CNG-CBG Fleet Research

Lakeshore Industry cluster Initiative Draft CNG-CBG Fleet Research March 4, 2013 ViTAL Economy Alliance Jim Haguewood jim@onegroupconsulting.com Neil Gamroth neil@onegroupconsulting.com Mark Madsen mmadsen@priorityone-advisors.com 1

THANK YOU! Lakeshore Industry Cluster Initiative Sponsors Diamond Platinum with support from WEDC Gold Ben Cress Wisconsin Public Service NextEra Energy Point Beach Nuclear Plant Silver Door County EDC Keller, Inc. Kewaunee County EDC Two Rivers Water & Light Alliant Energy Sturgeon Bay Utility Commission

Purpose and Hypothesis Purpose of the Report This report is provided to the Lakeshore Energy Industry Cluster Team as a cursory review and analysis of Compressed Natural Gas (CNG) as a fleet vehicle fuel. The report is not intended to provide an in-depth feasibility analysis, though it can be used as introductory information to key leaders and audiences. Hypothesis The Lakeshore region has large quantities and geographic concentrations of biomass feedstock for the production of biogas. A regional approach to biogas production and refinement to Compressed Biogas for use in regional vehicle fleets has potential feasibility creating and retaining significant wealth. 3

Lakeshore Natural Gas Supply The Lakeshore region has access to both natural gas pipelines and biogas sources. By utilizing available organic materials, food processing waste or other similar feedstocks allows for the creation and retention of economic value. 4

Important Terminology and Gas Concepts Methane, a byproduct from a bio digester, can be processed to a natural gas quality product. Then compressed to Compressed Bio Gas (CBG) and liquefied to Liquid Bio Gas (LBG). This biogas product has the same properties as Compressed Natural Gas (CNG) and Liquid Natural Gas (LNG) from a pipeline. This product is ideal fuel for cars, buses and trucks. The cost comparison is made using Gas Gallon Equivalents (GGE) and Diesel Gallon Equivalents (DGE). 5

Vehicle Fuel Price Trend Comparison CNG has become an attractive vehicle fuel due to steep increases in fossil and ethanol based fuels. In addition, CBG attractiveness has improved due to the price volatility. Price volatility is difficult to manage and budget against especially for public sector entities. 6

Key Considerations Key Factors for Consideration for a CNG Vehicle Project Identification of vehicle fleets by miles driven per day and year, operating from a common base and have low fuel economies Location of the fuel source Size and speed of the CNG fueling system Grant/Funding Sources Payback Period Price of diesel/gasoline Price of natural gas Vehicle fleet characteristics Biogas source System operation and maintenance costs Renewable Fuel Credits (RINs) & Carbon Credits Case studies have also identified regional efforts and large public and private sector fleets are leading a transition to new fuel sources which have expanded economic and environmental benefits 7

Case Studies Reviewed 1. Paper Transport, Green Bay based truckload carrier with operations in Wisconsin, Florida, Georgia and Oklahoma 2. City of Milwaukee, 15 CNG heavy-duty refuse trucks and 6 heavy-duty recycling trucks 3. City of Janesville 4. Grand Junction, CO., 5 refuse trucks, 1 street sweeper, 1 dump truck 5. Republic Services, private waste management, 34 refuse trucks 6. Dane County, Wisconsin 7. Federal CNG Fleet Study, heavy duty refuse trucks, school buses, transit buses 8. Chesapeake Virginia, 54 vehicles, using the Vehicle Infrastructure Cash flow Evaluation Model 8

Fundamentals of CNG Fleet & Vehicle Economics The following list of CNG fleet and vehicle characteristics and economic metrics from a number of case studies. This is provided as a general list and should not be considered complete or adaptable to a region or a CNG project. Fuel Costs: CNG cost of $1.14 to $1.34 per Gas Gallon Equivalent (GGE) Typically 25% - 30% of current gas/diesel cost, without energy incentives Vehicle Costs: Vehicle conversions Large trucks waste, buses, semis $30 40K Passenger vehicles/pick ups $9 15K New CNG vehicles 10 20% higher less incentives With gas and diesel at $3.50 $4.00 gallon Large trucks @80,000 miles/yr @8mpg & $2,50 savings/gge=saving of $25,000/yr Passenger vehicles @80,000 miles/yr @20mpg & $2 savings/gge=savings of $10,000/yr Environmental Benefits: Up to 90% Greenhouse Gas (GHG) reductions vs. gas and diesel Payback varies by project, as quick as 1 year and as long as 10 with large infrastructure investments 9

Fleet Case Study Economics Grand Junction, CO., 5 refuse trucks, 1 street sweeper, 1 dump truck This case study example is provided to showcase the cost, role and benefits of the CNG refueling station in fleet projects. Metric Annual Petroleum Offset Description Refueling system cost $1,358,458 34,150 DGE (12 month period from May 2011-April 2012 Incremental Capital Cost of CNG vehicles Simple payback period Vehicle performance Maintenance impacts Economic Development $167,187 for four CNG refuse trucks 10 years, based upon incremental vehicle cost plus City of Grand Junction investment in refueling system Reduced vehicle emissions, noise and odor Perceived minor power loss on steep hills Marginal increase in truck maintenance costs Fueling system limits ability to measure vehicle fuel efficiency Public fast fill refueling station boost interest in CNG vehicles Partnership with Grand Valley Transit to use time-fill station to fuel two new CNG buses increased utilization of time-fill station 10 Snapshot Results: $10,000 annual fuel savings per truck based upon a $3.33 diesel price CNG cost of $1.14 to $1.34 per DGE Initial investment in the refueling system will reduce payback on future vehicles New public/private partnerships were created as a result of the fast fueling station access being available.

Factors Influencing Feasibility Factors which did not effect project profitability, Efficiency difference between CNG and diesel engines(-25% to +10%) Change in vehicle/project life (10 years to 20 years) Electricity prices Maintenance costs for CNG stations Garage upgrades, minimal upgrade scenarios Number of new staff, (-2 to +4 ) 11

Lessons Learned 1. CNG projects have many applications and are customizable and can result in significant fuel cost savings 2. Work closely with vendors and technical expertise available at the National Renewable Energy Laboratory (NREL) 3. Have a clear understanding of the fueling infrastructure requirements, including demand, end users, local market and partnering scenarios. Fast fueling versus timed fueling should be a consideration. 4. Alternative and creative funding models are typically used including grant sources 5. Fleet managers should shop around for replacement parts, lubricants, filters and other specialized parts for CNG vehicles 6. Install fleet metering equipment for each pump to allow for predictive maintenance and performance monitoring 7. Spreading the cost of a refueling station across multiple fleets reduces individual costs and payback for vehicle purchases in the future for all partners. Hub models can promote CNG use and feasibility. 8. If pursuing a station interconnection with a gas distribution system obtain a complete understanding of the utility interconnection process before beginning work. 9. A lead agency in the implementation of CNG fleet fueling capabilities is likely to attract interest from other agencies wanting to partner 10. Develop vehicle specifications for each specific application, be aware of high mileage applications (300+ miles per day) which may require refueling reducing productivity rates 11. Ancillary benefits of CNG, noise and odor reduction, buy local campaigns and US energy security can help organizations improve their customer relationships, employee satisfaction and build brand loyalty 12. Public management of a refueling station(s), which will be available to the public, may take extra time due to politics and public process Note: This is a sampling of lessons learned from variety of case studies and CNG applications and should be not considered complete or applicable to every project 12

Vehicle and Infrastructure Cash-flow Evaluation Model This Excel based model is a perfect tool to introduce and provide fleet owners and managers with a methodology to conduct preliminary estimates and feasibility analysis. Sample Snapshot Enter a Fleet Type in D4 Fleet_Inputs 1 1: Transit Buses 1: Transit Buses 2: School Buses 3: Trash Trucks 4: 1/2 Transit, 1/2 School 5: 1/2 Transit, 1/2 Trash 6: 1/2 School, 1/2 Trash 7: 1/3 Each Cell Name Value Unit Default Number of Vehicles (1 250) No_Vehicles 50 Vehicles Required Rate of Return or Discount Required ROR 6.0% % 6% Federal Vehicle Tax Incentive Tax_Incentive 0% % of Inc_Cost 0% Realized Fed Veh Incentive Realized_Incentive $0.00 $ Post Incentive Incremental Cost Inc_Cost $50,502 $ CNG Vehicle Maintenance Costs CNG_Maint_Costs $0.52 $/mile $0.52 Price of CNG (per GGE) CNG_Price $1.21 $/DGE $1.21 CNG Price Increase CNG_Inflation 2.8% % per year 2.8% Alt Fuel Excise Tax Credit Excise_Tax_Credit $0.55 $/DGE $0.55 Monthly CNG Use (GGE) (692,640 3,463,200) Monthly_CNG_Use 48,644 DGE/month Diesel Vehicle Maintenance Diesel_Maint $0.52 $/mile $0.52 Diesel Fuel Price Diesel_Price $3.93 $/gallon $3.93 Diesel Price Increase Diesel_Inflation 3.5% %/year 3.5% Diesel Excise Tax Exemption (CNG already has $0.383) Diesel_tax_exempt $0.38 $ per gallon $0.38 Monthly Diesel Use Monthly_diesel_used 44,962 gallons DGE/GGE Conversion factor GGE_DGE_Conv 0.904 DGEs per GGE 0.904 CNG Station Salvage Value CNG_Station_Salv 20% % of original price 20% Garage Retrofit Cost (per bus) Garage_Cost $0.00 Y=(No_Vehicles*3750 Monthly Cost of Hossler Hossler_Cost $0.00 $4,167 13

Lakeshore CBG Market Opportunities 3,316 fleet vehicles in the Lakeshore region (FleetSeek List) Public/Private partnerships in the initial fueling station can drive additional CBG use by small companies and individuals Proven environmental benefits New natural gas fueling stations entering the market may be interested in locally produced biogas Biogas is typically 1/3 the price of CNG provided off of a pipeline and 25%-30% cheaper than gasoline and diesel The Lakeshore is not a first mover in this market, thus technology and delivery infrastructure is designed and has an operational history Digesters are operating in the region now, which can generate greater value by the production of transportation fuel. 14

Lakeshore CBG Market Challenges More biogas generation in the Lakeshore is required for the fleet market to have confidence in supply, to make the initial investment Due to the variety of regional feedstocks and locations suggests a consolidated digester model requiring collaboration by multiple parties This is a demand driven business model which must reach critical mass before it becomes profitable Though community CNG transportation models exist, they are complex and requires significant upfront capital requiring regional commitment The scale of this project must have a long term ROI perspective that is a combination of all involved, not single participants 15

Report Caveats: 1. Developments in CNG Fleet equipment are in early stages of adoption and changing rapidly. 2. Case studies presented may not represent local economic and financial conditions. 3. State and Federal policy effect renewable energy and carbon offset credits. These credits may change over time and it is important to understand impact of RINs and credits relative to end-consumer CNG prices. 16

Research Sources 1. Business Case for Compressed Natural Gas in Municipal Fleets, National Renewable Energy Laboratory, June 2010 2. Wisconsin Clean Cities 3. Wisconsin Clean Cities, Partner Snapshot: City of Milwaukee 4. Feasibility of Small Scale Biogas-to-CNG Vehicle Fuel Projects, BioCNG 5. Experiences with Compressed Natural Gas in Colorado Vehicle Fleets, Colorado Energy Office, August 2012 6. An Overview of the Technology, Economics and Project Development Process, Short Elliott Hendrickson, December 2012 7. Alternative Fuels Data Center, US Department of Energy 8. Clean Cities, 2012 Vehicle Buyer s Guide 9. Business Case for Compressed Natural Gas in Chesapeake Virginia Municipal Fleet, April 2011 17

For More Information visit: www.lakeshoreinitiative.webs.com Linked In Group: Lakeshore Industry Cluster Initiative Or contact: Connie Loden Economic Development Corporation of Manitowoc County cloden@edcmc.org or 920-482-0540 Lakeshore Industry Cluster Initiative Sponsors THANK YOU! Diamond Platinum Gold with support from WEDC Wisconsin Public Service Ben Cress Next Era Point Beach Nuclear Plant Door County EDC Silver Keller, Inc. Kewaunee County EDC Two Rivers Water & Light Alliant Energy Sturgeon Bay Utility Commission