If the United States does nothing more to expand its use of natural gas as a transportation fuel, about 3 percent of vehicles on the road — almost all of them heavy and medium-duty trucks — will be powered by natural gas by the end of the decade, according to a partner at the McKinsey and Co. consulting firm.
That would be up from 0.1 percent now, but far below the 10 percent or even 20 percent that Tom Inglesby said the country could have with a concerted effort.
“The low-hanging fruit are no longer there,” Inglesby said, referring to the immediate benefits from the surge in natural gas production because of the U.S. shale boom. “That’s why we’re moving into transportation.”
He and Mike Juden, senior practice expert at McKinsey, were among the speakers Tuesday morning at the World LNG Fuels conference, which is focused on natural gas as a transportation fuel.
Juden noted that in Asia — especially in Pakistan and Iran — natural gas vehicles have a large market share. Penetration is lower in Europe and South America but still far higher than in the United States, which he attributed to lower conversion costs, government subsidies and other regulations.
Some Italian cities, for example, allow only vehicles powered by natural gas to travel within certain sectors.
Italy also offers 700 euros (about $930) toward the purchase of a natural gas vehicle to anyone trading in an older car, he said.
But Juden and Inglesby both suggested that for at least the near future, the growth of natural gas-powered vehicles in the United States is likely to be greatest in commercial trucks, buses and fleet vehicles, where the payback is quicker.
For heavy-duty trucks, the payback — the time it takes for the fuel savings to pay for the cost of conversion — is less than three years, Juden said.
At today’s prices, liquefied natural gas is about $1 to $1.50 less for an amount equivalent to a gallon of diesel.
For a passenger car, the payback is six to 10 years, Juden said. That makes the passenger car market difficult to enter.
But Inglesby said the environmental benefits ultimately will have a bigger influence on companies’ decisions about whether to jump into the market.
Natural gas-powered vehicles have lower emissions than those using diesel.
Still, he said, many companies are waiting for someone else to make the first move.
And that’s a sticking point.
Inglesby said natural gas producers are unlikely to ask the federal government to implement a mandate, similar to that for ethanol.
Utilities traditionally haven’t taken the lead in building infrastructure, he said.
And companies “just want it to happen.”
“They’re all waiting,” he said. “It does create the chicken-and-egg dilemma.”