CNG: An Economically Viable Alternative to Conventional Fuel?

CNG: An Economically Viable Alternative to Conventional Fuel?

By Jasmine Shaheen & Tasneem Madi

The call to decrease carbon emissions has been growing stronger over the past few years and a plan for energy transition is underway. The oil and gas industry has been repeatedly targeted for its immense carbon footprint and as a result, the industry has been trying to keep up with the world environmental trends and laws to decrease its emissions. Compressed natural gas (CNG) emerges as one of the best solutions for the emission problem. However, one of the important questions that remains is whether natural gas can be the economically viable solution for the energy transition or not?

It is important to understand the natural gas market before answering such a question. Looking at the data, according to BP’s Statistical Review Report (2020), natural gas has had the second-growing share in the energy mix after renewables in 2019. The impact of the COVID-19 pandemic has had a significant impact on energy consumption in 2020 as global primary energy consumption and carbon emissions declined by 4.5% and 6.3%, respectively; the largest decline since 1945. Having said that, the natural gas share rose to high records of 24.7% in 2020, according to BP’s Statistical Review Report (2021).

CNG vs. Conventional Fuels

CNG has been adopted as a bridge to clean energy especially in the area of automobiles. With the expansion of urbanization, almost everyone has access to private cars. As a result, urban transportation has become a significant element of energy consumption and greenhouse gas emissions (GHG). The disproportionate reliance of urban transportation on high-emission fuels has caused a hurdle in the route to develop a low-carbon transportation system.

Over the past few years, however, CNG has widely become an alternative clean fuel to conventional fuels. According to worldwide natural gas vehicles (NGV) statistics, NGVs have reached more than 28,540,819 in 2019 and natural gas fueling stations have reached 33,383 in the same period. The Asia-Pacific region dominates the game with a sweeping 20,473,673 NGVs and 20,275 fueling stations. Africa comes next with 295,349 NGVs and 210 stations, and Europe follows with 2,062,621 NGVs and 5,194 stations.

The shift from conventional fuels to CNG is becoming more popular than ever largely because it is financially appealing to individuals. Looking at the US, the prices for CNG is not only cheaper than gasoline and diesel, but it is more stable as well. In January 2021, the average CNG prices recorded $2.19 per gasoline-equivalent gallon (GGE), while the average price for gasoline and diesel reached $2.32 and $2.64 per gallon, respectively. According to the US Department of Energy, CNG prices have been relatively stable since October 2018, unlike gasoline and diesel prices which fluctuate with the oil market.

Environment’s Favorite

To top that off, NGVs prices and vehicle conversions costs are in a gradual decrease and with innovations in CNG fuel tanks, these costs are even getting lower. Not to mention that NGVs are gaining hype as environment-friendly vehicles. On a well-to-wheels basis, NGVs emit about 11%–17% fewer greenhouse gas (GHG) emissions compared to vehicles that run on gasoline or diesel.

With new technologies on the rise, today’s natural gas engines emit significantly less particulate matter and nitrogen oxides (NOx) than engines produced just a few years ago. New low-NOx natural gas engines reduce ozone-forming NOx emissions by 90% than the current Environmental Protection Agency (EPA) standard.

Dejene Assefa Hagos, Researcher at Norwegian University of Science and Technology (NTNU), and Erik Ahlgren, Professor at the Department of Space, Earth, and Environment, and Energy Technology, at the Chalmers University of Technology, published research on well-to-wheel assessment of NGV and their fuel supply infrastructures in Denmark. The research shows that the use of CNG and liquefied natural gas (LNG) fuel in both road and marine transport can reduce GHG emissions for all types of vehicles by 15% to 27% per kilometer.

A Step into Green Economy

To encourage using CNG and NGVs, European countries implemented tax incentive schemes. For instance, Italy has increased its NGV market share to 5.42% only a year after it introduced purchase incentives ranging from EUR 1,500 to EUR 3,500 for new LPG and CNG vehicle registrations. The French government meanwhile allowed companies specific tax breaks if a company invested in CNG or LNG trucks. There is also a tax exemption on the registration document of up to 100% for CNG and LNG vehicles, depending on the French region.

In 2016, the UK imposed the highest tax rate for cars and trucks using diesel amounting to EUR 18.83/ Gigajoule (GJ). Likewise, Italy imposed a tax rate at EUR 22.91/GJ for vehicles using petrol and at the same time, Italy offered CNG at prices as low as EUR 0.96 /Kg, putting CNG at an advantage with the consumers.

As European governments foster an economically favorable environment for CNG, the demand for it has risen. It is evident, as the number of CNG fueling stations reached 3,642 in 2020 compared to 3,490 and 3,219 stations in 2019 and 2018, respectively. Italy comes on top with 1,393 CNG fueling stations, followed by Germany with 837 stations, and the Czech Republic with 210 stations.

The effect of natural gas as a bridge towards a low-carbon future seems promising especially as demand for CNG grows. Given the advantages of CNG as an alternative fuel to reduce GHG emissions, it seems that CNG is an economically and environmentally viable choice for the time being.



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