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Natural gas vehicles are the cleanest, most practical solution for low-emissions transportation today. While other clean transportation technologies exist, natural gas vehicle technology is a proven, similarly-performing alternative to conventional diesel and gasoline vehicles.
Stringent emissions standards for commercial transportation, together with concerns about volatile oil prices and oil supply security, are presenting economic advantages for natural gas vehicles. Governments around the world realize that natural gas or biomethane powered vehicles should be a major component of their transportation strategies. High transportation growth markets like China, India, and Brazil are driving the future energy picture for transportation, and they have been steadily increasing their natural gas use.
Around the world, natural gas is being widely adopted as a transportation fuel. Some of the main drivers for the rapid growth of natural gas for transportation are:
The natural gas vehicle (NGV) industry is a large and rapidly growing market. According to NGV America, as of February 2012 there are more than 15 million natural gas vehicles in use worldwide, including approximately 120,000 operating on U.S. roads. The International Association of Natural Gas Vehicles projects that there will be more than 50 million natural gas vehicles worldwide within the next ten years, representing approximately 9% of the world transportation fleet.
One of the primary reasons for NGV adoption is the increasing price stability that natural gas has over petroleum-based fuels. We believe that rising demand for oil will result in price increases and/or fuel shortages, which will continue to create favourable market conditions for adoption of cheaper alternative fuels such as natural gas. As the relative price of diesel compared to natural gas increases, the payback period shortens, and the incentive to switch becomes more attractive.
Datamonitor estimates the global medium- and heavy-duty vehicle market (consisting of vehicles over 3.6 tonnes) in 2009 was US$234.1 billion and is projected to grow at a 7.9% compound annual growth rate, or, CAGR, to US$343.0 billion by 2014. The market for automotive fleet vehicles consists of business-owned fleet cars, taxis and delivery vans. Natural gas substitution could yield significant cost savings and emissions reduction as fleet vehicles travel more miles on average and are replaced more frequently than privately owned cars.
At the highest end of the heavy-duty segment are the high horsepower off-road vehicles: heavy construction vehicles, marine engines, mining trucks, locomotives and large stationary power applications, with engine displacement greater than 16 litres. These engines consume large amounts of fuel and often operate in regions where LNG enjoys a significant cost advantage over diesel, providing favourable economics for natural gas use and a significant market opportunity for our products. Today only a fraction of these vehicles is powered by natural gas, presenting a considerable opportunity.
There is a significant opportunity in the light-duty off-road segment to replace petroleum-based fuel with natural gas in target markets: forklift engines and oilfield / stationary power engines. The market for alternatively-fuelled industrial forklift engines was estimated in 2008 at 62,000 engines per year in North America, according to the Industrial Truck Association. Cummins Western Canada estimates there are over 10,000 alternatively fuelled engines sold for oilfield use each year.
The world currently faces major challenges that are significantly impacted by transportation growth: