From SCDigest's On-Target E-Magazine

- Sept. 1, 2014 -

Logistics News: Growth of Natural Gas Trucks Not Reaching Levels Many Expected

Current Fuel Surcharge Practices Actually a Barrier to Adoption, Carriers Find, While Lack of Filling Stations Outside Major Highways Remains and Issue

SCDigest Editorial Staff

While sales of natural gas powered trucks are growing nicely in absolute terms, a variety of factors is working to keep the rise in nat gas trucks below the levels many had expected in 2014.

SCDigest was among those who thought 2014 would be the year natural gas powered heavy duty trucks would reach an inflection point that would put them clearly in the mainstream. That thinking coming from what seemed to be a very strong value proposition, both financial and environmental, a growing network of natural gas filling stations from companies like Clean Energy Fuels and others, and companies such as retail giant Lowes making major commitments to natural gas trucks. (See Lowes to Expand Natural Gas Truck Program with Complete Conversion at Texas Distribution Center.)

SCDigest Says: It might take a rethinking of fuel surcharge programs for the switch to natural gas to really take off at common carriers. What Do You Say? Click Here to Send Us Your Comments Click Here to See Reader Feedback

Additionally, major US companies such as Procter & Gamble and Walmart have put in place policies putting pressure on their suppliers to use natural gas trucks to meet sustainability goals.

In a period of very robust new tractor sales overall, Power Systems Research now predicts that 10,480 heavy-duty natural gas trucks will be sold this year, up 20% from the 8,730 sold last year.

However, "Some forecasters had expected sales to about double to 16,000 vehicles this year amid the trucking industry's enthusiasm for natural gas a year ago," the Wall Street Journal recently noted.

While it remains in SCDigest's view quite likely that natural gas powered trucks will eventually gain a significant if not dominant share of the market, why is that future not coming faster?

A variety of factors are involved, as it turns out.

First, of course, there is the cost, with the premium for nat gas trucks as much as $50,000 or even more than the about $150,000 it costs for a new diesel-powered truck.

So, even if the return on investment is strong, that is a lot more capital that a carrier or private fleet must expend to build a natural gas fleet. The famous "Pickens Plan" from legendary energy investor and Clean Energy Fuels founder Boone Pickens would tackle that issue by creating a 0% interest federal revolving loan program for the incremental cost of the vehicle to be paid back with the fuel cost savings over a three-year period. However, that idea has not made much progress in Congress to date.

But that extra investment should still provide a decent return, by one calculation, with fuel savings of between $1.60 and $1.70 for the natural gas equivalent of a gallon of diesel. That can lead to a payback period of around four years, based considering the average truck travels 125,000 miles a year, in addition to the reduction in greenhouse gas emissions, thought to be about 20% or more lower with nat gas.

That's a decent return, but not an overwhelming one, say most in the industry. Since of late fleets turn over their trucks every three to four years, that doesn't give a carrier much time to really gain from the nat gas investment.

One big issue is how so-called "fuel surcharges" come into play. As these practices have evolved since diesel prices began to soar a decade ago, carriers might just see the savings in fuel costs evaporate in receiving lower fuel charge payments from shippers. It might take a rethinking of fuel surcharge programs for the switch to natural gas to really take off at common carriers, though the savings would be captured by private or dedicated fleets.

That fuel surcharge issue is a real problem, according to Mike Card, president of Combined Transport Inc., which operates a fleet of 500 diesel trucks specializing in hauling heavy or wide cargoes.

(Transportation Management Article Continued Below)