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Thursday, May 1, 2014

Alt Fuels Ping Fleet Managers' Interests To Impact Bottom Line

It is not hard to understand why a fleet manager with 50 tractors, who might be able to save 30 cents a mile across all of those trucks, would be so interested in any new fuel option that might provide a savings.

In the transportation business, managing expenses and the bottom line is no different than any other operation. Technology often provides the innovation and the opportunity to create efficiencies within a set structure or process. In the case of fuel costs for a fleet, there are few costs that are more impactful on a day-to-day basis.

For fleet managers, the savings gets dropped into a formula multiplied by thousands of miles a week, and multiplied again by the number of trucks in the fleet, maybe 50 or even 100. Truth is, even if there were merely 5 trucks in a fleet, a minimal savings per mile would provide incredible savings over the course of a year.

Herein lies the driving force behind the emerging focus on alternative fuels. Since the beginning of heavy-duty trucking, diesel fuel has been king. However, the newest darling alternative fuel making noise is natural gas. The OEMs are developing natural gas platforms and the old guard trucks are seriously considering glider kits to make the immediate transition.

Whether it is compressed or liquefied, natural gas has been able to crack the consciousness of the trucking industry. It has managed to hold the attention and grow the core of believers that this may be the wave of the future. Cost and availability are the real attention-getters.

Natural gas is becoming more plentiful and more affordable. The U.S. oil boom has been so significant that it has made the U.S. the number one energy producer in the world. With that ascension to the top of the energy throne has come an enormous influx of natural gas that is plentiful and much more affordable than diesel.

So, what is the holdup? For many veterans of the industry, they have seen alternate fuel fads come and go — but likely there has never been one quite like the impact of natural gas. Natural gas offers similar torque characteristics and just a few years ago it was not even on the radar for a majority of fleet managers.

Other alternative fuel options such as propane and biodiesel have had their runs and biodiesel even has its federal mandates. Alt fuels such as the new dimethyl ether (DME) and even hydrogen have come into the fold for consideration. But natural gas looks to have cemented its place for the future.

There is a concern with natural gas that methane leakage rates are higher than previously understood, affecting its greenhouse gas (GHG) profile, so it could turn out not to be much of a GHG reduction option whereas other technologies might be better for that.

"No single alternative fuel will be sufficient to meet America's needs for fuel diversity and environmental benefits in the transportation sector," says Jon Leonard, senior vice president of Gladstein, Neandross & Associates (GNA). Leonard notes that the options for fleets are numerous and include fuels such as E-85 (a blend of up to 85% ethanol and 15% gasoline) and methanol, both of "which offer the advantage of being liquids like gasoline and diesel."

The difference maker for the long-term introduction of any alternative fuel source will be the volume. Will there be enough interest in any one option to reduce costs sufficiently to entice fleets to invest in the added infrastructure and vehicle cost premiums associated with the fuels?

If any one alternative fuel gets the buy-in from a few key national fleets, you could start to see more and more natural gas pumping outlets appearing on the landscape.