Today the choices for an American motorist looking to buy a CNG car are extremely limited. A handful of work trucks and cargo vans available in the 2013 model year can be purchased with a fuel system equipped to use gasoline or CNG, but only one CNG passenger car—Honda's natural gas Civic sedan—is currently available to U.S. consumers without an aftermarket retrofit. For the past two years, a group of governors—led by energy states Oklahoma and Colorado—has been urging Detroit to put more natural gas vehicles on the market with pledges to expand their public fleet purchases.

Some 18.2 million natural gas vehicles are on the road today worldwide, mostly in Argentina, Brazil, Iran, and Pakistan. But the number of natural gas vehicles in operation globally could rise more than 90 percent to 34.9 million by 2020, according to forecasts from Navigant Research, a market research firm headquartered in Boulder, Colorado.

That would still be a small niche in the context of 800 million vehicles now in service and trends pointing toward 1.7 billion vehicles globally by 2035. Yet the fuel has fresh allure. Proponents in the United States celebrate it as a homegrown resource with environmental benefits—a "bridge" from today's gas and diesel to the greener alternatives of tomorrow. At current energy prices, CNG offers savings equivalent to about $1.50 per gallon at the pump compared to gasoline. (See related: "Natural Gas Nation: EIA Sees Future Shaped By Fracking.")

Pump Price Allure

For the forthcoming natural gas version of its F-150, Ford plans to harden valves and other parts at the factory and then hand the prepped vehicle off to an upfitter for fuel systems—a process that will add more than $7,500 to the up-front cost. This is an effort, Ford says, to meet demand from business and fleet customers who want to "take advantage of [CNG's] low price and clean emissions."

At the pump, the economics appear compelling, thanks to natural gas that's been made abundant in the United States by hydraulic fracturing. (See related, "Natural Gas Stirs Hope and Fear in Pennsylvania," and interactive, "Breaking Fuel From Rock.")

"What matters is the difference between the price of gasoline and the price of natural gas," said Dave Hurst, senior analyst with Navigant Research. Compressed natural gas was selling for $2.10 per gallon equivalent in the United States, compared to $3.59 per gallon for gasoline and $3.99 per gallon for diesel fuel, according to the U.S. government's most recent quarterly data on alternative fuels.

The United States has been down this road before. "We've been there, done that," said John DeCicco, a research professor at University of Michigan's Energy Institute who served on a recent National Research Council committee examining transitions to alternative fuels and vehicles. It's easy to forget that natural gas vehicles gained brief popularity following the 1970s oil embargo and enjoyed a surge of appeal in the 1990s. But interest waned when natural gas prices rose and oil prices declined.

In the past, "negative external events" like the energy price shocks of the 1970s and early '80s, fired much of the interest in natural gas vehicles, says Hurst. This time around, however, he sees growth spurred by "positive industry developments," such as greater vehicle availability, a focus on the largest fuel users, and more openness to alternative fuels among drivers and fleet operators. (See related: "Trading Oil for Natural Gas in the Truck Lane.")

Navigant Research projects that sales of natural gas passenger cars in 2013 will number fewer than 3,400—nearly all of them Honda Civics for fleet customers. Public fleets and companies like AT&T, UPS, and FedEx have begun to purchase CNG trucks and cars, as well as heavy-duty vehicles that use liquefied natural gas, a super-cooled form of the fuel that is more suitable for long distances. (See related: "The New Truck Stop: Filling Up With Natural Gas for the Long Haul")

For individual consumers, however, convenience remains a major obstacle. U.S. motorists have access to at least 168,000 gasoline stations—about one station for every 23 miles of public roadway. CNG is available through a much thinner network of just over 600 public stations. "In a lot of places, consumers have to go looking for the fueling points," said Hurst. "Really, outside of some specific cities and places like California and Texas, Oklahoma, they get pretty few and far between."

Drivers may soon have some new options close to home. Aided by a $1.8 million grant from the U.S. Department of Energy's Advanced Research Projects-Energy (ARPA-E) program for high-risk, high-reward research, General Electric is in the midst of a two-year project developing a natural gas fueling system that could be installed at home for less than $4,500. The system would shorten the time it takes to fill up a tank to one hour, from as long as eight hours required by current home fueling systems.

Until such options become reality, most experts believe growth in natural gas vehicles is likely to be among public or private fleets that have their own filling infrastructure. Savings also add up much faster for those high-mileage motorists. "The benefit environmentally and economically is on the heavy fuel users," Hurst said.

Consider a driver who travels 15,000 miles per year in a Honda Civic. Using the EPA's fuel economy ratings, annual gasoline costs would amount to about $1,680 for the conventional model, or $1,220 for the hybrid. The CNG version of the car—which costs about $8,300 more than the gas version and $1,900 more than the hybrid—would use natural gas costing about $1,020 to cover the same distance. In some parts of the country, CNG fuel costs could run as low as $605, according to industry web sites, allowing the driver to break even after about eight years compared to the gas car or three years for the hybrid. At higher mileage—say, 25,000 miles per year—fuel savings would make up for the CNG premium in less than five years.

Fuel prices, of course, can change quickly. "It's important to recall that historically, the price of natural gas has been even more volatile than the price of oil," said DeCicco. In the coming year, wholesale crude oil prices, which account for about 65 percent of the retail price of gasoline, are expected to decline slightly, while benchmark natural gas prices are projected to rise. Yet the pump price for CNG "doesn't actually have a lot of CNG in it," said Hurst. Wholesale natural gas prices account for only one-fifth of the  retail price; a much larger portion of the pump price is simply the costs of distribution and marketing, and gas company profit—none of which are dependent upon the price of natural gas.

In other words,  a doubling of oil prices would mean real pain at the pump for many motorists, raising prices from $3 per gallon to $5 per gallon. A doubling of wholesale natural gas prices, however, would translate to only about 40 cents extra on $2-per-gallon-equivalent CNG, analysts say.

The cost-benefit analysis has been different in other nations that have been leading markets for natural gas vehicles. In places like Iran and Pakistan, vehicles are converted to use natural gas fuel with cheap parts, small tanks, and facing no quality checks, said Hurst. These conversions may cost less than one-tenth the cost of a natural gas retrofit in the United States. Fuel tanks here typically make up half of the up-front cost of a vehicle, and they tend to be unwieldy. Honda, for example, sacrifices trunk space to make room for the CNG tank in its Civic, and even then the tank holds only enough fuel to power the car for an estimated 220 miles. That's because, for a given volume, compressed natural gas provides roughly 30 percent less energy than gasoline.

Seeing opportunity, a number of companies are working to develop new, cheaper ways to store the fuel. Projects supported by the ARPA-E program, for example, include an effort by San Francisco-based Otherlab to model a new storage tank after human intestines, with the idea that the design would conform more easily to a car's shape. And Texas A&M University, in partnership with General Motors and others, is developing low-cost materials that would absorb high volumes of natural gas to increase storage capacity.

Methane Leakage

Even if U.S. motorists eventually see the vehicle choice and infrastructure solutions that would make it easier to drive on natural gas, it's not entirely clear how great the environmental benefits would be. CNG produces less pollution at the tailpipe level than gasoline does, yet production, refinement, and distribution of natural gas tends to leak methane into the atmosphere. And although methane breaks down in a shorter period of time than carbon dioxide, its potency as a greenhouse gas over a 100-year period is 25 times that of CO2. Over a 20-year period, methane is 72 times more potent as a heat-trapping gas. (See related, "Methane: Good Gas, Bad Gas.") The odorless gas also seeps from agricultural and natural sources, such as cattle manure and swamps, but oil and gas industry activities make up the largest single source of methane emissions in the United States.

Precisely how much methane is leaking remains unclear, and the inspector general of the U.S. Environmental Protection Agency (EPA) has called for better emissions data. EPA's national greenhouse gas inventory suggests that in the United States less than one percent of methane produced leaks to the atmosphere, but a study published last month in the journal Geophysical Research Letters showed a leakage rate of 6 to 11 percent at one Utah natural gas field. (See related blog, "Natural Gas For Cars.")

An analysis conducted by scientists affiliated with the Environmental Defense Fund (EDF), Duke University, Princeton University, and the Rochester Institute of Technology, published early last year in the journal Proceedings of the National Academy of Sciences, estimated a 3 percent leakage rate. The paper is a preliminary piece of a larger research project focused on methane emissions and natural gas that is being spearheaded by EDF with involvement by dozens of university scientists and partners in the natural gas industry. EDF expects to publish results of the work before the end of next year.

"It doesn't take very much methane leakage to erase the modest benefit that natural gas has over gasoline," said DeCicco. In a best-case scenario, calculated using basic chemistry, DeCicco said natural gas offers a 22 percent advantage over gasoline in terms of the greenhouse gas emissions per unit of energy delivered to the car. The advantage shrinks when methane leakage comes into play. Bottom line, he said, the methane associated with natural gas remains too high to justify direct use in passenger cars as a long-term strategy for deeply reducing greenhouse gas emissions.

With methane leakage problems unsolved, fuel tanks clunky and expensive, and fueling networks sparse, DeCicco thinks there are better paths to cleaner vehicles than natural gas. For example, making today's gasoline-powered internal combustion engines more efficient. "If you get a car that's 10 percent more efficient, you're burning roughly 10 percent less gasoline from the time you drive it off the dealer's lot," he said. If the goal is reduced emissions, in other words, improved fuel efficiency likely will be cheaper and more effective than a natural gas vehicle revolution.

"People get distracted by the fuel du jour," DeCicco said.

This story is part of a special series that explores energy issues. For more, visit The Great Energy Challenge.