HOUSTON, Texas -- As open as the Canadian market is to LNG vehicles, it still pales behind the reception China is giving the alternative fuel.
According to Tom Campbell, head of analysis at Zeus Intelligence, a research company specializing in LNG and natural gas data, the difference between adoption rates of LNG between China and North America are dramatic.
Zeus recently completed a study of the number of worldwide orders for LNG commercial vehicles. Zeus compiled data from company announcements and other publicly available data.
In 2013, Zeus found 41 orders placed for LNG-fueled trucks and buses from 38 fleets. While North America placed slightly more orders (18 vs. 15) than China, China ordered significantly more vehicles. (Orders were also tracked from Europe and England.)
“The scale was a little bit of a shock,” he said. “The growth we’re seeing in China is unreal.
“What we didn’t even talk about was the number of fueling stations, the number of liquefaction facilities under development. It’s really quite tremendous. It’s interesting also, the lessons of the North American market are already pretty well known—they’re going to be heavy duty Class 8 tractor fleets for the most part, in a one-trial fleet or one warehouse at a time.”
In comparison, Chinese companies are placing big orders (numbering in the thousands), and orders for other types of vehicles, including busses and refuse trucks.
“Also what’s pretty interesting is you’re seeing LNG in broader applications out there than you are here. I think a lot of that has to do with incremental costs of an LNG unit vs. a CNG unit. Here in the States, the cheapest truck you’re probably looking at is $45,000-$50,000, and I’ve seen them go up to $110,000 incremental costs. That’s the most extreme example I’ve seen. In China, you’re talking $10,000-$20,000 tops.”
Campbell said nobody knows exactly why incremental costs are so much cheaper in China, but he suspects a number of factors come into play.
“Cheaper labour is going to be part of that. You’ve got better economies of scale with companies making 1,000-plus truck orders—several of them—that’s going to make it easier to do. There may be some state grants distorting that, although I can’t really speak to that. I think it’s also cheaper components.”
Because Chinese fleet owners and managers can buy LNG vehicles for such a nominal cost-difference, it’s easy to justify the purchase, especially when the benefits are weighed.
“What we’re seeing in China is those incremental costs are only a couple of thousand dollars difference. It’s relatively miniscule. Which means a lot of those operators say if it’s the same cost, I’m going to go with LNG so I have more on-board storage and so I can avoid all of the weight penalties that get associated with CNG.”
While the study looked at what happened last year, Campbell is comfortable forecasting what will happen to the LNG market in the near future. He says the Chinese market will pick up even more, although he feels it’s getting near an inflection point.
He also says growth of the North American market will continue, in part because of new technology.
“What we’ve seen a lot in the last year is a lot of new technology options have arrived. There’s the new 12L gas engine which just came out last year. Volvo is working on a 13L. That means there are a lot more options so people can right-size.
“I think we’re starting to see more competition in the components market—the fuel tanks, the fuel supply systems—and that’s going to have a positive pressure on reducing the incremental costs, and that’s going to be pretty big.
“We’re also seeing a lot of people building plants. Some of them are targeted for trucks. Some of them are targeted for ships, for drilling rigs, for fracking rigs, whatever, but we’re seeing a lot of that. That will mean supply will be located more closely to users, and that’s going to really help lower pump prices for some people,” he said.
As for the Canadian market, Campbell says LNG has better penetration here than it does in the US.
“I think the Canadian market is pretty exciting in a lot of ways,” he said.
“I think partly you’re dealing with a lot more very large trucks in Canada—at least proportionally than you are in the US. And those are tailor-made for LNG, so there is a lot of push for that.
“There’s a lot more government support for LNG in Canada, and for [natural] gas in general in Canada. There’s a lot of theoretical government support here in the US, but in Canada there is actually a lot more government initiatives, grants, whole big programs to support it.
“And also in Canada you’ve got some interesting synergies people are achieving. You’ve got these mine-haul trucks you’ve got drilling rigs, you’ve got these heavy-duty tractors all operating, particularly out west, in relative closenss to each other, and that makes it easier for somebody to justify building a plant.”
Zeus reports two Canadian companies places LNG orders: Bison Transport (15 trucks) and Loblaw Companies (five trucks).
The largest North American orders were placed by:
- UPS (700 trucks—plus an additional 12 in a separate order)
- Raven (36 trucks)
- Kenan Advantage (25 trucks)
- Dillon Transport (25 trucks)
- Linde AG (20 trucks)
- Lowe’s (17 trucks)