A flagship autogas document has been released by the World LP Gas Association (WLPGA) on the heels of the 27th World LP Gas Forum in Miami. The release follows a global autogas industry network review at the October event. Available for download at http://auto-gas.net
, a new dedicated website aimed at becoming a go-to online resource for the international autogas community, the document contains case studies and data reflecting changes in the over-the-road market that seeks to inform stakeholders.
“Autogas Incentive Policies: A Country By Country Analysis of Why and How Governments Encourage Autogas and What Works,” reports autogas consumption has been rising rapidly in recent years, reaching 25.8 million metric tonnes in 2013 and increasing 57% in the past decade. There are now nearly 25 million autogas vehicles on the road around the world and more than 70,000 refueling sites. Autogas is the second most widely used alternative to conventional transport fuels after ethanol.
However, demand remains highly concentrated in a small number of markets. The four largest consumers — Korea, Turkey, Russia, and Poland — saw the largest increases in consumption over the last 10 years. Worldwide, autogas currently accounts for 1.2% of total road transport fuel consumption. Further, autogas accounted for 9.7% of global consumption of LP-gas, but this share varies considerably across countries. Among the nations surveyed, the share is highest in Turkey, where it is 74%, and is lowest in the U.S. at just 0.8%.
Moreover, autogas use is still concentrated in a small number of nations. Just five countries — Korea, Turkey, Russia, Poland, and Italy — together accounted for half of global autogas consumption in 2013. The 12 countries surveyed for the report accounted for 55%. In addition, the share of autogas in total automotive fuel consumption varies widely, ranging from a mere 0.1% in the U.S. to 18% in Turkey. The only country other than Turkey where autogas makes up more than 10% of the automotive fuel market is Korea, where the share is 14%. The report asserts that the enormous disparity in the success of autogas in competing against conventional automotive fuels — gasoline and diesel — is explained mainly by differences in government incentive policies.
Noted is that the primary justification for supporting the use of autogas and other alternative fuels through government incentives is their environmental advantage. Autogas outperforms gasoline and diesel in the vast majority of studies comparing environmental performance that have been conducted around the world. Emissions are especially low with respect to noxious pollutants. With respect to greenhouse gas emissions, autogas performs better than gasoline and outperforms diesel on a full-fuel-cycle basis, and when the LP-gas is sourced mainly from natural gas processing plants.
The report concludes that autogas incentive policies are most effective when there is a financial incentive for an end user to choose it over a conventional fuel. The attractiveness of autogas over other fuels depends on the added cost of an autogas vehicle compared to a gasoline variant, or the additional net cost of converting an existing gasoline vehicle; the pump price of autogas relative to diesel and gasoline; and the availability of the fuel on the market. Therefore, the higher the upfront purchase and conversion costs, and the scarcer the refueling opportunities are, the larger the financial incentive must be.
Lower running costs — fuel cost is the most important — need to compensate for added upfront capital expenditures and minor inconveniences. Ideally, savings will eventually offset capital costs. This depends on fuel consumption. The report finds that payback periods under three years have shown the greatest success.
The report emphasizes that the emergence of autogas as an alternative to gasoline and diesel is the direct result of government policies to address energy security and/or environmental concerns. With the exception of ethanol, autogas has been more successful than any other alternative automotive fuel because of its practical and cost advantages. The oil price shocks of the 1970s provided the initial impetus for the development of alternative automotive fuels, as countries sought to reduce their dependence on imports of crude oil and refined products. Environmental concerns have since overtaken energy security as the principal driver of government policies to promote such fuels, as they are generally less polluting.
Accord was evident among World Forum Autogas Summit roundtable members in Miami regarding the weight of government policies on autogas efficacy. While candid and subdued support prevailed favoring continued government incentives and subsidies, Australia provided a cautionary tale for such linkage. The commonwealth’s autogas market took off in the 1990s thanks to a combination of a zero excise tax on the fuel and generous vehicle conversion grants. Consumption fluctuated around 1.1 million tonnes a year between 2004 and 2010 — but has since fallen appreciably.
The WLPGA report outlines a number of factors explaining the decline, including the introduction of, and a progressively rising, excise tax on autogas. Improved fuel economy and consumers shunning larger six-cylinder vehicles, formerly the mainstay of the Australian autogas market, in favor of smaller four-cylinder vehicles — diesel and hybrids — also contributed. Following was a reduction in the value of grants for autogas vehicles. Sales dropped to 813,000 tonnes in 2013, their lowest level since 1994 and down from an all-time peak of nearly 1.5 million tonnes in 2000.
Prospects for autogas use in Australia were dealt a further blow by decisions by two OEM carmakers in the country, Ford and General Motors (Holden), which will cease producing autogas models by 2017 as a result of declining demand and wavering government support for the fuel. Formerly, the federal government made grants available for the conversion of existing vehicles or purchase of OEM autogas vehicles. In 2006 it introduced a program that provided grants to private motorists for the conversion of existing light-duty vehicles (LDV) of less than 3.5 tonnes, or for the purchase of an OEM autogas LDV. The subsidy was doubled at the end of 2008 from (AUD) $1000 to $2000 for an OEM purchase or a conversion. But the conversion grant was thereafter reduced from $2000 to $1250, and by 2012 it had fallen to $1000. Beginning in July 2011, the program was capped at 25,000 claims a year, and then it was eliminated entirely as of June 2014.
The negative results came, surprisingly, because Australia has a comparatively long and pioneering history of autogas use. The federal government encouraged its use since 1981 for reasons of energy security — the country is a large producer and exporter of LP-gas, derived mainly from natural gas processing — and air quality. Today, the nation remains the eighth-largest autogas market in the world with an extensive nationwide retail distribution network. About 3700 refueling sites served an estimated 490,000 vehicles at the end of 2013, about 3% of the total car and truck fleet. More than half of all service stations sell autogas.
“We should not depend on others to sell our fuel, products, or vehicles for us,” asserted summit panelist Warring Neilsen, manager of corporate affairs at Elgas, a leading Australian wholesaler and retailer with residential, commercial, and autogas operations under the UNIGAS brand name. “We need to take ownership for the entire customer experience. Unless we control the entire supply chain we won’t be in gear. The way forward is to supply a complete package for the customer.” The chairman of the Autogas Summit’s leadoff session added, “We have a great story to tell.”
Echoing those sentiments, Autogas Summit roundtable chairman Stuart Weidie, president and CEO of Blossman Services (Ashville, N.C.) and president of Alliance AutoGas, commented, “If nobody got a subsidy, we could stand on our own.” Doubling down, Tom Armstrong, fleet director for ThyssenKrupp Elevator Americas (Alpharetta, Ga.), concurred, “The ROI [return on investment] works with no subsidy.” But that message needs to be broadcast. Armstrong noted that CNG “gets the press.” Propane needs marketing, he maintained, adding that, paramount to successfully marketing autogas to fleets is the message: infrastructure is a fraction of the cost of natural gas.
“Globally that’s our problem,” said Neilsen. “We’re behind the eight-ball when it comes to getting the message out to government and the consumer. We need to promote globally. Subsidies for conversions [in Australia] have gone away. Let that be a lesson to all. We need to work to be self-reliant. Government support can quickly evaporate. Subsidies can leave you weak. Therefore, the autogas industry must seek, justify, and earn support from the consumer on its own merit. Our argument is health and economics. We need to keep banging on our advantages.”
In Australia’s experience, Neilsen explained that subsidies brought numerous additional players into the market. “They came in to feed on the subsidies. In some cases there was little care for quality. It’s hard to regulate a small conversion center. As a result, the entire industry was condemned. Some of those feeding on subsidies had no focus — the person most precious is the customer.”
He further observed that, regarding Australia’s involvement with credit for autogas, financial institutions far preferred OEM offerings to aftermarket conversions. “The aftermarket ended up carrying a lot of baggage. OEMs are the most difficult to engage with, and the concentration must remain on OEMs, but the aftermarket is critical as well.” Going forward, he challenged the industry to convert hybrids to autogas, and to promote “the bigger story that we have a fuel so versatile we can compete with any competitor,” whether they be traditional or alternative fuels.
Although environmental concerns may have overtaken energy security as the principal driver of government promotion of alternative fuels, private companies adopting sustainability initiatives have a more singular mission. Autogas Summit participants heard that private fleet management has a laser focus on return on investment when it comes time to compare fuel choices. Thyssen-Krupp’s Tom Armstrong made the point: “Don’t imagine I was going to go into my boss’s office and say, ‘Hey, it’s going to cost a million bucks, but we’re going to save some trees.’ The ROI has to be there.”
That said, ThyssenKrupp’s move to smaller, more fuel-efficient vehicles required identification of compatible vehicles for its fleet — alternative fuel or not — a task that fell to Armstrong. “With all the choices it’s difficult to determine which direction to follow,” he acknowledged. The fleet manager laid out a strategy of the five Cs — Conserve, Cost Effective, Common Sense, Clean, and Commit. Propane was the only alternative fuel that qualified for all five Cs.
While CNG hit Clean and Conserve, it missed on cost effective, common sense, and commit. E-85 scored on Clean and Cost Effective. Electric, hybrid, and hydrogen tallied two checkmarks — Clean and Conserve. In the final analysis, Armstrong was also able to identify available propane vehicles that fit ThyssenKrupp’s fleet requirements. In addition, propane eclipsed other fuels for a three-year ROI based on mileage and fuel costs. And, while they’re still in place in the U.S., the company is accessing incentives to further lower costs.
Armstrong is in charge of 3200 vehicles — 1600 vans, 1100 pickup trucks, 300 utility trucks, 100 flatbed trucks, and 100 cars. His company’s sustainability challenge set a goal to reduce fuel consumption by 20% by this year, and autogas is to represent 10% of the fleet, or 300 vehicles. Currently, the fleet includes right-sized and alternative-fuel vehicles that run on propane or electricity.
The numbers tell the tale: $1.91 in savings per gallon for propane autogas; $4152 off fuel costs, per vehicle, annually; and 6917 pounds of carbon dioxide eliminated per vehicle per year from ThyssenKrupp Elevator’s carbon footprint, based on its average 25,000-mile-per-year usage. Additionally, the company displaces about 2000 gallons of gasoline per vehicle annually by utilizing autogas.
The World Forum’s Autogas Summit was opened with an introduction into cutting-edge LPG fuel metering technology for modern vehicles presented by Netherlands-based Prins Autogassystemen BV, whose U.S. product distributor, Blossman Services Inc., is a managing member of Alliance AutoGas. A presentation by Roush CleanTech (Livonia, Mich.) highlighted that, at the time of the summit, more than 200,000 schoolchildren had been safely taken to class on propane-fueled buses.
Repsol (Madrid) presented the results of its project on direct liquid injection, in cooperation with other automotive developers. The research concluded that, due to its characteristics, autogas is the only alternative fuel that can be used in today’s low-rpm Otto and turbo-boosted engines while still meeting stringent European Union emissions standards, providing an off-the-shelf solution. Combustion is said to generate nearly no particulate matter. Minimal mechanical modification and no manufacturing cost benefits accrue to OEM vehicle manufacturers.
Finally, the event concluded with an invitation to the 2015 WLPGA Autogas Summit in Seoul, South Korea Jan. 28-29, hosted by the Korea LPG Association.
Note. “Autogas Incentive Policies: A Country By Country Analysis of Why and How Governments Encourage Autogas and What Works” may be downloaded at http://auto-gas.net/uploads/Autogas%20Incentive%20Policies%202014.pdf.