More beverage fleets see CNG, or compressed natural gas, in their future.
It is now regarded as an “alternative fuel,” but with expert observers predicting an annual 10 percent or greater increase in CNG usage for the beverage business in the years ahead, it may quickly become mainstream. It’s not ideal for fleets that have to travel long distances because of the lack of public fueling stations, but it works well for most delivery-route oriented beverage distributors.
“I would expect to see some pretty significant growth in the beverage sector as people see fleets succeeding and having good experiences with CNG,” says John Boesel, president and chief executive officer of Calstart.
“I see natural gas growing significantly as part of America’s transportation system,” says Rich Kolodziej, president NGVAmerica (Natural Gas Vehicles for America).
The large price increases of other fuels, such as diesel and propane, compared to minimal increases for natural gas are causing many feet owners to consider a change. “Every time there is a huge spike in diesel prices, our phones and our member’s phones ring off the hook,” Kolodziej says.
“Right now, we are seeing a number of fleets very impressed with the economics of natural gas,” Boesel says. Citing Pepsi’s 208 natural gas trucks, he adds, “they are really seeing the economic benefit of going with natural gas over diesel.” With new drilling technologies like fracking and horizontal drilling, “we are going to be looking at a pretty healthy supply of natural gas over the next three to five years, and that will keep the prices low,” he adds.
CNG Takes Manhattan
Manhattan Beer Distributors was one of the first beverage companies to use CNG fuel for its fleet in 2001, now has 25 percent of its trucks running on natural gas, and is looking forward to the day when 100 percent of its 300-plus vehicles are using the fuel, says Juan Corcino, director of fleet operations. “We are on the right track for 2018.”
Manhattan has fueling stations at its locations in the Bronx, Brooklyn and Long Island, and is building two state-of-the-art stations that will dispense 10 gallons per minute. Its first 15 trucks and fueling station were at its main Bronx facility in 2001, followed 15 more CNG trucks and a station at its Brooklyn branch in 2005, and 15 more and a station in Wyandanch, N.Y. on Long Island. The company added 12 CNG trucks in Long Island last fall. The first 45 trucks were converted to CNG from diesel, but 24 ordered last year are equipped with CNG from the factory, Corcino says.
The company now has 75 trucks running on CNG, plus one hybrid electric unit that it is testing.
Like many others, Manhattan has the advantage of natural gas pipelines run by the area utility, so deliveries are never an issue. The distributor is also alert to all government grants and incentives it is eligible for to defray the cost of installing the infrastructure and the cost differential from diesel trucks.
“The return on investment for the incremental cost is nothing for us because the grant that is available in this area covers 100 percent of the incremental cost in some cases, in other cases it only covers 80 percent of the incremental cost, which is still extremely good,” Corcino says.
The cost savings on fuel also is very significant. When the company converts its entire fleet to CNG, its annual fuel cost will drop from its current average of $3 to $4 million annually to $1.5 to $2 million. Because of longer oil change and spark plug change intervals, and none of the emissions systems mandated for diesel trucks, Manhattan saves 40 percent on maintenance, he estimates.
Corcino outlines the disadvantages and advantages of converting a fleet to CNG.
Among the disadvantages:
- The high cost of installing and maintaining a CNG station.
- Lack of public CNG stations, so trucks have to return to base every day.
- The cost of a CNG vehicle is much higher than diesel, an additional $45,000-$75,000 depending the engine use, the amount of fuel required, and how big the fuel tanks are.
The advantages include:
- It is the right thing to do for the environment.
- There is an effortless start-up during cold weather conditions, requiring less warm-up time than diesel.
- The engine is quieter than diesel.
- Stations don’t require fuel delivery because of a direct pipe from the gas supplier.
“When we started with CNG, we were not sure if it was the right thing to do because no one else was going in that direction,” Corcino says. But the cost of natural gas fuel is going to stay low while diesel will continue to increase. He confirms predictions of a 10 percent-plus growth rate for CNG use for every class of vehicle.
Taylor Positive About CNG
J.J. Taylor Companies has had a positive experience with CNG fuel for its trucks, says Jose Rivera, corporate vice president of administration.
The company has fueling infrastructure for 43 tractors at its Tampa facility, and is building a fueling station in Fort Myers for 10 tractors. It received the 43 tractors in February of 2013. “We’ll be adding another 27 between July and December of this year. By the end of the year, we should be at 48 percent of our fleet. We plan to grow to 90 percent in Florida in about three years,” he says, noting that CNG doesn’t make sense in some of their locations.
“It has some tangible benefits and some intangible benefits. There are a couple of drawbacks that you have to work with, but overall it has been a great experience. We are achieving what we wanted to achieve, and so far it is working out very well for us,” he says.
Cost of fuel is a major benefit, as is its clean burning characteristic. “It is good for the environment and good for you economically.” One advantage not emphasized is that it is quieter, without the diesel fumes. “So the driver has a better life and doesn’t lose his hearing.”
A negative J&J Taylor found was the cost of the equipment was more than the initial sales pitch. For example, a tractor that was supposed to cost $80,000 ended up costing $125,000-$130,000, Rivera says. When they started out, financing was difficult, until they found a fair market value lease on the natural gas trucks from PHH FirstFleet, a division of PHH Arval. It is one of the first fair market value leases of CNG vehicles in the U.S.
“We try to be as green as possible. But at the end of the day we have a financial responsibility so it has to make economic sense too,” he says. “It doesn’t make sense for everybody. You have to do your homework and make sure it makes sense for you. But it has been a really good experience. I cannot complain about it.”
Best Practice Primer for CNG
Boesel and Kolodziej offer several best practices for beverage fleets getting started in CNG.
One is to understand how a company’s trucks are used, where they go, and where they are refueled, Boesel says. “That is critical because you don’t have the widespread infrastructure. So if you have a fleet and you think your fleet has to go 400 miles in a day, that could be an issue.”
Companies need to look at the economics, understand what the prices are, and factor that into the cost of a CNG station, he says. Then they need to find a good partner to supply the natural gas, and look at the availability of government incentives.
Beverage distributors may find that they can put in a fueling station that is both private and public, selling natural gas to outside customers. “Some fleets are doing that and finding that they can charge a premium and make some money on the side. It’s unlikely they could do that with diesel fuel, but moving to a new fuel, it actually can create an opportunity to enter the business of being a fuel retailer,” Boesel says.
Kolodziej’s first best practice is to look at how many vehicles are going to be bought, and over what period of time. “If you are going to get a lot of them right away, you are going to do one thing. If you are going to get one or two or two, and then two more and then two more, you do something else.”
Another key question is: “Where am I going to get the gas? If you are going to a public station, there’s no issue, you just go. But if you want to have gas onsite, either fast-fill or time-fill/overnight fill, you have to decide what you are going to do,” he says.
Fleets with very few CNG vehicles present a problem because it’s not worth building a station. “If you know you are going to ramp up from two to 50 trucks, you sign a contract with a company that may come in and build a station for you, and then the contract says, over that period of time, you’ll take a little at the beginning, but a lot later on,” Kolodziej says.
Another option is wet fueling, where a company comes in at night with a truck, and fills up the trucks. This requires trucks to be parked overnight at the facility, which is how most beverage firms operate.
More expensive than wet fueling, but less expensive than the big station is to work with companies that will put in a small station that is sized for a small number of trucks, he says. Koldziej uses six as an example. “After you get to six trucks, the operator will take that station out and put in a bigger one. If you have two and you know you are going to ramp up, then you put in a station for four or six, and over the next year or so, put that station to the max. Once you get to six and you start going to eight or 10, that station goes out and a new station comes in. So you have a small capital investment rather than a big capital investment for a station that can do 100 trucks.”
There is a new option from Mobile Fueling Solutions, which uses technology from GNC Galileo S.A. It utilizes existing stations and infrastructure to deliver CNG in modular containers transported by road on special trailers, says Dean Sloane, chief executive officer. “Our ability to bring CNG fuel to your site and vehicles requires minimal or no capital expense or infrastructure commitment. This will significantly advance the natural gas industry and the proliferation of NGV fleet vehicles,” he says.