Natural Gas Vehicles for the Chippewa County Highway Department Cost/Benefit Analysis

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1 Natural Gas Vehicles for the Chippewa County Highway Department Cost/Benefit Analysis Prepared for: Chippewa County Highway Department Presented by: Luis Galimber%, Jeremy Hall, Lingqiao Qin, Daniel Reichl & Janice Soriano Prac%cum in Transporta%on Management and Policy May 10, 2013

2 Purpose of Project Iden'fy technological requirements & assess economic benefits of conver'ng Chippewa County Highway Department maintenance & patrol fleet to compressed natural gas (CNG). Three dis%nct cost- benefit analyses: Vehicle Analysis No Ac'on Replace w/cng Convert to CNG Project Analysis No Ac'on Transi'on to CNG Fueling Sta%on Analysis Private Sta'on Public Sta'on

3 Fleet Characteris%cs Photo Credit (from top right, clockwise): Flickr.com, automotobounce.com, new- cars2013.com, J. Soriano Source: Chippewa County Highway Department

4 Vehicle Analysis Analyze Each Vehicle Individually Over 50- Year Period Do Nothing Vehicle fueled by Gasoline/Diesel Convert to CNG Assumes vehicle converted in 2014 Replace with CNG Assumes vehicle replaced at end of service life

5 Required Cash Flows for Vehicle Analysis Vehicle Cost Salvage Value Fuel Cost Maintenance Cost Summary of Results

6 CNG Vehicle Technology Photo Credit: Go Natural CNG

Vehicle Cost & Salvage Value CMV High Feasibility Passenger Moderate Feasibility Heavy

replacements Limited conversion availability Short service life No market for

Values CNG vehicles tend to be more expensive Assume salvage value remains the same

7 Vehicle Cost & Salvage Value CMV High Feasibility Passenger Moderate Feasibility Heavy Equipment Limited Feasibility Ease of conversion Long service life Market support for replacements Limited conversion availability Short service life No market for replacements Possible but made difficult by safety regula'ons Vehicle Cost & Salvage Values CNG vehicles tend to be more expensive Assume salvage value remains the same (Lemmons, J., Linder, P., 2013) Photo Credit (from le`): beallcorp.com, na'onmaster.com, en.komatsu- club.com

8 EIA Fuel Price Forecast Tradi%onal Fuels Fuel Price ($) CNG Diesel ($/gal) CNG ($/DGE) Gasoline ($/gal) CNG ($/GGE) Year Source: EIA, Annual Energy Outlook 2013

9 Factors Influencing Maintenance Costs Vehicle Usage & Characteris'cs Maintenance Intervals Technological Advancements Maintenance Cost

10 Maintenance Costs Studies show wide variance in CNG vehicle maintenance costs Up to 40% reduc%on in maintenance costs (Oklahoma Natural Gas, 2013) Between 6% & 29% increase in maintenance costs (UPS Fleet Study, 2002) Maintenance intervals extend by up to 25,000 miles (NGV Feasibility Study, Oklahoma City University, 2010) Assumed 10% reduc*on in maintenance costs for all vehicles.

11 Recommenda%ons from Vehicle Analysis Passenger Vehicles (101 Total Vehicles) Commercial Motor Vehicles (73 Total Vehicles) Replace (CNG) 38 Do Nothing (Gasoline) 54 Replace (CNG) 39 Convert (CNG) 34 Convert (CNG) 9 Heavy Equipment (28 Total Vehicles) Do Nothing (Diesel) 28

12 Descrip%on of Alterna%ves Project Analysis (50- Year Period) Alterna've 1: No Ac'on All vehicles fueled by gasoline or diesel Alterna've 2: Transi'on to CNG Vehicles fueled by CNG, gasoline, or diesel based on recommenda'ons

13 Descrip%on of Alterna%ves Alterna%ve 1: No Ac%on Do Nothing (Gasoline) 101 Do Nothing (Diesel) 73 Passenger Vehicles Commercial Motor Vehicles Alterna%ve 2: Transi%on to CNG Replace (CNG) 38 Convert (CNG) 9 Do Nothing (Gasoline) 54 Replace (CNG) 39 Convert (CNG) 34

14 Required Cash Flows for Project Analysis Vehicle Cost Salvage Value Fuel Cost Maintenance Cost Training Cost

15 Training Flow Chart for CNG Installa'on Cer'fica'on Technicians must be recer'fied every five years CNG Fuel System Inspector Cer'fica'on Alternate Fuels Cer'fica'on Test Sources: American Na'onal Standards Ins'tute & Na'onal Ins'tute for Automo've Service Excellence

16 Training Costs for CNG Item CNG Installa%on Cer%fica%on Total Cost per Person Class Fee $900 Travel Expenses $642 CNG Fuel System Inspector Cer%fica%on Applica'on & Examina'on Fee $425 Alternate Fuels Cer%fica%on Test Registra'on & Cer'fica'on Fee $170 Total Training Cost $2,137 Source: Alterna've Fuels Data Center, Technician Training

17 Results of Project Analysis Alterna%ve Alterna%ve 1: No Ac%on Alterna%ve 2: Transi%on to CNG Present Worth of Costs Present Worth of Savings Break- Even $87.0 Million N/A N/A $75.3 Million $11.7 Million 3.10 Years Discount Rate = 2.5% 50 Year Planning Horizon

Vehicle Analysis Project Analysis Fueling

18 Vehicle Analysis Project Analysis Fueling Sta%on Analysis Private vs. Public Fueling Sta%on Private Sta%on (on- site; reserved for ﬂeet only) Public Sta%on (oﬀ- site; public use) Photo Credit: news.com Photo Credit:

19 Private Fueling Sta%on Costs Time- Fill Sta'on Requires Overnight Fueling Fast- Fill Sta'on 7.0 GGE/min $800,000 - $1,000,000 (America s Natural Gas Alliance, CNG Infrastructure Report) Photo Credit: Photo Credit: (America s Natural Gas Alliance, CNG Infrastructure Report)

20 Results from Fueling Sta%on Analysis Off- Site Fueling Sta%on, Owned by Private Company Sta'on Cost for Chippewa County = $0 On- Site Fueling Sta%on, Owned by Chippewa County Sta'on Cost for Chippewa County = $700,000 CNG Fuel Price Reduc'on = 16.7% (Clean Ci'es Alterna've Fuel Price Report, 2012) Fueling Sta%on Sta%on Present Worth Ownership Cost of Savings Break- Even Private Company (Off- Site) $0 $11.7 Million 3.10 Years Chippewa County (On- Site) $900,000 $14.0 Million 5.32 Years Discount Rate = 2.5% 50 Year Planning Horizon

21 Sensi%vity Analysis for Fueling Sta%on Break- Even Point (Years) Sta'on Cost: $700,000 Sta'on Cost: $900,000 Sta'on Cost: $1,100,000 DataPoint 0% 5% 10% 15% 20% CNG Fuel Price Reduc%on

22 Final Recommenda%ons Compressed Natural Gas is a viable op'on for the Chippewa County Highway Department Convert Commercial Motor Vehicles first CMVs: Longer Replacement Cycle = Higher Benefits Invest in on- site fueling sta'on instead of off- site Improves Net Worth of Savings by $2.3 Million Break- Even Point: 5.32 Years compared to 3.10 Years

23 Acknowledgements Chippewa County Highway Department Bruce Stelzner Paul Mohr Chippewa County Economic Development Corporta%on Charlie Walker Department of Civil & Environmental Engineering Teresa Adams

24 Natural Gas Vehicles for the Chippewa County Highway Department Cost/Benefit Analysis Ques%ons? Prac%cum in Transporta%on Management and Policy May 10, 2013

25 Fuel Proper%es Chemical Gasoline No. 2 Diesel C4 to C12 C8 to C25 CNG CH4 (83-99%), C2H6 LNG CH4 Structure (1-13%) Main Fuel Source Crude Oil Crude Oil Underground reserves Underground reserves Energy 100% 1 gallon of diesel 5.66 pounds or gallon of LNG Contained in has 113% of the cu. `. of CNG has 100% has 64% of the Various energy of one gallon of the energy of one energy of one Alterna%ve of gasoline. gallon of gasoline gallon of gasoline. Fuels as Compared to One Gallon of Gasoline Physical State Liquid Liquid Compressed Gas Cryogenic Liquid Maintenance Issues High- pressure tanks require periodic inspec'on and cer'fica'on. High- pressure tanks require periodic inspec'on and cer'fica'on.

26 Fuel Proper%es Gasoline Diesel Chemical Structure C 4 to C 12 C 8 to C 25 Main Fuel Source Crude Oil Underground reserves Fuel Boiling Point Ini'al: 35 C (95 F) Final: 200 C (395 F) C ( F) Energy Contained as Compared to 1 Gallon of 100% % Gasoline Physical State Liquid Liquid Energy Security Impacts Manufactured using oil, of which nearly 2/3 is imported Manufactured using oil, of which nearly 2/3 is imported

27 CNG Environmental Emissions CNG main component (90%) methane is lighter than air and burns almost completely, crea'ng CO 2 and H 2 O. CNG disperses quickly leak or emergency ven'ng, surrounding ecosystems and water systems are not threatened. CNG reduces greenhouse gas emissions by 20% to 30% when compared to diesel and gasoline (California Air Resources Board). Overall reduc'ons in exhaust emissions (BioCNG website, 2013): - Carbon monoxide by 70% to 90% - Non- methane organic gas by 50% to 75% - Nitrogen oxides by 75% to 95% - Carbon Dioxide by 20% to 30%

28 Breakdown of Costs: Vehicles

29 Example Analysis: 2008 Ford F250

30 Example Analysis: 2008 Ford F250 Replacement Cycle = 15 Years Cost of New Gasoline Vehicle (2023) = $24,000 Cost of Conver'ng to CNG (2014) = $11,000 Cost of New CNG Vehicle (2023) = $35,000 Salvage Value of Gasoline Vehicle = $4,000 Salvage Value of CNG Vehicle = $4,000

31 Example Analysis: 2008 Ford F250

32 References 1. EIA Annual Energy Outlook, Vehicle conversion tech sources Lemmons 2009, Linder 2009[JEREMY] 3. Oklahoma Natural Gas ( UPS CNG Truck Fleet Final Results of Alterna've Fuel Truck Evalua'on Project, Natural Gas Vehicle Feasibility Study (Powerpoint presenta'on), Oklahoma City University, Training costs sources [LUIS] 7. Cost of fueling sta'ons [DAN] 8. America s Natural Gas Alliance, Compressed Natural Gas Infrastructure Final Report.

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