Author: Eric Heymann (+49) 69 910-31730
April 13, 2012
Natural gas continues to lead a niche existence as a fuel for road vehicles despite offering many advantages. The variable costs for a car that runs on natural gas are much lower than those for petrol or diesel engined cars. Besides, it also causes fewer emissions of CO2 and other pollutants. But, so far, natural gas passenger cars are in short supply. Furthermore, the premium charged is still too high for many customers. The filling station network would need to be expanded. However, the problems can generally be managed. On balance, natural gas vehicles have good prospects of growing their market share in the years ahead.
Over the past few weeks, prices of petrol and diesel fuel have soared to new record highs in Germany. The rising prices at the pump are essentially due to the high oil prices on the world market; these result from the increasing demand for oil in the face of tight supply volumes with only limited scope for expansion. The fact that the price surges hit road transport particularly hard is not very surprising considering that it relies on petroleum more than virtually any other sector. Over 99% of the passenger cars sold in Germany in 2011 ran on either petrol or diesel. In many major car markets – say in the United States and China – the situation is virtually the same.
One of the main ways to exit the cost trap in the near term is by boosting the efficiency of internal combustion engines; tangible progress has been made in this area in recent years – partly due to government regulation. The hybridisation of cars similarly focuses on reducing fossil-fuel consumption and the dependence on such fuels. On a medium to long-term horizon, great hopes are being pinned on electric mobility and hydrogen. By contrast, natural gas has attracted only little public attention as an alternative fuel for road vehicles. This is surprising, given that natural gas offers many advantages over both petrol and diesel as well as the technologies regarded as promising solutions for the future (electric mobility, hydrogen).
From the driver’s point of view, the roughly 50% savings on variable costs with natural gas are one of its advantages over petrol. These result (not only in Germany) from the tax relief on natural gas and from the higher energy content of one kilogramme of natural gas in comparison with one litre of petrol or diesel. While the low variable costs are set against higher acquisition costs for natural gas vehicles, the price premiums charged are much lower than on electric cars. For high-mileage road users, natural gas vehicles may pay off within just a few years. While the range of the natural gas car is still shorter than for diesel cars, it is already several hundred kilometres. Given a meanwhile pretty dense network of filling stations and short refilling times the range should not be a knock-out criterion for very many drivers. This, too, is a major advantage over electric cars.
From an ecological standpoint, natural gas vehicles offer the advantage of emitting about 25% less CO2 per kilometre driven than petrol-powered vehicles. If biomethane from sustainable sources is blended with natural gas, the CO2 performance is even better. In view of ambitious CO2 fleet targets this is an attractive proposition also for carmakers, especially since – unlike in the case of electric mobility – they can fall back on the proven technology of internal combustion engines. Further improvements in petrol engine efficiency are generally also a boon to natural gas vehicles. Moreover, pollutant and noise emissions are lower than for petrol or diesel cars.
One further argument in favour of greater use of natural gas vehicles is that there are fewer supply tensions gripping the global gas market than the oil market. This is due not least to the increasing exploration and development of unconventional gas deposits, for example in the US. The reserves-to-production ratio is much higher for natural gas than for petroleum, i.e. given current consumption levels global reserves of natural gas should last longer than those of oil. While the prices of both sources of fuel are likely to go up in the longer term, the average price increase for gas should be smaller than for oil. Ultimately, greater use of natural gas in road vehicles would reduce the sector’s dependence on oil, even though natural gas is a finite fossil fuel, too, that in Germany, for the most part, has to be imported.
Natural gas use throws up significant problems, but they are certainly manageable
Given natural gas’s advantages as a fuel it is amazing that no more than a paltry 0.2% of all new car registrations in Germany in 2011 were for natural gas vehicles. There are reasons for this: so far, for example, the supply of natural gas vehicles has remained limited. While it is possible in principle to convert petrol engines to run on natural gas, it is seldom worthwhile. For many customers the premium charged is too high or the filling station network (also abroad) still too patchy. There is a factor of uncertainty resulting from the fact that the tax benefit for natural gas only applies up to and including 2018. This probably already puts some individuals off buying a natural gas vehicle today. Last but not least, many drivers still have safety concerns about using natural gas to fuel their car.
The cited problems pertaining to natural gas are significant, but they can be attenuated. Many carmakers, for example, say they want to expand their product range of natural gas vehicles, with greater unit sales then reducing the premium charged. If there are more natural gas vehicles on the road, investments in filling station infrastructure pay off more rapidly in turn. In the medium to longer term the share of methane generated from renewable energies can be increased (biomethane, wind gas). Policymakers would have to find a follow-up regulation for the expiring tax benefit as soon as possible. Gradual reduction of the benefit over several years might be an option. The low CO2 emissions would in fact serve as an argument for a type of long-term tax advantage for natural gas over petrol or diesel, especially since politicians had set themselves the target of increasing the share of natural gas vehicles on the road. All those involved would have to be even more active in communicating the advantages of natural gas as a fuel. If these prerequisites were fulfilled, natural gas vehicles could gradually grow out of their niche in the years ahead.
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