12/09/2014

Natural Gas Costs Went Down in 2014 and Here’s Why

Natural Gas graphic banner with trailer trucks in background

Transporting goods is a major expense in a company’s supply chain. In fact, transportation costs make up about 63% of total logistics expenses1. Trucking alone comprises about 48% of logistics costs. Companies are always looking for ways to cut costs and improve efficiency and one way to accomplish this is by using natural gas. Natural gas dates as far back as 1000 B.C. and has been distributed as energy in the United States since 18212. As technology advances so does the use of natural gas. In the most recent years, businesses are taking steps to take advantage of the many benefits that natural gas offers and applying them to their transportation solutions.

Prior to the move towards natural gas, all tractor trailers ran on diesel. Natural gas can be less expensive than diesel and emits less harmful gases. As time goes on, more trucks are being converted to take natural gas exclusively or a combination of both natural gas and diesel. There are two natural gas options for trucks, liquefied natural gas (LNG) and compressed natural gas (CNG). Depending on the operation, natural gas may save carriers and their clients about 40% of fuel costs. In 2014 even more developments were made to improve the costs of using natural gas over diesel.

New Natural Gas Tank Providers

Prior to 2014 there weren’t many natural gas tank manufacturers/packagers. The competition was low and the high prices reflected that. This year, more have entered the tank manufacturer game and began to reduce the weight of the tanks and the upfront costs to purchase them. Their new tanks cut upfront costs by about 20-30%. Capital costs were reduced which made the idea of transferring over to natural gas more realistic for many companies.

Natural Gas Grants

The cost of converting to natural gas fleets can seem intimidating but recently states have begun offering grants to make the transition more feasible. The grants can be obtained by the owner of the vehicle at no cost. There is an application provided by the state and is made up of a variety of questions for the carrier to answer. The amounts of the grants vary but for more information you can see a full list of state websites for natural gas grant applications. We will continuously update this list of natural gas grant applications, so check back often.

Fueling Infrastructure Improvements

As popularity for natural gas grows, so does the infrastructure to support the fleets. Natural gas providers such as Gain and Trillium list their locations on their websites. Every year, more and more fueling stations are being built throughout North America making natural gas more widely accessible. Some providers are even willing to build sites with a shipper or carrier if there is enough volume to support them. In addition, some compressed natural gas providers are willing to combine volume for deeper discounts across different locations.

Natural Gas Tank Maintenance

In earlier years there were a lot of uncertainties surrounding the maintenance of natural gas trucks. Many feared that the maintenance would be expensive in comparison to diesel trunks, but in 2014 that has proven untrue. It has become evident that with the absence of the expensive maintenance of the exhaust after treatment systems that are required on diesel but not required on the natural gas trucks, the maintenance costs are flat with diesel in comparison.

Overall, the popularity and use of natural gas is increasing. As natural gas tanks become more available, the costs to convert fleets will decrease and overall their transportation expenses will decrease as well. Businesses can calculate their estimated savings through CNG Savings Calculator.

Sources

  1. http://www.scdigest.com/assets/newsviews/13-06-28-1.php?CID=7193
  2. http://www.apga.org/i4a/pages/index.cfm?pageid=3329