Electric cars are often touted as the nail in the coffin for gasoline-powered vehicles. However, there's another fuel revolution in the developing world, which is changing the economics of electric cars. Whether it's CNG, LNG, autogas, or propane, gaseous-hydrocarbon fuels turn conventional cars into dual-fuel vehicles, and limit the uptake of electric cars in these economies.
Tesla and the lost supercharger stations
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A quick look at the map of Tesla supercharger stations across the planet poses some interesting points: There are curiously few supercharger stations in south-central America, with only one in the Latin-speaking part of the new world. Few exist in Eastern Europe, Spain, Africa, the Middle East, India, or Oceania. This map can be correlated to GDP per capita, GDP, infrastructure, the country's electric car incentives, and the uptake of dual-fuel vehicles. For the average consumer, it's simple economics-their area of residence drives their vehicle fuel choices.
Balancing economics, power, and emissions
In developing countries, the choice to install a dual-fuel option is economics driven, rather than an environment-conscious one, according to the Natural Gas Vehicle Journal. According to the journal, most countries can expect a 40-60 percent reduction in fuel costs, which is more compelling in a second world where fuel costs are a larger portion of incomes.
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The vehicle fleets in these countries tend to be aging, and the choice between going electric or going LPG or CNG is often not tied to buying a new vehicle. Developing countries opt for a mixer-type dual-fuel system ranging in cost from $300-$1,000 with an average 25 percent power loss, while those going to dual-fuel in first-world countries opt for more expensive injector-type systems that result in a slight power increase - these systems average $6,000. Those touting electric cars often consider lifecycle costs of purchasing two new vehicles, while consumers in second-world economies look for cost reductions in the vehicles they currently own.
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Regardless of the type of dual-fuel system, these systems always have the side-benefit of reducing CO2 emissions. A 2009 EPA study found an 18-30 percent reduction in CO2, depending on the secondary fuel used. With a significant reduction in fuel costs, and tailpipe emissions, the economics for electric cars over dual-fuel cars becomes murky at best for many developing economies.
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Simple modifications, non-standard fuels
Switching petrol cars to dual fuel is relatively easy. To do so, the following components need to be installed: a new filling point, tank, ECU, injectors, reducer, pressure sensor and an electronic switch. Dual-fuel vehicles have switches allowing them to go from petrol to gas. Related: U.S. Production Is Falling, Why Isn't Oil Recovering Faster?
Despite the relative ease of modification, there is a challenge in fuel standardization across countries. LPG, composed of 60 percent propane and 40 percent butane is more common in Eastern Europe, propane is common in North America, while in South America CNG is preferred. Unfortunately the ingenuity of these second world economies doesn't come without cost. The cheaper systems often installed in the developing world, lax enforcement of laws such as mandatory five-year tank tests, and lack of awareness lead to many explosions of these cheaper systems.
Worldwide spread
Many countries have opted for dual-fuel vehicles, with South America being the most prominent region. With Brazil's uptake in natural gas vehicles, it's no surprise that Sau Paulo is the world's largest city economy currently without a supercharging station. In oil-abundant Iran, natural gas vehicles proliferate, and government subsidies contribute to natural gas fuel prices being 75 percent lower than gasoline.
China looking to break the trend
The Tesla map has one glaring exception to the GDP correlation-China. Despite having almost 4 million dual-fuel cars, last year China quadrupled its electric car sales to over 330,000 vehicles. This was largely driven by government incentives and a limit on the number of gas cars in large cities such as Beijing. Electric cars are often the only options for those looking to drive in larger cities in China, where officials are looking to reduce pollution in its megacities.
Navigant research forecasts that Asia-Pacific regions will become more important for the Li-ion electric vehicle market in the next decade. In a country like China that already has a significant amount of CNG cars, it will be interesting to see how the market dynamics will develop as three different technologies fight for market share.
Although electric cars have made significant inroads to wealthier countries, there have been adoption challenges in second-world countries. Currently this is largely driven by economics, with the lower entry costs of going dual-fuel outweighing the long-term savings of electric cars. These trends are compounded by a lack of infrastructure, such as Tesla's superchargers.
Long-term, carbon emissions plans and the COP21 Parris accord and its CO2 neutral mandate could push these countries farther toward dual-fuel, rather than electric. The earlier adoption of dual-fuel vehicles was limited in the first world due to regulations driving up installation costs; while in the developing world, dual-fuel cars could have had a human cost linked to a lack of regulation. There is one given with both electric and dual-fuel vehicle adoption: the world's oil consumption will be adversely affected.
By Matt Slowikowski for Oilprice.com
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Matt Slowikowski is the founder of the energy analytics blog enernomics.org. He specializes in economic analysis of the energy industry and energy projects. More
Comments
First, I'm thrilled that natural gas has finally replaced coal as the primary fuel for power generation in the US. It's cheaper, better for the environment and power companies can't seem to change over fast enough. This means for me as an EV driver the price of electricity will be more stable and my car is polluting less than ever before.
Second, there is a popular rumor going around the internal combustion engine (ICE) is doomed. I personally don't agree with the idea. Far from it in the US. Pure electric cars are perfect for Europe and other parts of the world where cities are close together and more compact than in the US. US cities tend to be vast distances apart compared to the rest of the world's standards. Our cities also tend to be spread wide, sprawling across much larger areas than cities of comparable populations in other places. Pure EVs are also perfect for American city & suburb commutes, errands, etc. New, longer range EVs and improved charging infrastructure also makes visiting neighboring cities and towns easier. So, unless someone puts a gun to my head, I'm not going back to an ICE for my daily drive. There's just no comparison and I know many who agree. For longer trips though, current EV technology just isn't practical.
The days of the ICE as the sole propulsion system may be numbered, but the ICE will live on for a very long time as part of some kind of hybrid system. I do believe the days of gasoline and diesel will end within a decade. CNG, LNG, etc. will replace gasoline and diesel in ICE/Hybrid vehicles because of environmental laws & requirements. Yes, non-hybrid vehicles burning CNG, etc. directly for ICE power is the most efficient use of the fuel. The challenge comes when all ICE engines are burning some type of gaseous-hydrocarbon, there will be a point where CO2 emissions stop declining and begin to increase again. For this reason, I believe hybrids will eventually rule the roads in America. I noticed this article left out hydrogen. As I understand it, the majority of hydrogen produced today is via the refining process and not by electrolysis. So, seems to me fuel cell vehicles, which are still electric vehicles, could be a huge future market for the oil industry.
The point of all of this is to say EVs are here to stay and the ICE isn't going anywhere either. The roles both will play in future transportation will probably meet somewhere in the middle. Both have their advantages and drawbacks. I don't see gas stations rushing to install CNG pumps any faster than they are installing quick charge stations. Sure, it's happening, but the public needs to see a serious drop in price at the point of sale for both technologies before they are going to move beyond gasoline & diesel. The public doesn't care about the environment, no matter how much they pretend to. The environment needs to be protected, or we all go back to the smog choked cities of the 1970s. A balanced approach would seem to get everyone where they want to go. However, compromise is a dirty word in the current political world.
Key drivers here is that oil exploration seems to be finding more gas than oil while wind and solar are beginning to displace demand for coal and gas in power generation. Not surprisingly we have a worldwide glut of LNG as local domestic gluts of natural gas spill over into export markets. So this surplus gas, largely a low value byproduct of oil E&P, needs to find new markets. Consequently there is a serious need for gas to find its way into transport fuel markets at a scale that displaces gasoline and diesel.
This need to find new markets will only increase as the cost of solar and wind continue to decline below the cost of gas-fired and coal-fired generation. As gas is priced out of the power markets, the surplus must find its way into other markets. LNG exported to other power markets won't cut it. LNG must find its way into transport markets instead.
Currently, domestic NG is under $2/mmbtu, export LNG around $5/mmbtu, while spot prices for gasoline and diesel are around $12/mmbtu and a retail price of gas around $2.50/gal is $20/mmbtu. Thus, motorists are paying a substantial premium to power their vehicle with gasoline rather than gas. So there is a lot of room for a middle market to develop the infrastructure needed to exploit this premium, and this is what is lacking. The per mile cost of fueling a vehicle could easily be cut in half substituting gas for gasoline.
But does the oil & gas industry really want to move in this direction. This substitution will drive down the price of gasoline even as it supports the price of gas and LPGs. The net effect could be lower revenue for the oil & gas industry, which really needs oil at a high premium to gas. So what would push the industry to fully embrace natural gas as a transport fuel. I think this comes down to competition from the likes of Tesla. As EV makers advance on scale and price, the oil & gas industry will be forced to accept less revenue per vehicle mile. The energy cost for an EV sedan is about $0.03/mile. Gasoline at $2.50/gal is about $0.10/mile. Solar is only going to reduce the cost of powering EVs, so the oil & gas industry seriously needs to contemplate a long-term path to $0.05/mile or lower. Injecting natural gas into transportation seems an essential part of this path. But try to contemplate the ramifications of the petroleum industry losing about 50% of its transportation fuel revenue just to be barely competitive with solar and EVs.
First of all, it's a nuisance. You can't park in some places (building regulations require reinforced structure, and not all places have that). When you tank your car, you can't do it yourself - it has to be done by a gas station worker. Not all gas stations have LNG, and there is no standardized plug for tanking, meaning that when you travel abroad you need to carry a set of adapters (one for Italy, one for Germany, etc.).
Second of all, Tesla managed to push the electric car into luxury zone, while LNG cars are in the opposite end of the spectrum.
There are no supercharger stations in Eastern Europe because virtually nobody can afford a car that still costs as much as mid-size apartament in downtown Warsaw. But that may change with model 3. We'll see.
Bottom line? LNG is already here and it's not making much of a change.
RobSez & JHM - great analysis. I was admittedly trying to be a little sensationalist in the article, and firmly believe that the transportation fuel mix will be significantly less reliant on oil in the coming decade.
I do also believe that solar costs will continue to fall, but the markets where the total cost of solar & wind match natural gas & coal is quite low. This is a capacity factor issue, and will slowly be addressed by storage. In most realistic scenarios, coal and gas will supplement renewables for quite some time.
GoGreen - Gasland is a great movie, I've watched both. It does not address coal gassification, deep sea methane beds, nor does it address the recent globalization of the natural gas markets with increases in sea terminals.
john - Going fully green is not an affordable, available, or feasible solution for some second world countries in the next 5-10 years. In first world countries, I am not seeing the trucking or construction vehicle industries going electric soon either.
Rembal - I lived in Poland from 2006 to 2007, and have visited Warsaw & Poland five times in the past two years. I understand the challenges with NGVs in Europe - further to the point, Poland simply does not have natural gas reserves. Do you see Poland supplanting a diversified oil supply for Russian gas? Yes, Swinoujscie was built, but it's not significant enough to supply the whole market. NGVs will be reserved for countries that can either import natural gas from many sources, have their own reserves, or have significant intensives from the government.
Mark - great point on R&D spending. However, you're not considering the R&D spending on batteries, electric motors, magnet materials to decrease the size of electric motors (especially important for wind turbine nacelles) which all spill over and impact the cost of electric cars. If you're talking fossil fuel, you should compare renewables to fossil fuel for an apples to apples comparison.
There will inevitably be a point at which NGVs no longer lower emissions, and movement to hybrids and electric will be the only way to further lower CO2 emissions. In this article, I'm not mentioning global warming, not because it doesn't exist, but because, consumers in second world countries do not have the same buying power to purchase electric over natural gas. I am trying to point out there are many forces at play which will affect oil price (as is the last line in the article). Natural gas in practical situations can leak, reducing the its ability to affect the green house effect. Methane is 1200 times more harmful compared with CO2, however also only lasts 12 years in the environment compared with thousands for CO2. Overall, when dealt with carefully, it can help reduce CO2, and lowers the cost of transportation in developing economies.
Cheers,
Matt
CNG/LNG use for automotive power is certainly possible and even commendable in comparison to Gasoline/diesel. It's drawback is the lack of power density. It takes more volume to get the same range. It's second disadvantage is lack of infrastructure. While propane can be trucked anywhere that's expensive - in money, fuel, carbon emissions, and time. Pipelines are ideal for natural gas, and they don't exist in great number in the areas that are free of supercharger stations. If your country is not blessed with natural gas you have to import it on tankers, beautiful big expensive LNG tankers to specialized LNG terminals and the cost per btu triples, more or less.
Thus LNG/CNG is not a perfect fuel. Nor is gasoline. Electricity - liek hydrogen- is not a fuel.