The issue surrounding the building of CNG infrastructure
Is the “classic chicken and egg” debate, in which state officials must decide what to do first: invest in CNG vehicles or CNG infrastructure? “2 Spokesman for Arkansas governor Mike Beebe
Do a Google search for “CNG Chicken and egg scenario” and the result is a seemingly endless list of industry participants using the idiom to describe the approach to increasing the scale of the CNG market… either by producing CNG vehicles (which likely won’t sell without the fuel to make them run) or building pipelines and fueling stations and waiting until someone comes along to buy your fuel (a risky business proposition at best).
The development of infrastructure continues to be a hurdle to adoption of CNG with currently only about 800 public filling stations in the United States3 compared with nearly 153,000 service stations selling gasoline as of February 2014. 4 It’s an easy question to ask why station owners don’t just add a CNG pump to their existing stations, like the E85 Flex fuel options we find at many stations. The answers are at the same time complex and simple. As our group learned during its visit to the Freedom CNG filling station in Houston, there are multiple costs involved that aren’t part of a normal station. First, a station must have a 500PSI natural gas tie-in that passes through a scrubber/ dryer, a compressor that converts the gas to over 3000PSI, and finally, aboveground storage tanks. (For photos and more information about our visit to the station see Freedom CNG Filling Station Visit under the ECONOMY tab.) The cost for a single pump, public fast-fill retail station capable of serving 50 to 80 light and medium-duty vehicles ranges from $700,000 - $900,000.5 The complexities of compressing natural gas and getting it to market by pipeline aside, the one thing station owners would agree on is that they don’t want to invest where they cannot make a profit. Fuel station owners are understandably reluctant to spend such a large sum knowing that it would take years for them to receive any return on their investment.
Is the “classic chicken and egg” debate, in which state officials must decide what to do first: invest in CNG vehicles or CNG infrastructure? “2 Spokesman for Arkansas governor Mike Beebe
Do a Google search for “CNG Chicken and egg scenario” and the result is a seemingly endless list of industry participants using the idiom to describe the approach to increasing the scale of the CNG market… either by producing CNG vehicles (which likely won’t sell without the fuel to make them run) or building pipelines and fueling stations and waiting until someone comes along to buy your fuel (a risky business proposition at best).
The development of infrastructure continues to be a hurdle to adoption of CNG with currently only about 800 public filling stations in the United States3 compared with nearly 153,000 service stations selling gasoline as of February 2014. 4 It’s an easy question to ask why station owners don’t just add a CNG pump to their existing stations, like the E85 Flex fuel options we find at many stations. The answers are at the same time complex and simple. As our group learned during its visit to the Freedom CNG filling station in Houston, there are multiple costs involved that aren’t part of a normal station. First, a station must have a 500PSI natural gas tie-in that passes through a scrubber/ dryer, a compressor that converts the gas to over 3000PSI, and finally, aboveground storage tanks. (For photos and more information about our visit to the station see Freedom CNG Filling Station Visit under the ECONOMY tab.) The cost for a single pump, public fast-fill retail station capable of serving 50 to 80 light and medium-duty vehicles ranges from $700,000 - $900,000.5 The complexities of compressing natural gas and getting it to market by pipeline aside, the one thing station owners would agree on is that they don’t want to invest where they cannot make a profit. Fuel station owners are understandably reluctant to spend such a large sum knowing that it would take years for them to receive any return on their investment.
“If You Build It, They Will Come”
It’s not just a line from a film. The CNG transportation fuel industry is beginning to build its infrastructure on this theory. Texas produces natural gas from the Eagle Ford, Barnett and Haynesville Shale regions. And many small business owners are recognizing that they can make a profit by bringing the product to markets across the state. And in theory, as they build the infrastructure, the public demand for CNG vehicles will increase due to the greater availability of the lower-priced fuel; which in turn will feed the demand for more CNG facilities in more areas of the state.
John Athon of Freedom CNG is one of those business owners. His company’s solution to the infrastructure conundrum is both the chicken and egg and field of dreams ideas. During the time he spent with us at the Freedom CNG facility at the Houston Distributing Center, Mr. Athon explained how his company is expanding due to a business plan that provides an anchor business that guarantees a stakeholder that will help grow the business. For Freedom CNG, Houston Metro is one of the large businesses, which provides them with guaranteed income stream by committing to a contract for fuel purchases. The partnership is ideal for both companies. Metro is assured that they will be able to fuel their buses and Freedom CNG has a built-in customer from day one that the station opens for business. There is no waiting for vehicles to come. The station is there when the public is ready. With more of these partnerships, the infrastructure will continue to grow.
In addition to having a ready customer, businesses wishing to build alternative fuel facilities as will as those businesses and individuals wanting to purchase CNG vehicles can take advantage of grants and tax incentives to help pay the cost of the capital investment and spur the infrastructure development.
It’s not just a line from a film. The CNG transportation fuel industry is beginning to build its infrastructure on this theory. Texas produces natural gas from the Eagle Ford, Barnett and Haynesville Shale regions. And many small business owners are recognizing that they can make a profit by bringing the product to markets across the state. And in theory, as they build the infrastructure, the public demand for CNG vehicles will increase due to the greater availability of the lower-priced fuel; which in turn will feed the demand for more CNG facilities in more areas of the state.
John Athon of Freedom CNG is one of those business owners. His company’s solution to the infrastructure conundrum is both the chicken and egg and field of dreams ideas. During the time he spent with us at the Freedom CNG facility at the Houston Distributing Center, Mr. Athon explained how his company is expanding due to a business plan that provides an anchor business that guarantees a stakeholder that will help grow the business. For Freedom CNG, Houston Metro is one of the large businesses, which provides them with guaranteed income stream by committing to a contract for fuel purchases. The partnership is ideal for both companies. Metro is assured that they will be able to fuel their buses and Freedom CNG has a built-in customer from day one that the station opens for business. There is no waiting for vehicles to come. The station is there when the public is ready. With more of these partnerships, the infrastructure will continue to grow.
In addition to having a ready customer, businesses wishing to build alternative fuel facilities as will as those businesses and individuals wanting to purchase CNG vehicles can take advantage of grants and tax incentives to help pay the cost of the capital investment and spur the infrastructure development.
Rundkvist, Martin. "Non-Chicken Laid First Chicken Egg." Science Blogs. Science Blogs LLC, 13 Nov. 2008. Web. 20 Apr. 2015. <http://scienceblogs.com/aardvarchaeology/wp-content/blogs.dir/417/files/2012/04/i-9400cabe9379a10e5ae5d1c90bc352c1-chicken192.jpg>.
"13 Governors Ask Auto Leaders for CNG Plan." Business, Political, and Cultural News in Fort Smith and Northwest Arkansas. TCW Media, 16 July 2012. Web. 26 Apr. 2015. <http://www.thecitywire.com/node/22834#.VVKiVNNViko>.
"Natural Gas Fueling Station Locations." Alternative Fuels Data Center:. U.S. Department of Energy, 13 Aug. 2012. Web. 20 Apr. 2015. <http://www.afdc.energy.gov/fuels/natural_gas_locations.html>.
"Service Station FAQs." Service Station FAQs. American Petroleum Institute, 2 Feb. 2014. Web. 12 May 2015. <http://www.api.org/oil-and-natural-gas-overview/consumer-information/service-station-faqs>.
Smith, Margaret, and John Gonzales. "Costs Associated With Compressed Natural Gas Vehicle Fueling Infrastructure." U.S. Department of Energy: Energy Efficiency & Renewable Energy. U.S. Department of Energy, 1 Sept. 2014. Web. 28 Feb. 2015. <http://www.afdc.energy.gov/uploads/publication/cng_infrastructure_costs.pdf>.
"Http://www.8ball.co.uk/." 8Ballcouk RSS. 8Ball Mailorder Ltd, 2015. Web. 12 May 2015. <http://www.8ball.co.uk/all/all-t-shirts/attitude/slogan-t-shirts/field-of-dreams>.
"13 Governors Ask Auto Leaders for CNG Plan." Business, Political, and Cultural News in Fort Smith and Northwest Arkansas. TCW Media, 16 July 2012. Web. 26 Apr. 2015. <http://www.thecitywire.com/node/22834#.VVKiVNNViko>.
"Natural Gas Fueling Station Locations." Alternative Fuels Data Center:. U.S. Department of Energy, 13 Aug. 2012. Web. 20 Apr. 2015. <http://www.afdc.energy.gov/fuels/natural_gas_locations.html>.
"Service Station FAQs." Service Station FAQs. American Petroleum Institute, 2 Feb. 2014. Web. 12 May 2015. <http://www.api.org/oil-and-natural-gas-overview/consumer-information/service-station-faqs>.
Smith, Margaret, and John Gonzales. "Costs Associated With Compressed Natural Gas Vehicle Fueling Infrastructure." U.S. Department of Energy: Energy Efficiency & Renewable Energy. U.S. Department of Energy, 1 Sept. 2014. Web. 28 Feb. 2015. <http://www.afdc.energy.gov/uploads/publication/cng_infrastructure_costs.pdf>.
"Http://www.8ball.co.uk/." 8Ballcouk RSS. 8Ball Mailorder Ltd, 2015. Web. 12 May 2015. <http://www.8ball.co.uk/all/all-t-shirts/attitude/slogan-t-shirts/field-of-dreams>.