World Autogas Demand Jumps 57% In Past Decade; Incentives Play Key Role

A flagship autogas document has been released by the World LP Gas Association (WLPGA) on the heels of the 27th World LP Gas Forum in Miami. The release follows a global autogas industry network review at the October event. Available for download at http://auto-gas.net, a new dedicated website aimed at becoming a go-to online resource for the international autogas community, the document contains case studies and data reflecting changes in the over-the-road market that seeks to inform stakeholders.
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“Autogas Incentive Policies: A Country By Country Analysis of Why and How Governments Encourage Autogas and What Works,” reports autogas consumption has been rising rapidly in recent years, reaching 25.8 million metric tonnes in 2013 and increasing 57% in the past decade. There are now nearly 25 million autogas vehicles on the road around the world and more than 70,000 refueling sites. Autogas is the second most widely used alternative to conventional transport fuels after ethanol.
 
However, demand remains highly concentrated in a small number of markets. The four largest consumers — Korea, Turkey, Russia, and Poland — saw the largest increases in consumption over the last 10 years. Worldwide, autogas currently accounts for 1.2% of total road transport fuel consumption. Further, autogas accounted for 9.7% of global consumption of LP-gas, but this share varies considerably across countries. Among the nations surveyed, the share is highest in Turkey, where it is 74%, and is lowest in the U.S. at just 0.8%.

Moreover, autogas use is still concentrated in a small number of nations. Just five countries — Korea, Turkey, Russia, Poland, and Italy — together accounted for half of global autogas consumption in 2013. The 12 countries surveyed for the report accounted for 55%. In addition, the share of autogas in total automotive fuel consumption varies widely, ranging from a mere 0.1% in the U.S. to 18% in Turkey. The only country other than Turkey where autogas makes up more than 10% of the automotive fuel market is Korea, where the share is 14%. The report asserts that the enormous disparity in the success of autogas in competing against conventional automotive fuels — gasoline and diesel — is explained mainly by differences in government incentive policies.

Noted is that the primary justification for supporting the use of autogas and other alternative fuels through government incentives is their environmental advantage. Autogas outperforms gasoline and diesel in the vast majority of studies comparing environmental performance that have been conducted around the world. Emissions are especially low with respect to noxious pollutants. With respect to greenhouse gas emissions, autogas performs better than gasoline and outperforms diesel on a full-fuel-cycle basis, and when the LP-gas is sourced mainly from natural gas processing plants.

The report concludes that autogas incentive policies are most effective when there is a financial incentive for an end user to choose it over a conventional fuel. The attractiveness of autogas over other fuels depends on the added cost of an autogas vehicle compared to a gasoline variant, or the additional net cost of converting an existing gasoline vehicle; the pump price of autogas relative to diesel and gasoline; and the availability of the fuel on the market. Therefore, the higher the upfront purchase and conversion costs, and the scarcer the refueling opportunities are, the larger the financial incentive must be.

Lower running costs — fuel cost is the most important — need to compensate for added upfront capital expenditures and minor inconveniences. Ideally, savings will eventually offset capital costs. This depends on fuel consumption. The report finds that payback periods under three years have shown the greatest success.

The report emphasizes that the emergence of autogas as an alternative to gasoline and diesel is the direct result of government policies to address energy security and/or environmental concerns. With the exception of ethanol, autogas has been more successful than any other alternative automotive fuel because of its practical and cost advantages. The oil price shocks of the 1970s provided the initial impetus for the development of alternative automotive fuels, as countries sought to reduce their dependence on imports of crude oil and refined products. Environmental concerns have since overtaken energy security as the principal driver of government policies to promote such fuels, as they are generally less polluting.

Accord was evident among World Forum Autogas Summit roundtable members in Miami regarding the weight of government policies on autogas efficacy. While candid and subdued support prevailed favoring continued government incentives and subsidies, Australia provided a cautionary tale for such linkage. The commonwealth’s autogas market took off in the 1990s thanks to a combination of a zero excise tax on the fuel and generous vehicle conversion grants. Consumption fluctuated around 1.1 million tonnes a year between 2004 and 2010 — but has since fallen appreciably.

The WLPGA report outlines a number of factors explaining the decline, including the introduction of, and a progressively rising, excise tax on autogas. Improved fuel economy and consumers shunning larger six-cylinder vehicles, formerly the mainstay of the Australian autogas market, in favor of smaller four-cylinder vehicles — diesel and hybrids — also contributed. Following was a reduction in the value of grants for autogas vehicles. Sales dropped to 813,000 tonnes in 2013, their lowest level since 1994 and down from an all-time peak of nearly 1.5 million tonnes in 2000.

Prospects for autogas use in Australia were dealt a further blow by decisions by two OEM carmakers in the country, Ford and General Motors (Holden), which will cease producing autogas models by 2017 as a result of declining demand and wavering government support for the fuel. Formerly, the federal government made grants available for the conversion of existing vehicles or purchase of OEM autogas vehicles. In 2006 it introduced a program that provided grants to private motorists for the conversion of existing light-duty vehicles (LDV) of less than 3.5 tonnes, or for the purchase of an OEM autogas LDV. The subsidy was doubled at the end of 2008 from (AUD) $1000 to $2000 for an OEM purchase or a conversion. But the conversion grant was thereafter reduced from $2000 to $1250, and by 2012 it had fallen to $1000. Beginning in July 2011, the program was capped at 25,000 claims a year, and then it was eliminated entirely as of June 2014.

The negative results came, surprisingly, because Australia has a comparatively long and pioneering history of autogas use. The federal government encouraged its use since 1981 for reasons of energy security — the country is a large producer and exporter of LP-gas, derived mainly from natural gas processing — and air quality. Today, the nation remains the eighth-largest autogas market in the world with an extensive nationwide retail distribution network. About 3700 refueling sites served an estimated 490,000 vehicles at the end of 2013, about 3% of the total car and truck fleet. More than half of all service stations sell autogas.

“We should not depend on others to sell our fuel, products, or vehicles for us,” asserted summit panelist Warring Neilsen, manager of corporate affairs at Elgas, a leading Australian wholesaler and retailer with residential, commercial, and autogas operations under the UNIGAS brand name. “We need to take ownership for the entire customer experience. Unless we control the entire supply chain we won’t be in gear. The way forward is to supply a complete package for the customer.” The chairman of the Autogas Summit’s leadoff session added, “We have a great story to tell.”

Echoing those sentiments, Autogas Summit roundtable chairman Stuart Weidie, president and CEO of Blossman Services (Ashville, N.C.) and president of Alliance AutoGas, commented, “If nobody got a subsidy, we could stand on our own.” Doubling down, Tom Armstrong, fleet director for ThyssenKrupp Elevator Americas (Alpharetta, Ga.), concurred, “The ROI [return on investment] works with no subsidy.” But that message needs to be broadcast. Armstrong noted that CNG “gets the press.” Propane needs marketing, he maintained, adding that, paramount to successfully marketing autogas to fleets is the message: infrastructure is a fraction of the cost of natural gas.

“Globally that’s our problem,” said Neilsen. “We’re behind the eight-ball when it comes to getting the message out to government and the consumer. We need to promote globally. Subsidies for conversions [in Australia] have gone away. Let that be a lesson to all. We need to work to be self-reliant. Government support can quickly evaporate. Subsidies can leave you weak. Therefore, the autogas industry must seek, justify, and earn support from the consumer on its own merit. Our argument is health and economics. We need to keep banging on our advantages.”

In Australia’s experience, Neilsen explained that subsidies brought numerous additional players into the market. “They came in to feed on the subsidies. In some cases there was little care for quality. It’s hard to regulate a small conversion center. As a result, the entire industry was condemned. Some of those feeding on subsidies had no focus — the person most precious is the customer.”
He further observed that, regarding Australia’s involvement with credit for autogas, financial institutions far preferred OEM offerings to aftermarket conversions. “The aftermarket ended up carrying a lot of baggage. OEMs are the most difficult to engage with, and the concentration must remain on OEMs, but the aftermarket is critical as well.” Going forward, he challenged the industry to convert hybrids to autogas, and to promote “the bigger story that we have a fuel so versatile we can compete with any competitor,” whether they be traditional or alternative fuels.

Although environmental concerns may have overtaken energy security as the principal driver of government promotion of alternative fuels, private companies adopting sustainability initiatives have a more singular mission. Autogas Summit participants heard that private fleet management has a laser focus on return on investment when it comes time to compare fuel choices. Thyssen-Krupp’s Tom Armstrong made the point: “Don’t imagine I was going to go into my boss’s office and say, ‘Hey, it’s going to cost a million bucks, but we’re going to save some trees.’ The ROI has to be there.”

That said, ThyssenKrupp’s move to smaller, more fuel-efficient vehicles required identification of compatible vehicles for its fleet — alternative fuel or not — a task that fell to Armstrong. “With all the choices it’s difficult to determine which direction to follow,” he acknowledged. The fleet manager laid out a strategy of the five Cs — Conserve, Cost Effective, Common Sense, Clean, and Commit. Propane was the only alternative fuel that qualified for all five Cs.

While CNG hit Clean and Conserve, it missed on cost effective, common sense, and commit. E-85 scored on Clean and Cost Effective. Electric, hybrid, and hydrogen tallied two checkmarks — Clean and Conserve. In the final analysis, Armstrong was also able to identify available propane vehicles that fit ThyssenKrupp’s fleet requirements. In addition, propane eclipsed other fuels for a three-year ROI based on mileage and fuel costs. And, while they’re still in place in the U.S., the company is accessing incentives to further lower costs.

Armstrong is in charge of 3200 vehicles — 1600 vans, 1100 pickup trucks, 300 utility trucks, 100 flatbed trucks, and 100 cars. His company’s sustainability challenge set a goal to reduce fuel consumption by 20% by this year, and autogas is to represent 10% of the fleet, or 300 vehicles. Currently, the fleet includes right-sized and alternative-fuel vehicles that run on propane or electricity.

The numbers tell the tale: $1.91 in savings per gallon for propane autogas; $4152 off fuel costs, per vehicle, annually; and 6917 pounds of carbon dioxide eliminated per vehicle per year from ThyssenKrupp Elevator’s carbon footprint, based on its average 25,000-mile-per-year usage. Additionally, the company displaces about 2000 gallons of gasoline per vehicle annually by utilizing autogas.

The World Forum’s Autogas Summit was opened with an introduction into cutting-edge LPG fuel metering technology for modern vehicles presented by Netherlands-based Prins Autogassystemen BV, whose U.S. product distributor, Blossman Services Inc., is a managing member of Alliance AutoGas. A presentation by Roush CleanTech (Livonia, Mich.) highlighted that, at the time of the summit, more than 200,000 schoolchildren had been safely taken to class on propane-fueled buses.

Repsol (Madrid) presented the results of its project on direct liquid injection, in cooperation with other automotive developers. The research concluded that, due to its characteristics, autogas is the only alternative fuel that can be used in today’s low-rpm Otto and turbo-boosted engines while still meeting stringent European Union emissions standards, providing an off-the-shelf solution. Combustion is said to generate nearly no particulate matter. Minimal mechanical modification and no manufacturing cost benefits accrue to OEM vehicle manufacturers.

Finally, the event concluded with an invitation to the 2015 WLPGA Autogas Summit in Seoul, South Korea Jan. 28-29, hosted by the Korea LPG Association.

Note. “Autogas Incentive Policies: A Country By Country Analysis of Why and How Governments Encourage Autogas and What Works” may be downloaded at http://auto-gas.net/uploads/Autogas%20Incentive%20Policies%202014.pdf.

A Big Step

By Roy Willis, CEO, Propane Education & Research Council (PERC)

The Propane Education and Research Enhancement Act of 2014 (PEREA) was signed into law by President Obama on Dec. 18. It capped a successful legislative year for the National Propane Gas Association and the propane industry.

RoyWillis 250The new law changes a key propane price input into determining whether the activities of the Propane Education & Research Council (PERC) will continue to be restricted to research and development, training, and safety matters, as they have been since 2009. The restriction of our consumer education activities will remain in place until the Commerce Department conducts a new analysis that uses that key price input and finds that propane prices are below the statutory threshold.

Unless the department changes the underlying formula for the price analysis, I’m confident the restriction will be lifted using the new propane price data. For PERC, removal of the restriction would open the door to a more robust communication strategy with consumers in each of our market segments.

We’ve begun looking at our existing programs and how they might be modified, made more efficient, or replaced once the restriction is lifted. We also have started considering ways to use an unrestricted public education authority to support expanded use of propane in residential, commercial, agriculture, autogas, landscaping, and other off-road market segments.

Under restriction, PERC’s outreach in the residential market is primarily training programs for construction professionals, participation in homebuilder trade shows and conferences, an appliance incentive program, and a cost-sharing effort with the states for appliance rebates. If the restriction is lifted, PERC will consider new communications outreach to people buying, building, and renovating homes.

What is certain is that growing gallons through greater off-peak and year-round demand is vital to the long-term economic viability of the retail propane business.

With that reality in mind, the Council, the Advisory Committee, PERC staff, and key contractors will be considering options and developing proposals that, ultimately, we will present to the industry for its input. Our aim is reaching a consensus on the best path forward.

Passion for Propane — Commentary By Charles Robertson

What do I love most about our propane industry? The relationships that are built from conducting business, and the friendships that are fostered as we all strive to do our best for our families, our neighbors, and the teams we create within our businesses. At the end of each year, we know as an industry that we heated millions of homes, carried people and products safely throughout this great land, and did it more efficiently and with lower pollution levels than many other energy products. Propane—what an amazing product!
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The technology improvements in the propane autogas industry are simply impressive. Great advancements continue in the larger truck engines. The small-engine enhancements that are being utilized for lawn and irrigation are second to none. We are truly coming into our own as an industry with better products that are environmentally superior. It is our time!

However, this great product is being challenged on many fronts—government restrictions, permitting issues, hours-of-service restrictions, driver training, supply constraints, pipeline tariff increases, and crane training, to name a few. None of these challenges are insurmountable, and I would strongly suggest we can turn many of them into opportunities. The million-dollar question is, how do we accomplish that?

Our industry continues to struggle as we have such a small voice in the “Energy World” when compared to coal, natural gas, nuclear, or the electric industries. Even the not-yet-efficient solar and wind industries have caught the eye—and ear—of government. Billions of dollars have been allocated to support their growth. Does anyone doubt that solar and wind would be severely challenged on their economics if not for government handouts? I am not proposing government handouts for propane, but what I am suggesting is for us to get more involved — to get more involved in the one organization that is battling on our behalf, the National Propane Gas Association (NPGA).

I have to admit, when a supplier from the past approached me to get involved on an NPGA committee, the Propane Supply and Logistics Committee, I was hardly chomping at the bit to join that group. I have been blessed with being involved in our industry for over 25 years, but not previously with NPGA. My prior perception held that NPGA was simply a group of retailers that got together to discuss our challenges with few, if any, real results coming from those talks.  

I write this article to inform you that I was simply wrong—something we consultants do not admit very often. After attending my first set of meetings, I was very impressed. NPGA, led by Rick Roldan, is a well-oiled machine. The experience, leadership and organization, integration with our retail network, and the never-ending communication that I see between NPGA, our state associations, and government agencies is — to steal a word from my son — awesome. I am proud our company has recently joined the NPGA as a member, and even more proud now to have been asked to serve on a committee.  

By understanding our challenges, and working directly with government agencies, we have a voice. As I mentioned in my opening, what I love most about our industry, and what makes it so unique from others, are the relationships that are built from the work we do together and the accomplishments we relish as we get through the battles we face as an industry. NPGA is forging relationships with senators, House representatives, and their staffs. These decision-makers are being made aware of our challenges, and can either assist us in overcoming them or at least not create more impediments that limit us.

We have just had an opportunity to vote in our mid-term elections. I hope you got involved and voted. I hope you wanted to be part of a process that helped create and keep our country strong. I believe the message of the vote’s outcome was to “not continue on our current path.” The Senate has changed hands. There will be new people in office and new committee leadership that I believe will be friendly to our cause—because we have a good story to tell.  

With this change and current opportunity, our industry must do more to build on relationships. Many of us have family members that may have a desire to continue the family business. I would submit that with strong, professional representation we can secure that future for those following us. So my message is to get involved—join your state association and support NPGA, our voice in Washington. Getting involved in NPGA will prove to be a worthy investment.


Charles Robertson founded Twin Feathers Consulting (Overland Park, Kan.) in 1998. The company is entrusted with managing more than 150 MMgal. annually, focusing on clients’ supply security and margin enhancement. Robertson began his propane career in the NGL department at Amoco. He has more than 25 years of experience in the propane industry.

Acquisition Expands Westport’s Stake In Direct-Injection Technology

Westport Innovations (Vancouver, B.C.) is expanding its stake in the propane direct-injection market for trucks and passenger cars as a result of the natural gas vehicle company’s December acquisition of Prins Autogassystemen (Eindhoven, the Netherlands). Responding to BPN’s questions regarding the business transaction, Westport executive vice president Mehran Rahbar said Prins has made major investments in direct-injection technology, and that the shift to this technology in the passenger car market has just begun.

“We foresee a very good opportunity for growth in numbers and market share in this market,” Rahbar said. “Furthermore, with the experience and strength of both companies, introduction to new markets with existing products will be faster and more efficient. Our combined engineering resources will keep a faster pace in technology and innovations and further refine the current product lineup for introduction to new or existing markets. This strategy applies to both passenger car and truck markets.”
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Westport Innovations Inc., which engineers natural gas engines and vehicles, announced on Dec. 2 that it acquired Prins Autogassystemen Holding B.V. for approximately $15.1 million. Prins’ operations in Europe will be combined under the Westport Applied Technologies business unit.

Utilizing its extensive experience with natural gas direct injection, Westport will offer two products from Prins that Rahbar noted will “cover all direct injection needs.” Those are the DLM 2.0 system, which provides liquid propane injection through high-pressure original equipment gasoline injectors; and the VSI 2.0 system, which provides vapor propane indirect injection. Prins recently won the World LP Gas Association’s Innovation Award for its development of the Prins Dieselblend 2.0 system. The dual-fuel diesel blending technology creates an average blend rate of 20% to 30% propane and 70% to 80% diesel (BPN, October 2014, page 29).

Bart van Aerle, CEO of Prins, said about the acquisition, “Together, we can create the best-in-class alternative fuel systems across multiple fuel platforms and deliver on superior technology and performance characteristics.” Prins offers alternative fuel systems for bi-fuel, mono-fuel, and dual-fuel applications using LPG, CNG, and LNG. Westport recognized Prins’ “deep engineering and research and development capabilities—extensive multidisciplinary knowledge of systems, software, engineering, electronics, testing, calibration, and certification.”

The Prins vapor sequential injection system is offered in the United States by Alliance AutoGas, a national consortium of propane marketers, equipment providers, and certified conversion centers to encourage companies to add propane-fueled vehicles to their fleets. Rahbar reiterated to BPN that the Prins/Alliance partnership will continue. Stuart Weidie, president and founder of the alliance, agreed, telling BPN, “Blossman Services Inc.’s long-term agreement as the United States importer of Prins vehicle technology remains in place, and activities related to expanding our portfolio of certified vehicle platforms will continue.”

Westport and Prins are already familiar with one another. During the past year, the two companies have worked as a “supplier-customer” partnership on an original equipment manufacturer (OEM) project, although Westport would not elaborate on details of that partnership. However, the relationship led directly to mutual interest for closer technology collaboration. This seems to be a natural transition for Westport, as two Italian companies in Westport’s applied technology group, Emer and OMVL, have been active in the LPG business for several years.

“As 60% of the world propane is derived from [natural gas], and with production of bio-propane in coming years, the availability of propane will grow,” Rahbar noted. “This will provide a good foundation and prospect for propane as a good alternative, and more viable source of energy for engine combustion and its related technologies. For passenger cars, the storage of propane is simpler, fueling duration is shorter, infrastructure is less costly, and system costs are lower compared to CNG. In parallel, the characteristics of propane, as fuel, [are] very similar to gasoline.”

Roush F-650 Propane-Fueled Bobtail On the Road; F-750 Coming Soon

What options does a propane company have when it does not need a propane-fueled bobtail as large as 33,000 GVW with a 3200-gal. barrel? Several smaller, independent propane marketers are now using the new F-650 propane-fueled bobtails from Roush CleanTech (Livonia, Mich.) in their delivery fleets. Roush’s F-650 handles barrels up to 3000 gallons with a GVW up to 30,000 lb. For those that need the larger bobtail, Roush plans a September release of an F-750 propane-fueled bobtail with the higher GVW and that can handle the larger barrel.
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“A lot of propane marketers run a 3000-gallon-or-smaller barrel on their bobtail, so [for them] the F-650 works just fine,” said Todd Mouw, vice president of sales and marketing for Roush CleanTech.
 
Williamson LP Gas (Dayton, Texas) is a good example of a company that uses the bobtail delivery trucks with barrels smaller than 3200 gallons. It has been in business since 1953, and all of its propane delivery trucks have run on propane since its inception. Williamson has outfitted its Roush propane-fueled bobtail with a 2600-gal. barrel.

“We’ve always run propane, and we wanted to stay with propane because that’s what we sell,” said route manager and driver Richard Till. “We carry our fuel on the back of our trucks.”

Till, whose company has owned the Roush bobtail since October and had put about 2500 miles on it as of mid-December, stated that the bobtail “does everything we want it to do.”

The F-650 bobtail has been in the works at Roush for about two years. Although the company knew the vehicle was on the small side for what many of the larger propane companies wanted, it also realized that Ford would not offer a 33,000 lb GVW vehicle with a 6.8L, 3V engine until 2015. Recognizing the potential, Roush released its F-650 for the smaller bobtail market about a year ago. “In 2015, Ford will introduce the F-750 on gasoline with the gas prep package for propane, which we’ll then convert to propane, which will get us to that magical 33,000 GVWR number,” Mouw noted. The 6.8L 3V engine and commercial grade 6R transmission will power the F-650 and F-750.

The bobtails feature the same engine and transmission combination available in more than 4200 propane-fueled Bluebird school buses on the road today, which are rated at 33,000 GVWR. Mouw stated that because the engine and transmission combination is in many of the Ford commercial products, that large volume of production translates to significant price advantages for the Ford chassis over competitive class 6-7 chassis.

Roush has produced the bobtail with price in mind for cost-conscious propane marketers. At the vehicle’s launch date, the company offered two tank configurations. One features tanks on the passenger and driver’s side, with 45 total usable gallons, while the second includes dual tanks with 83 usable gallons. And recently, in response to customer requests, Roush added a third option with a single long tank on the driver’s side offering 50 usable gallons. The single-tank option provides an additional advantage for cost-conscious marketers. The price will be under $68,000 for the base chassis with the Roush CleanTech fuel system, which Mouw noted is at least $2000 less than a comparably equipped diesel chassis from one of Ford’s competitors in the Class 6-7 space.

Because some marketers might still be skeptical about purchasing a propane-fueled bobtail after the technological issues that occurred in the past, Roush has worked to alleviate those concerns. It invested more than $35 million to make its technology robust enough for the toughest duty cycles. The same engine/transmission combination worked well for school buses, so Roush is confident it will work well in the bobtail application. More than 375 Ford repair locations are capable of repairing the vehicles. Mouw believes the F-650 competes well with the 30,000 GVW option of the Freightliner S2G propane-fueled bobtail, and the F-750 will also compete well with the S2G’s 33,000 GVW version.

Williamson LP Gas has had a good experience with the Roush vehicle so far. “It’s got all the power you want,” Till stated. His company’s driving routes include many stop signs in heavy residential traffic, and the truck’s automatic transmission has worked well in those situations.

“With a standard transmission, a lot of times you can’t get across, and you’ve got to sit there and wait until you have enough time to get across and shift gears,” commented Till, who has been with the family-owned business since 1991. “But with the automatic transmission, you have the get up and go.” The company does not have an on-site fueling station, simply fueling the vehicle from the barrel when needed.

“We’ve mostly had Chevys. This is our first Ford,” remarked Till. “We haven’t had to do any mechanical work, but it seems to be easier to work on, with access and things like that. The Ford is a lot cheaper than the Freightliner. You have to look at economics and make sure the vehicle can do what you want it to do for you. It’s done everything so far. We’re pleased with the truck.”