Fleets considering a compressed natural gas program now have two online resources to help evaluate economic soundness.
Natural gas has come to the forefront of the country’s energy news recently as a clean-burning, abundant and domestically produced energy source.
In the fleet world, these attributes have garnered growing interest in compressed natural gas for medium-and-heavy-duty vehicles. Liquefied natural gas is considered a better fit for applications that require a more dense concentration of fuel, such as over-the-road trucks or service vehicles that have longer routes. Fleets also appreciate that CNG can reduce operating costs and offer relative price stability compared to conventional petroleum fuels.
For cities considering a transition to CNG, there are many aspects of CNG vehicles and fueling infrastructure that impact the viability and financial soundness of such a move. Analyzing these aspects to assess the economic feasibility of a CNG conversion can be a complex process, but there are tools to make it easier.
Tools to help
The National Renewable Energy Laboratory recently updated its Vehicle Infrastructure and Cash-Flow Evaluation model to help fleets evaluate the soundness of CNG vehicle and fueling infrastructure projects. VICE 2.0 is an expansion of the original VICE model and demonstrates the relationship between the operational parameters of the vehicle fleet and the financial viability of a CNG project. It focuses on CNG because it is the best suited for “yo-yo fleets,” or fleets that start and end their day in the same location.
The updated model supports several common categories of conventionally fueled — i.e., gasoline and diesel — heavy- and light-duty vehicles, such as transit buses, school buses, trash trucks, delivery trucks, paratransit shuttles or “para shuttles,” and taxi cabs. VICE 2.0 is especially beneficial to fleets with routes that start and end in the same place and are therefore able to refuel at a central location.
VICE 2.0 also incorporates significant visual and reporting enhancements, including a graphical presentation of return on investment; cumulative cash flow; and payback period, both simple and discounted. The model calculates petroleum displacement, both annual and cumulative, and annual greenhouse gas reductions, which it displays based on the input provided.
VICE 2.0 is user friendly and publicly available on the Alternative Fuels Data Center website at www.afdc.energy.gov/vice_model.
A recently published NREL report, “Building a Business Case for Compressed Natural Gas in Fleet Applications,” describes the capability of VICE 2.0 and explains how the model estimates the business case for decision makers considering a switch to CNG. The report is available at www.afdc.energy.gov/publications.
The report is divided into two main sections. First is an overview of VICE 2.0 that establishes the default values used by the model in a “base case” assessment. These values attempt to represent the most typical parameters affecting the financial performance of CNG projects, including investment type, tax exemption status for the fuel, and operations and incentives for hypothetical, base-case vehicles.
As explained in the report, VICE 2.0 allows decision makers to categorize CNG projects as vehicles and infrastructure or vehicle acquisition only. Investments for vehicles and supporting infrastructure can be staggered across a 20-year project timeline, and vehicle investment may be made independently from infrastructure investment.
The second part of the report explains how fleet operators should examine the specific operating parameters of their fleets, which may be significantly different from the generalized base case. Th is gives fleet operators a starting point, demonstrating how changes to the operational parameters of the model’s base case, like fuel cost and vehicle miles traveled, affect the profitability of the project.
The report advises caution when making independent vehicle and infrastructure investments. Even if a project shows potential with respect to the investment metrics, it is important to ensure that the infrastructure capacity will meet the fueling demands of the fleet. VICE 2.0 provides a quick graphic check for this situation.
In terms of economic soundness, most projects of this type are judged on the basis of net present value, return on revenue and payback period. The report provides a short tutorial of each of the indicators, and VICE 2.0 can help evaluate financial viability based on various factors, such as fleet size, fuel consumption, and station and vehicle costs.
As illustrated throughout the report, subsidies and tax credits can have a tremendous positive impact on project profitability, especially for projects that involve vehicle and fuel purchasing. Fleet managers can track the availability of CNG incentives through their local Clean Cities coordinator, whose name and information can be located at www.afdc.energy.gov/cleancities/coalitions/coalition_contacts.php, or through the Alternative Fuels Data Center website, www.afdc.energy.gov/vice_model.
Determining the financial soundness of any investment is an important fi rst step for any decision maker. Th e VICE 2.0 model and the report, “Building a Business Case for Compressed Natural Gas in Fleet Applications,” are uniquely designed for fleet managers considering an investment in CNG and can help ensure wise investment decisions about CNG vehicles and infrastructure.
Other online resources for fleets considering CNG, including case studies, are www.afdc.energy.gov/case, the Alternative Fuels Data Center, www.afdc.energy.gov, EERE Clean Cities, www1.eere.energy.gov/cleancities, and the Energy.Gov website, www.energy.gov.
Information provided by NREL.
Vehicle Infrastructure and Cashflow Evaluation (VICE 2.0) helps fleets evaluate CNG investments.
Using your fleet-specific data on
- Number of vehicles
- Vehicle types
- Fuel use
- Vehicle incremental cost
- Annual vehicle miles traveled
- Planned vehicle-acquisition schedules.
VICE calculates and displays
- Return on investment
- Payback period (discounted and simple)
- Annual greenhouse gas savings
- Fuel capacity and usage.
VICE covers the following vehicle types:
• Transit bus
• School bus
• Trash truck
• Paratransit shuttle