CNG use has ‘chicken and egg’ conundrum

TULSA — During the first ever Compressed Natural Gas (CNG) summit, leaders in the natural gas world made a compelling case for the adoption of compressed natural gas as a viable American alternative to petroleum. But this alternative will not be available to the public without major overhaul to the current infrastructure. Are the monumental initial costs worth it?

The primary impediment the development of CNG is facing is the “Chicken and Egg” conundrum of public access and demand. Or put another way, how does CNG become available to the public — considering the high initial investment — if there is not a public demand for CNG?

There are three general types of fueling stations: stations that are on company property which companies use solely for their private fleets, onsite stations available for public access but primarily used for fleets, and offsite stations at public retailers (like convenience stores).

Many in the public access station world don’t have the incentive to build CNG stations without a guaranteed market.

Director of Market Development for NGVAmerica Stephe Yborra has a solution: “Make a chicken and egg omelet.”

What Yborra and other leaders such as Oklahoma Gov. Mary Fallin have proposed is to form business aggregates (small businesses joining together to purchase a station) to create a reliable market, which would entice those in the natural gas industry to build more stations. These stations, once built, may provide public access.

“The cost of infrastructure is high, so the volume of fuel has to justify it. Fleets create volume, which creates economy of scale,” Yborra says, “You (the public) are the gravy, the meat and potatoes are the trucking world.”

As Yborra says, the public is not the initial focus of CNG expansion, which might explain why Honda offers the only CNG manufacturer-built car.

So, while many in the public are excited about the current developments of CNG, if they do not reside in preexisting pockets of CNG stations (such as Oklahoma, California, parts of Texas), they might have to wait a while. Also even in those pockets, the best use for CNG passenger vehicles is around town — picking up the kids from soccer, driving to work and the coffee shop — because there might not be any stations on the way to the Grand Canyon.

But fortunately for CNG enthusiasts, there are companies like AT&T, who are slowly creating CNG fleets, and providing them with fuel from public access stations — thus, expanding the market and consumer awareness.

Another consideration to the cost of infrastructure is the cars themselves. CNG must be stored at higher pressures than conventional gasoline, so the fuel tanks must be heavier, stronger, and larger. Also, cars have to be converted to CNG — with certified CNG specialists installing the kits. And this costs more. The typical cost for conversion is between $8,000 and $12,000.

Ouch.

But, according to proponents of CNG, that money is rapidly regained by saving at the pump, since CNG costs little more than half of regular gasoline. And there are many government incentives and grant programs, especially for business fleets. In order to fuel the industry, the state of Oklahoma offers generous tax credits — some conversions are eligible for tax credit up to 50% of the conversion.

Leading the bipartisan charge for CNG expansion, Fallin (Republican) and a growing group of state governors, such as Colorado Gov. John Hickenlooper (Democrat), have met with top executives of Chrysler, GMC, and Honda, to hammer out a deal. As Fallin said in her keynote speech on Wednesday, States have a lot of buying power — a lot of vehicles — and the potential is pretty appealing to automakers. So, if states adapt their vehicles, more stations will be built, public awareness of CNG will rise, and the market will expand.

The hope for CNG users is that the current amount of stations — 1,100 — will someday mirror the number or conventional gasoline stations — around 120,000. That might seem like a daunting goal, but with the combined force of the government, business aggregates, and public access advocates, and eager consumers, it may be within reach.