The Canadian NGV Market – Building the Market

The second article in our series looking at the Canadian NGV Market

While natural gas prices may be relatively low - and look likely to stay that way for the foreseeable future – the complexity of converting to natural gas means that the market is not necessarily developing as quickly as many would like, despite additional benefits such as improved emissions standards and a more environmentally friendly image.

Natural gas vehicles is perhaps a market where a large number of early adopters are needed – not to mention a lot of investment. Here, we look into some examples of how existing players are exploring ways of incentivising these early adopters, and hear from some industry stalwarts on how they are working together to create conditions where companies can enter the segment with confidence.

Seeding the Market

The energy company Fortis BC has put a lot of effort into building natural gas capacity to serve fleets across Canada, alongside other firms such as ENN Canada. In order to do this and help incentivise NGV conversions, Fortis has worked closely with local government in British Columbia and has used its own funding to provide grants, with the proviso that investment feeds back into the region, Fortis BC Energy Products and Services Manager Arvind Ramakrishnan told FC Gas Intelligence.

“Our LNG facilities were built for peaking but we’re now trying to find other uses for the fuel, especially for transportation, marine and mining as well as remote communities,” Ramakrishnan said.

The incentive program seems to make good business sense for Fortis. Not only is it generating its own revenue stream through the stipulation that gas must be purchased from Fortis stations but it ensures demand matches the company’s gas supply as near to capacity as possible.

“At a time when our use per customer is declining because of the thermal efficiency of housing stock, NGV is a significant opportunity to fill the pipe with a flat load because it’s not seasonal. This is very important for demand management and asset utilisation, said Ramakrishnan. “If we can keep the pipes full the net impact is reduced delivery rates. It’s a very strong business case for us.”

Building Partnerships

In Canada, a good example of partnership building is Ferus Natural Gas Fuel’s November 2013 agreement with ENN Canada, which has seen the companies merge their respective operational expertise and station development and fleet knowledge.

The agreement will involve the construction and operation of two LNG liquefaction plants in Vancouver, British Columbia and Edmonton, Alberta, serving the trucking sector as well as providing fuel for marine, rail, mining and exploration. The scalable facilities will produce 100,000 US gallons per day of LNG, with the first product expected in early 2016. Ferus will build and operate the plants while ENN Canada is committing to putting a significant amount of the fuel through its proposed fuelling stations.

Partnerships such as this are necessary to build confidence and create self-sustaining pockets of infrastructure that will help the country reach a tipping point, said Chris Hoad, ENN Canada Marketing Manager.

“It’s back and forth all the time. We have a sizeable capital investment. We’re working one on one with fleets on major routes like Windsor-Montreal which handles 1,000s of trucks a day. If a fleet says put it in the ground, we will come.”

Education

“Fleet managers have a lot on their plate,” says Alicia Milner, CNVGA President. “Natural gas takes effort to understand and fleets need to plan ahead and work out how the use of natural gas is going to affect their operations and organisation. It’s about understanding individual fit and ROI. At the end of the day, natural gas can help fleets have a greener operation, while also remaining competitive.”

An understanding of the economics of converting to natural gas – including the issues of fuel savings, fuel access and the affordability of compliance with emissions regulations – is something that fleet managers require to build a business case, adds ENN’s Chris Hoad.

“We have to remember the entire ecosystem. Comparing the gas prices is to forget the total cost of ownership. The truck, the tank, the engine as well as finance companies plus maintenance and shops need to be retrofitted. Not in all cases will the gas price cover all the pieces of the puzzle.”

An example of firms coming together to overcome these difficulties is Enbridge Gas Distribution Inc. working in concert with the CNGVA, Union Gas and others to support Regional Hubs reaching out across Canada. The aim is to provide education, information and encourage dialogue between interested parties, and bring clients, OEMs, utilities and other supporting players together to help demystify natural gas as a transportation fuel.

Meanwhile engine manufacturers are taking up the challenge, and are informing and educating fleet consumers who are looking to make the switch from diesel to natural gas. Cummins Westport Inc. has developed a five-step playbook that takes the fleet manager from initial assessment through to deployment.

One very positive aspect of natural gas vehicles, and a point that comes up again and again when talking to fleet managers and executives, is the fact that there is a high level of collaboration and exchange of ideas within the sector – even between organisations who may well view each other as competitors. And collaboration between all stakeholders is something seen a prerequisite to success when developing an NGV fleet.

Despite the strength of the argument for natural gas as a transportation fuel, the market still needs to be approached on a case by case basis. Actors from government to associations and leading companies in the space such as utilities and OEMs are pulling together to provide the necessary information and guidance, but consultation alone may not be enough until the tipping point is reached.