Tax breaks help cut costs of alternative fuels

  • 14-Oct-2009 04:31 EDT

The Propane Education Research Council helps companies and government agencies determine whether to switch to natural gas.

Alternative fuels can help fleet owners save money, often without requiring large investments. But before vehicle owners switch to biodiesel and natural gas, they need to ensure that they are maintaining quality levels and making sound financial decisions.

Panelists at the recent BusCon bus convention in Chicago expressed optimism that bus owners and operators can reap benefits by moving to alternative fuels. Reducing both emissions and costs lead the way.

“Natural gas is 23% better in greenhouse gas emissions than diesel and it’s cheaper, too,” said John Somers, Director of Transit Business Development for Clean Energy Fuels Corp., a company originally founded by Boone Pickens.

Somers noted that there are more than 130,000 natural gas vehicles on America’s highways today. Alternatives such as liquid natural gas (LNG) are much cheaper than petroleum-based fuels.

“Any time oil is over $31 per barrel, LNG offers a cost benefit,” said Kwangsup Hwang, General Manager of Doosan Infracore America’s Engine Division.

Doosan started the division earlier this year to focus on compressed natural gas (CNG) engines for the truck and bus market. The company is currently producing 6- and 8-L engines and is preparing to ship an 11-L version for 40-ft (12-m) buses.

Somers also quantified the pricing benefits of natural gas, explaining that fleet owners can save 50 cents or more per gallon over diesel fuel. Somers and other panelists noted that North America produces more than enough natural gas to support increased usage in transportation. That may be one reason that the fuel is being supported with hefty tax credits.

“There are tax credits; if you switch to LP, you can get 50% of the incremental cost differential,” said Greg Zilberfarb, Outreach Consultant for the Propane Education Research Council. “There’s also a 50-cent/gal fuel credit in the form of an excise credit for alternative fuels.”

Converting to natural gas does not require a major investment. Engine changes are fairly minimal, as are costs for infrastructure development. Zilberfarb also noted that it costs less than $20,000 to set up a 2000-gal (7570-L) fueling station.

However, he cautioned that operators can’t just look at the initial costs of a changeover. Mileage per gallon is typically lower.

“When propane is stored as a liquid, it has 15-20% lower mileage per gallon. That’s something you have to factor in,” Zilberfarb said.

The proponents also acknowledged that natural gas suppliers helped create some of the hurdles that must be overcome. Some early adopters were burned, creating a negative image for the fuel.

“Originally, the utilities companies ran the infrastructure; they basically killed it with low quality,” Somers said. Quality issues with natural gas are rare today, he added.

Quality issues also plague another alternative: biodiesel. As with natural gas, suppliers who jumped in during the start of the industry gave its image a black eye. Quality problems have plagued biodiesel mainly because its low cost of entry opened the door for many suppliers.

“Biodiesel has been used for millions of miles, with satisfaction depending on fuel quality,” said Richard Nelson, a National Biodiesel Board representative who is also Co-Director of Kansas State’s Center for Sustainable Energy.

However, he noted that there is relatively little risk of contamination when users only buy from suppliers who are certified to American Society for Testing and Materials standards. The success of certification has already driven change. Many of the low-quality providers have folded.

“Ninety-five to 97% of the fuel produced today is good,” Nelson said. “If you deal with very small companies that make biodiesel, that’s where problems can arise.”

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