5 Synergies with land transport

Natural gas for ship propulsion in Denmark

5.1 Overview

Natural gas as a fuel in land transport is not a futuristic vision – it is a well-proven, developed, and reliable technology that has already entered the market in Europe. In Europe, most natural gas driven vehicles run on CNG. Natural gas is used for both commercial and private use. The commercial use is mainly for urban services, e.g. public transportation and garbage collection services. Political and regulatory support is a common feature for countries with natural gas driven vehicles.

LNG is particularly suitable for large and energy intensive usage. LNG in land transportation has not kicked off in Europe, but is expected to play an increasing role in the natural gas fuel market in future.

In this chapter, we will first describe European experiences with natural gas as a fuel in land transport. We will see that natural gas as a fuel has been embraced as a proven and well-established technology applied in private as well as in commercial vehicles. Then, different views concerning the Danish land transport will be presented. We will learn that natural gas is not yet being used in Denmark, mainly because of higher cost and not so much because of unwillingness, unfamiliarity, or operational concerns with the technology. The cost problem can be solved by a political solution that favours natural gas as a fuel over regular fuels, thus turning natural gas into an attractive alternative. Finally, as can be seen from the conclusion, there exist synergies between the shipping industry and the land transport with regard to the use of natural gas. Some harbours may identify synergies that will help increase the economic benefit of natural gas as a fuel. However, the best synergy arises when both sectors use natural gas in that it will influence the political attitude towards natural gas as a fuel.

5.2 Experience with natural gas in land transport

5.2.1 Natural gas as a fuel in Denmark

Natural gas driven vehicles for commercial or private use have not yet been seen in large scale in Denmark.

Denmark has had a limited number of Liquefied Petroleum Gas (LPG) driven vehicles. The commercial use of LPG within the Danish transportation sector had its peak with more than 250 busses in the Copenhagen area. However, today none of the LPG busses are left in operation as LPG has been outdone by diesel engines due to the better efficiency and cost saving.

Denmark has politically to a large extent focused on promoting electric cars instead of gas driven vehicles.

5.2.2 Natural gas as a fuel in Italy

As of December 2009, Italy has the largest number of natural gas powered vehicles in EU-27 with more than 670,000 vehicles running on natural gas. In fact, Italy has more than half the number of natural gas driven vehicles in Europe. Italy is also the country with the second highest share of natural gas powered vehicles in EU-27 (after Bulgaria) with about 1.7% of the total number of vehicles running on natural gas. The many natural gas vehicles can fuel at any one of Italy’s 630 public fuelling stations that offer CNG.

Italy has introduced a “Cash for Clunkers” scheme by which a subsidy of EUR 1,500 is paid when scrapping an old car in return for a new. An additional EUR 1,500 can be obtained if the old car is substituted with a new CNG or LPG powered car. This amount is increased to EUR 2,000 if the car emits less than 120 g/km. A similar scheme is in place for commercial vehicles. Also Italian tax on CNG fuel is low - see below. All in all, CNG powered vehicles in Italy are heavily subsidised also for private consumption.

Figure 51 Comparison of Italian fuel costs
Figure 5‑1 Comparison of Italian fuel costs^[31]

The Italian car manufacturer FIAT offers a wide range of natural gas powered vehicles in which the natural gas fuel tanks provide the same kind of safety as similar petrol fuel tanks. As such, the domestic car industry has embraced natural gas as an alternative fuel.

Figure 52 Example of FIAT vehicles powered by natural gas
Figure 5‑2 Example of FIAT vehicles powered by natural gas^[32]

In Italy many busses used for public transportation run on natural gas and Italy has a total of 2,100 natural gas urban busses in 50 different towns. In addition, 1,200 CNG trucks are in operation in Italy, mainly in garbage collection services.

5.2.3 Natural gas as a fuel in Germany

In the course of few years, the number of natural gas powered vehicles in Germany has grown to 85,000. The development was sparked off by a rapid development of a fuelling station network with more than 800 fuel stations providing CNG. The growing number has also been a success due to the fact that the German authorities has promised to keep natural gas fuel at reduced tax up to 2018, thereby guaranteeing an economically beneficial alternative to traditional fuels. In addition hereto, also the local authorities have advocated for the promotion of natural gas fuelled vehicles, e.g. taxis and school busses.

Germany has around 1,300 busses and 450 heavy duty trucks running on CNG, all operating in urban services. The German car manufacturing industry has responded to the increasing demand of natural gas fuelled vehicles by offering a variety of models with CNG-driven engines for both the passenger car segment and for light duty commercial vehicles.

5.2.4 Natural gas as a fuel in Sweden

With around 23,000 vehicles in Sweden being fuelled by natural gas, Sweden is among the countries with the most natural gas powered vehicles in Europe. However, the number of vehicles corresponds to only 0.5% of all vehicles in Sweden.

Sweden’s development in this respect is remarkable, since the only natural gas transmission grid is located in the south-western part of Sweden stretching from Malmö to the northern part of Gothenburg. Consequently, trucks are used to distribute CNG to gas stations throughout the rest of Sweden to ensure the availability of natural gas. The Swedish development is to a large extent due to governmental support to local bio-gas facilities, combined with other incentives for those operating and owning a natural gas driven vehicle (e.g. free parking in many cities).

There are today 850 busses and 400 heavy duty trucks on natural gas in Sweden. The public bus transportation system in Malmö and Helsingborg is operated by CNG driven busses.

5.3 Sector’s view on natural gas as fuel

The commercial land transport sector can broadly be divided into three categories i) hauling (trucks) ii) road person transport (busses) and iii) railways. Relevant market participants have been interviewed on the subject as outlined in Section 5.5. Below, a summary of each sector’s view and position on natural gas as a fuel is reflected.

5.3.1 Hauling

Availability of fuel is vital for any transport carrier or long haul company. A large distribution network of natural gas in all of Europe is therefore necessary in order to make it attractive for transport carrier companies to use natural gas powered trucks instead of diesel powered trucks. However, the infrastructure is not yet in place, so it will take some time before the natural gas powered trucks will have a dominant position.

However, there has recently been much activity in the area. For instance, Volvo Trucks have since 2007 developed natural gas driven trucks, ready for commercial release in 2011. The trucks are dual-fuel, such that they also can run on diesel, engaging the concern described above regarding the not fully developed natural gas network.

The Transport Department of the Danish Chamber of Commerce (Dansk Erhverv), which is the professional association of transport carriers in Denmark, is generally positive towards natural gas as a fuel and sees it as a possible future fuel for their business. However, they stress that the competitiveness of Danish companies must not be negatively affected.

5.3.2 Road person transport

There are basically two types of bus transportation, public transport and chartered coaches. Companies operating charted coaches share the same inherent interest as the road cargo transport, namely that the infrastructure is in such a state that their busses can be fuelled whenever needed, regardless of where in Europe they find themselves. This is a major reason why coaches will not switch to natural gas – the infrastructure throughout Europe must be in place to support a system of natural gas driven busses.

Public transportation is characterised by operating routes within limited geographic areas and gas facilities can thus easily be built on a city-by-city basis. As part of the contract negotiations between the transport authorities (i.e. the municipalities) and the companies that operate the bus routes, specific fuel requirements can be incorporated as part of the contract. Any additional costs in relation to the operation of natural gas busses should be carried by the transport authorities.

Some bus operators have participated in tenders proposing to use natural gas as fuel, but have lost these tenders due to the extra cost. As the transport operators have included the extra cost of natural gas powered operations in their tenders, the decision lies with the transport authorities rather than with the operators. In general the operators consider CNG busses a mature technology and are interested in alternatives to the traditional fuels. Some Danish operators have gained experience from CNG powered operations in other countries, including Sweden.

The operating cost of natural gas driven busses is higher than diesel powered busses. Examples of open tender procedures with options for both natural gas and diesel powered bus operations have resulted in a 10-20% higher price on natural gas operations (this price difference cannot be generalised into a systematic price difference). The transport authorities consider CNG busses operationally reliable and have expressed no reservations towards natural gas as a fuel.

Transport operators and authorities share the belief that the tax structure on natural gas as fuel is essential in order to promote natural gas driven public bus transport.

5.3.3 Railways

There is little experience with natural gas in relation to railways. The International Union of Railways (UIC) has funded a project in which railway energy saving technologies are being analyzed. The study^[33] they have performed on natural gas is rated “interesting” and has a mid-term time horizon. Thus, the technology is not yet perceived fully developed, contrary to the technology for vehicles and ships. In the study, Deutsche Bahn indicates four necessary success criteria for a wide-spread introduction for natural gas propulsion:

Availability of natural gas engines in higher power range for locomotives as well as for under-floor integration
Further development of gas engine technology to improve efficiency at low load
Reduction of higher costs of gas technology compared to diesel technology
Development of supply infrastructure
Low price for natural gas and long-term calculability (taxation)

In Denmark, security issues regarding the railway tunnel between Zealand and Sprogø pose particular concern with regard to trains with natural gas propulsion. Hence, natural gas in relation to railways is not yet under consideration and remains currently on an exploratory stage.

5.3.4 Manufactures

Various models of both natural gas driven busses and trucks are already available. However, the price of a natural gas driven bus is relatively high. For instance, the list price of a city bus like the MAN Lions City A21 (low floor) is approximately DKK 1,800,000 (242,000 EUR) for the diesel version as opposed to DKK 2,100,000 (282,000 EUR) for the gas version equipped with the in Denmark required light weight tanks.

Diesel and gas engines have very similar levels of particles; the main benefit of gas busses is therefore the reduction in CO₂ emissions.

The main obstacle for a serious introduction of natural gas as a fuel is the Danish taxes.. Also the current Danish regulation on axle weight does not allow for gas (and hybrid) busses. Danish regulations differ from other European countries, but the regulations are expected to be changed soon in connection with the impending introduction of hybrid busses.

Figure 53 CNG Bus – The top of the bus stores the tanks with CNG. Source: MAN Nutzfahrzeuge – www.man-mn.com
Figure 5‑3 CNG Bus – The top of the bus stores the tanks with CNG. Source: MAN Nutzfahrzeuge – www.man-mn.com

5.4 Synergies in transport using natural gas as fuel

The synergies can be divided into two classes. General synergetic effects, arising from the maturing of use of natural gas as fuel, and specific synergetic effects related to the specific facilities in operation.

5.4.1 General synergetic effects

The main synergetic effect between natural gas as a fuel in shipping and in land transport is the increase in the awareness concerning the environmental and economical benefits which could influence politicians in a direction more positive towards natural gas as a fuel.

Provided that the fuel for land transport and shipping will be processed in the same way (i.e. that both industries use either CNG or LNG) there may be additional benefits. A large and competitive market of a certain fuel type will increase reliability of supplies and put a downward pressure on prices due to competition. Further, a large market for supply of facilities and maintenance hereof will increase competition and knowledge of the technology. This will obviously benefit both land transport and shipping. Such synergies should be regarded as either long or medium term advantages.

As LNG in hauling and railways has not yet been implemented on a large scale in Europe, it is unlikely that comprehensive synergies with LNG in shipping will take place in the short term.

Should LNG be applied in the shipping industry, it will help the implementation of LNG in the transport sector as well for several reasons:

Danish rules and regulations on LNG will be in place
General knowledge and experience of using LNG as a fuel will exist
Existing LNG import terminals, contracts and/or LNG facilities will be in place

Should LNG be taken up by the land transport industry, it will most likely be an advantage for the shipping industry using LNG since an increase in LNG volumes most probably will decrease the average cost in connection with the import and handling of LNG. Finally, a large CNG market in Denmark will increase the profitability of CNG exporting facilities offshore, e.g. utilizing stranded gas from remote offshore fields in the North Sea.

5.4.2 Specific synergetic effects

When establishing a CNG or LNG facility, all possible synergetic effects should be sought. Often with these facilities, the economics of scale are such that the average unit price decreases significantly as the volume handled increases. Thus, facilities running at a high capacity will generally have lower per-unit cost. The sharing of an LNG or CNG facility between land and sea transport is therefore favourable. However, the economic net benefits of a shared facility will depend on a number of conditions and must be evaluated on a case-by-case basis. For instance, harbours with no access to the natural gas distribution network will find cooperation with a LNG facility more attractive than harbours connected to the existing distribution system.

Since CNG can easily be installed locally, it will not necessarily be advantageous to have one CNG facility supplying both land transport and marine. However, in certain areas where harbour and land transport terminals are located close to each other, operational synergetic benefits may be present. Special attention is drawn to LCNG-facilities, which receives LNG and processes it to CNG. As such, a LNG receiving facility can support CNG fuelling stations in the surroundings, since LNG can be transported to these facilities by truck. Moreover, such a facility can support the use of both CNG and LNG in land transport, as recently seen with the opening of a combined LNG and CNG road station in Abrera, Spain.

A promising example of a project seeking to exploit the synergetic effects of a LNG facility is found at Molslinien, which is considering changing to LNG use on their high speed ferries and are working with the bus company Abildskou Busses to share their planned LNG project, such that Abildskou can use the LNG facility at the harbour to fuel a natural gas driven coach.

Although technical synergies can be identified, the economic viability behind them should always be carefully addressed. As natural gas as propulsion has not matured in all sectors yet, many synergetic effects remain on the speculative state today.

5.5 Contributing parties

Conclusions throughout this chapter are based on Ramboll’s existing knowledge in combination with interviews of and information from the following market participants:

Movia	Transport authority
Arriva	Transport operator (Denmark and Sweden)
City Trafik	Transport operator
DSB	Railway operator
MAN Nutzfahrzeuge	Producer of trucks and busses equipped with hybrid, natural gas, or regular diesel engines
Volvo Truck	Producer of trucks and busses, natural gas/dual-fuel and regular diesel engines
Danish Chamber of Commerce	Transport Department. Professional association of transport carriers
Danske Busvognmænd	Professional association of bus carriers.
Abildskou Busser	Bus operator

In addition, information and data from Natural Gas Vehicle Association Europe (NGVA Europe) has been applied http://www.ngvaeurope.eu/.

Further, input from discussions at the workshop “Morgendagens Brændstoffer”, organised by Cleaner Shipping Partnership and the Transport Innovation Network on 31 May 2010, has been included.

5.6 Summary of synergies

Natural gas is a reliable fuel for both private and commercial vehicles and builds on a proven technology already implemented in many European countries. In other European cities natural gas powered vehicles for urban services, e.g. public transport and garbage collecting services, have proven successful. However, this success has been the result of a political will to support the use of natural gas fuel with subsidies or reduced tax. It is a commonly shared belief that lower taxes on natural gas are important for a successful implementation of natural gas driven vehicles in land transport.

There are technical synergies related to the facilities with LNG and CNG, yet the economic importance of them must be evaluated on a case-by-case basis. The main synergies between the two transport sectors take place on the political level where natural gas as a fuel could obtain better conditions if both sectors use the fuel. However, there could be significant operational synergies when using LNG in both shipping and land transport depending on the specific harbour in question.

[31] Source: NGV System Italia

[32] Source: Fiat

[33] The conclusions of the study can be found here: http://www.railway-energy.org/