Do Natural Gas Vehicles Make Sense?

T. Boone Pickens recently launched his Pickens Plan to build $1.2 trillion worth of wind turbines and additional power lines to meet 20% of the US demand for electricity. The natural gas which is currently producing that electricity would then be shifted to fuel cars reducing oil imports by 1/3.

I had never really looked into the advantages and disadvantages of natural gas vehicles (NGVs) before, but the Pickens Plan prompted me to take a closer look.

There are 3 main advantages of NGVs.

First, natural gas is cheaper than gasoline. On 9/13/08, GasBuddy put the average cost of a gallon of gasoline in the US at $3.78. Looking around the country on CNG Prices.com it looks like natural gas prices average in the $2-$3 range per gasoline gallon equivalent (GGE) (127.77 cubic feet of natural gas or 1.32 therms at 96.7 cubic feet per therm or 132,000 btu), but varies greatly state to state. Utah has a price of $.88 a GGE due to state regulations that oblige the utility company to offer one half of the gas it sells to its retail customers at the cost of production. Due to the low price, Utah leads the country in natural gas vehicles with 6,000.

Second, natural gas burns cleaner. Natural gas vehicles emit 20% less CO2, less carbon monoxide, non-methane organic gas and nitrogen oxides.

Third, natural gas is produced domestically. While 58.2% of all petroleum in the US is imported, almost all natural gas is domestically supplied. While oil production has been going down in the US, natural gas production has increased in the last few years due to new technology that allows tapping of shale beds. Importing oil has geopolitical implication for the US and even the country we import from is probably not better off economically, something economists refer to as the oil curse.

There are 3 main disadvantages of natural gas vehicles over gasoline powered ones.

First, NGVs are more expensive. The most popular (only?) production NGV in the US is the Honda Civic GX. It goes for $25,090. The comparable Civic Sedan DX goes for $15,405 and the comparable Civic Hybrid goes for $23,550.

Part of this greater expense is due to the low volume of NGVs sold. As of August 29th, Honda had only sold 800 Civic GXs this year. If production were to increase, prices would fall. But, NGVs would still be more expensive due to more expensive fuel tank that holds the compressed gas.

In terms of efficiency, NGVs are almost identical to gasoline vehicles as the Civic GX gets 28 miles to the GGE compared to 29 mpg for the the Civic Sedan (the Civic hybrid on the other hand gets 42 mpg).

Second, NGVs have a shorter range. The GX has a tank that holds 8.03 GGE (or 1000 cubic feet if I did the math right) and a range of 220 miles vs 13.2 gallons and 382 miles for the Sedan. Because gasoline is a denser fuel, NGVs will always have a shorter range.

Third, there are fewer places to refill. There are 1,100 natural gas stations in the U.S., of which only 1/2 are open to the public, vs. 200,000+ U.S. gas stations.

One way to get around this problem is to install a refilling station in your garage. The Phill does just that, but it is quite pricey at $6000 (although likely lower after government rebates). It also requires a $2,000 refurbish every 3,000 gallons which is making many NGV owners look elsewhere. A home refilling station is more convenient for refueling, but at just 1/2 gallon an hour much slower than at a station where filling time is not that much slower than gasoline.

Overall then, do NGVs make sense?

If in the future the natural gas was produced in the US and an NGV had a similar total cost of ownership as a gasoline vehicle then I think it would be the way to go.

But, some believe that the US will see declining production of natural gas in the next 6 years (on the other hand if the methane hydrates were used then there is a lot of energy there). Also, natural gas power plants are often setup next to wind turbines to produce electricity when the wind doesn't blow, so I am not sure if there will be that much natural gas saved if all of the wind turbines are installed. I have doubts whether there would be enough natural gas available domestically to fuel a substantial portion of our vehicles.

It is also not clear how much the price of NGVs will decline and how much money would need to be spent on infrastructure for refueling stations.

Instead of NGVs, I think it would be better to focus on hybrids, plug-in hybrids and electric vehicles. The Civic Hybrid gets 42 mpg vs. just 28 miles to the GGE for the Civic GX. The hybrid is currently cheaper and emits less co2 per mile driven because of its greater fuel efficiency. Natural gas can also be used to generate electricity to power a plug-in hybrid or electric vehicle (and likely fuel an electric car further on the same amount of natural gas as a NGV). Instead of building a new natural gas infrastructure, I think it would be better to spend the money on R&D for electric vehicles. Natural gas is still a fossil fuel, and switching to electric vehicles will allow for a transition to renewable sources of energy.