NGVs and the Life-Cycle Cost AdvantageNGVs and the Life-Cycle Cost Advantage The Compelling Case forThe Compelling Case for

Natural Gas Vehicles in Fleet ApplicationsNatural Gas Vehicles in Fleet Applications

SStephe Yborra – Directortephe Yborra – DirectorClean Vehicle Education Foundation / NGVAmericaClean Vehicle Education Foundation / NGVAmerica

Mobilizing North Carolina Conference & Expo Mobilizing North Carolina Conference & Expo Greensboro Coliseum – April 18, 2007Greensboro Coliseum – April 18, 2007

Signs of the TimesSigns of the Times

Market Drivers Spur Alternative Fuel VehiclesMarket Drivers Spur Alternative Fuel Vehicles(Especially Natural Gas Vehicles!)(Especially Natural Gas Vehicles!)

• Global energy supply-demand imbalance will only get worse– New discoveries lag add’l growth, let alone current consumption

• Air quality issues getting political traction as economy is impacted– Health: absenteeism, lost productivity, societal healthcare costs

– Cost of non-compliance is unacceptable

• Advances in transportation technologies to meet tougher emissions requirements create trade-offs in performance and O&O costs– Petroleum-based transportation is becoming more expensive

– Alt fuel technologies are gaining acceptance, attaining economies of scale

EPA’s HD Engine EmissionsEPA’s HD Engine Emissionsand Fuel Requirementsand Fuel Requirements

1998 Stds1998 Stds2002/2004 Stds2002/2004 Stds

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.0 1.0 2.0 3.0 4.0 5.0NOx (g/bhp-hr)

PM

(g/

bh

p-h

r)

2010 Std (.20 g/hp-hr NOx)

2007 Std (1.2 g/hp-hr NOX +NMHC)

The Price of Progress: OUCH!The Price of Progress: OUCH!Complexity, Confusion and CostComplexity, Confusion and Cost

Fuel Exhaust

EGR

NOxAfter-

Treatment

Urea

Water +Additives

or

ElectricPower

Reductant

Platinumand/ orCerium

Desul

furis

ation

Gas to Liquid

or

or

or

Fuel Processing Engine DesignModifications

Exhaust After-treatment

Alt. Fuels

or

HCCI

PMAfter-

Treatment

CombustionChamberDesign

Low Pressure

EGR

High Pressure

• NGVs are proven and reliable– Nearly 5 million worldwide

• NGVs use an inherently clean fuel– Simple CH4 structure, few combustion byproducts– Less NOx, soot and greenhouse gases

• Natural gas is domestic fuel– 97% comes from North America

• NGVs are quiet– 80-90% lower db level than diesel

• NGV life-cycle costs are lower– Fuel costs are far lower!– Maintenance costs are =/< than gasoline or diesel vehicles– Life-cycle cost advantage improves with new federal tax credits

Benefits of NGVsBenefits of NGVs

Methane Molecule

NGVs Are a “Good Fit” for Many NGVs Are a “Good Fit” for Many Different Fleet ApplicationsDifferent Fleet Applications

• Local/State Government

• Airports

• Refuse

• Transit

• School Districts

• Utilities

• Local-Service Businesses– Plumbers, HVAC, etc.

• “Short-Haul” Delivery Operations– Food/Beverage/Snack, Linens, Package

Delivery/Courier Services, Port/Rail, Newspapers, etc.

Despite Some OEM Withdrawals, A Wide Despite Some OEM Withdrawals, A Wide Variety of Natural Gas Vehicles Are AvailableVariety of Natural Gas Vehicles Are Available

• Sedans, Pick-ups/SUVs, Vans/Wagons– American Honda– All GMC brands and

Ford/Mercury/Lincoln via SVMs

• Work/Vocational Trucks – Peterbilt, Freightliner, Freightliner CC,

Sterling, Crane Carrier, Condor, Autocar, Isuzu, GM, Workhorse, Ottawa….. Dozens of upfitters in all work sectors

• Bus and shuttle – NABI, Orion, New Flyer, Specialty

El Dorado-National, Champion, Supreme,Blue Bird, Thomas Built, Optima…

2007 Certified Natural Gas Powered2007 Certified Natural Gas PoweredEngines and Vehicles for Fleet ApplicationsEngines and Vehicles for Fleet Applications

• American Honda– Civic GX

• BAF Technologies– 4.6L (Crown Vic/Grand Marquis, Town Car)

– 5.4L (E-350 cargo/passenger van – certifying F150/250 later in 2007)

– 6.8L (E-450 cutaway)

• Baytech Corporation– 6.0L L/M/HD (GM, Isuzu, Workhorse –

pick-ups, vans/stepvans, CFs, cutaways)

– 8.1L (Topkick/Kodiak, cutaways)

• EcoFuel– 6.0L HD (GM)

• Cummins Westport– 5.9L “B Gas Plus” – 195-230hp

– 8.9L “ISL-G” – 250-320hp (replaces 8.3L “C Gas Plus” and 8.9L “L Gas Plus”)

• Emission Solutions Inc.– 7.6L Phoenix NG – 175-265hp

(re-power for Int’l DT466 trucks)

• John Deere– 8.1L HN04 – 250-280hp (‘til 12/07)

• Westport Innovations Inc– 15L “ISX-Gas” – 450hp

VVehicle Purchase Tax Incentiveehicle Purchase Tax Incentive

• A income tax credit to the buyer of a new, dedicated alternative fuel vehicle:

– 50 percent of the incremental cost of the vehicle; incremental cost cap based on four GVW ranges

– An additional 30 percent if the vehicle meets certain tighter emission standards.

– Tax credit goes to the seller if the buyer is a non-tax paying entity

(continued)

• Credits range from $2,500 to $32,000 depending on vehicle weight– $2,500-$4,000 for vehicles under 8,500 lbs. (incremental cost cap : $5K) – $5,000-$8,000 for vehicles between 8,500-14,000 lbs. (icc: $10K)– $12,500-$20,000 for vehicles between 14,000-26,000 lbs. (icc: $25K)– $20,000-$32,000 for vehicles over 26,000 lbs. (icc: $40K)

• Credit is effective for vehicles placed in service after December 31, 2005 and currently set to expire on 12-31-10. Extension to 2016 likely.

• “Conversions” qualify, if retrofit/re-power was done after 12/31/05

VVehicle Purchase Tax Incentiveehicle Purchase Tax Incentive

Motor Fuels Excise Tax CreditMotor Fuels Excise Tax Credit• The Volumetric Excise Tax Credit for Alternative Fuels (VEETC)

– JOBS Act of 2004 created VEETC for ethanol and biodiesel– SAFETEA-LU (“Highway”) Act of 2005 made CNG, LNG, LPG, and

hydrogen eligible when those fuels are used in on-road vehicles(and some off-road vehicles, such as forklifts)

• A 50 cent motor fuels excise tax credit is paid to the seller:– Per GGE of CNG or per liquid gallon of LNG

• The credit is applied/paid to eligible recipients without regard to the amount of excise tax paid, if any (including tax exempts)

(continued)

Natural Gas Vehicle IncentivesNatural Gas Vehicle Incentives

Federal Tax Incentives (discussed already)

State Grants: Check with Clean Cities Representatives

Federal Grants:

• DOT Congestion Mitigation & Air Quality (CMAQ) grant– Up to 80 percent of cost of vehicle

• DOE State Energy Program (Clean Cities) grants– Covers incremental cost of vehicle and up to 10% of station

• EPA– SEP/(“penalty fund) project grants

– Diesel Emission Reduction Program grants

Refuse Collection Truck Life-Cycle CostsRefuse Collection Truck Life-Cycle Costs(assumes private firm purchases from dealer, fuels at O&O station)(assumes private firm purchases from dealer, fuels at O&O station)

Natural Gas “Clean” Diesel

Cost of refuse collection vehicle $225,000 $173,000

Incremental Cost of CNG vehicle $52,000 -

Vehicle Tax Credit ($32,000) -

Net Incremental CNG Truck Cost $20,000 -

Fuel Use/yr (dge)* 9,350 8,500

Cost/dge** (before fuel tax credit) $1.90 $2.85

Fuel Cost/yr (before fuel tax credit) $17,765 $24,225

Fuel credit @ net $.317/gge ($.351/dge) ($3,282)

Fuel Savings/yr $9,742 -

Simple Payback 2.1 years -

8 Yr. Life-Cycle Advantage*** $57,478 -

* Assumes 2.5mpg (diesel) and 10% fuel consumption “penalty” for S.I.N.G. engine vs diesel-cycle, a differential that is diminishing as 2007 emissions strategies are employed in model year MY’07 engines and more in MY’10.

** Natural gas DGE cost based on $8/Mcf commodity + $.20/kW per DGE compression cost +$.20 M&O expense + $.33 capital/equipment cost + $.09 taxes. Diesel price is rack rate including federal motor fuels excise taxes. Estimate does not include any of $.556/dge CNG tax credit effective 10-01-06 (net credit of $.351/DGE after tax is applied

*** Assumes equal maintenance costs. Natural gas vehicles have documented lower maintenance costs than comparable diesel units. NGV’s maintenance cost advantage is projected to increase as MY 2007-2010 diesel engines and exhaust after-treatment technologies are introduced.

Municipal Dump/Plow Truck Life-Cycle CostsMunicipal Dump/Plow Truck Life-Cycle Costs

Natural Gas “Clean” Diesel

Quoted cost of dump-plow truck* $168,000 $128,000

Incremental cost of CNG vehicle $40,000 -

Vehicle tax credit (net dealer’s 5% “cut”) $30,400 -

Net Incremental Cost $9,600 -

Fuel Use/yr (dge)** @ 15K miles 3,300 3,000

Cost/dge*** $1.81 $2.62

Fuel Cost/yr $5973 $7860

Fuel credit @ $.50/gge ($.556/dge) $1835

Fuel Savings/yr $3722 -

Simple Payback 2.6 years -

10 Yr. Life-Cycle Advantage**** $27,543 -

* Based on Freightliner M2 with dump-plow package; CNG unit with 3 CNG tank vertical package

** Assumes mixed city/suburban duty cycles, 8mpg (diesel) and 10% fuel consumption “penalty” for S.I.N.G. engine vs diesel-cycle.

*** Natural gas DGE cost based on $8/Mcf commodity + $.20/kW per DGE compression cost +$.20 M&O expense + $.33 capital/equipment cost . Diesel price is rack rate excluding federal motor fuels excise taxes. Estimate does not include any of $.556/dge CNG tax credit effective 10-01-06 (net credit of $.351/DGE after tax is applied.

**** Assumes equal maintenance costs. NGV costs are generally lower.

Cargo Van/Passenger VanCargo Van/Passenger Van• Sample Applications

– Newspaper, Pkg/Courier Svc, Airport Shuttle

• GVW-9600+ lbs. – Ford E-350, Chevy 3500 Series

• MPG: 10/18 City/Hwy

• Miles /day: 75-175

• Fuel Use: 10-15 gge/day; 2600-3000gge/yr • CNG Premium: $14-16,000 (before fed tax credit)

• Fed Tax Credit: $8000

• Simple Payback: 1.7 – 3.3 years

• Life-cycle cost advantage: $3,570 - $13,750

Step VanStep Van• Sample Applications

– Pkg Srvc, Bakery/Snack Food, Linen

• GVW-14,000+ lbs.– Workhorse P, Freightliner Custom

• MPG: 4.0 – 6.5

• Mileage: 50-80/day; 325-450/wk; 20K/yr

• Fuel Use: 15-20 gge/day; 4800 gge/yr • CNG Premium: $23-26,000 (before fed tax credit)

• Fed Tax Credit: $20,000

• Simple Payback: 1 - 1.5 years

• Life-cycle cost savings: $30,600 - $63,000

Urban Class 5-7 TruckUrban Class 5-7 Truck• Sample Applications

– Beverage (beer/soda/water, dairy), Rest. Supply

• GVW - 26,000+ lbs.– Int’l 4000 Series, Freightliner M2

• MPG: 3.25 – 4.75• Mileage: 45-80/day; 250-455/wk; 13-22K/yr• Fuel Use: 14-25 gge/day; 5000-6800 gge/yr • CNG Premium: $48-52,000 (before fed tax credit)

• Fed Tax Credit: $32,000• Simple Payback: 2.75 – 4.2 years • Life-cycle cost savings: $34,800 - $50,000

Questions?Questions?

Thanks for your attentiveness!

For more information please contact:

Stephe Yborra

Director of Marketing & Communications

NGVAmerica

400 N. Capitol Street, NW - Suite 450Washington, DC 20001

Director of Market Analysis, Education and Communications

Clean Vehicle Education Foundation

6011 Fords Lake Court

Acworth, GA 30101

syborra@ngvamerica.org / syborra@cleanvehicle.org

(301) 829-2520

How to Apply For Motor Fuels Excise Tax CreditHow to Apply For Motor Fuels Excise Tax Credit

• Register: Use IRS Form 637, “Application for Registration” (mark “AL” for alternative fueler)

• File Quarterly (if there’s a tax liability): IRS Form 720, “Quarterly Federal Excise Tax Return). Apply credit toward excise tax owed (if any). How you recover “overage/rebate” depends on tax status:

– A. Taxable Entities: File IRS Form 4136 at end of year to recover credits over and above those applied against quarterly tax liability.

– B. Tax-Exempt Entities: File IRS Form 8849 and addendum form Schedule 6 as often during year as desired as long as there is at least one transaction

Case Study: Linen ServiceCase Study: Linen Service• 14 CNG stepvans @ 18gge/day;

– Uses 255gge/day or 66,300gge/year

• Has four I-R 25hp compressor station– Redundancy + 75% add’l capacity to grow

• Cost per CNG gge: $1.484 (saves $1.50/gge)– Gas Bill: $1.036/gge

• Commodity (cost of the gas): $0.737/therm = $.9213/gge (124,800Btu/therm)• Local gas company service (fee to transport gas to his meter): $.08/gge• State special assessments and local municipal use taxes: $.035

– Electric compression costs (estimated @ 1Kw/gge): $.18/gge– “Sinking fund” to cover station maintenance & operations: $.17/gge– Capital amortization of station equipment: $.33/gge (based on $220K over 10 yrs)– State motor fuel excise tax: $.085/gge– Net $.317/gge federal tax credit ($.183/gge excise tax less $.50/gge credit)