Reuters: Regulatory News: COLUMN-Will US federal fleet help alternative fuel switch? Kemp

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COLUMN-Will US federal fleet help alternative fuel switch? Kemp May 25th 2012, 15:19 Fri May 25, 2012 11:19am EDT By John Kemp LONDON May 25 (Reuters) - Widespread use of alternative motor fuels has been hampered by lack of fuel distribution infrastructure, despite strongly favourable economics for alternatives to gasoline and diesel, and a range of financial incentives offered by U.S. federal and state governments. The U.S. federal government's commitment to alternatives, coupled with renewed interest among large commercial fleet operators, encouraged by the big spread between cheap natural gas prices and the high cost of petroleum-derived fuels, could provide the critical mass of demand to support the roll out of a nationwide alternative fuel system. But effectiveness will be maximised only if federal agencies and private fleet operators settle on a relatively limited number of alternative technologies, at least in particular areas, rather than fragment their consuming power across the full range country wide. Early indications are not hopeful. ALTERNATIVE FUELLED VEHICLES Federal law defines alternative fuel vehicles broadly to include both those running on alternative fuels such as compressed natural gas (CNG), liquefied natural gas (LNG), hydrogen and high blend ethanol (E85) as well as certain qualifying hybrid electric vehicles run on a combination of regular petroleum and electricity (42 USC 13211). In 2010, there were nearly 1 million vehicles running on alternative fuels in use across the United States, according to the Department of Energy's Alternative Fuels and Advanced Vehicles Data Center, up from less than 400,000 a decade earlier. In addition, more than 2 million hybrid electric vehicles had been sold over the same period. Alternative fuelled vehicles are still a tiny minority of vehicles on U.S. roads, but the number is increasingly rapidly. The problem is that few are actually filling up with alternatives to gasoline owing to the lack of outlets actually selling alternative fuels such as E85 or LNG. There were just 10,000 fuelling stations dispensing alternative fuels in 2011 (up from less than 7,000 in 2010). Of those, a little over 3,300 were supplying electricity (six times as many as in 2010 making this the fastest growing segment of the alternative fuel infrastructure). But less than 1,000 dispensed compressed natural gas, and just 45 dispensed LNG. Even E85 was available from fewer than 2,500 outlets. In contrast, there are almost 160,000 retail gasoline stations across the country, and many more private refuelling facilities owned by large fleet operators such as UPS, transit systems, and the federal government. Availability problems are compounded by the uneven distribution of alternative fuelling stations. There are lots in California, the nation's biggest vehicle market, and another concentration in the ethanol-producing states of the Midwest such as Illinois, Indiana and Minnesota, but not many in the rest of the country. Drivers in Ohio have access to just 74 dispensing E85, nine providing CNG, and none selling LNG, according to the Energy Department. The result is that even when cars are capable of running on alternative fuels, many are actually filling up with regular gasoline and diesel, defeating the object of having them in the first place. ACHIEVING CRITICAL MASS Commercial incentives to adopt alternative vehicles (including electric hybrids) have never been greater, especially for fuels derived from natural gas, as oil prices have remained stubbornly stuck above $90 per barrel while natural gas has slumped to its lowest in more than a decade, and seems set to remain low owing to fracking. The challenge for alternative fuel advocates and policymakers keen to reduce dependence on petroleum-derived fuels is how to encourage the uptake of alternative fuelled vehicles without the infrastructure in place and how to incentivise the rollout of the infrastructure without the vehicles (the familiar coordination problem). One obvious solution is to encourage take up by operators of large vehicle fleets who could help provide the critical mass of consumption that would justify large-scale investment in an alternative fuelling infrastructure. Some large fleet operators are already converting to the use of alternative fuelled vehicles, according to an excellent analysis in the Wall Street Journal on Wednesday ("Will truckers ditch diesel? Surplus of natural gas prompts some fleets to switch; lack of fuelling stations" May 23). The Journal cites conversion and purchasing programmes at garbage collector Waste Management Inc, UPS and AT&T. But the biggest boost to alternative fuels could come from the federal government, which is the largest fleet operator of all. FEDERAL GOVERNMENT FLEET The federal government owns more than 650,000 vehicles, across civilian agencies (250,000), the postal service (212,000) and the armed forces (190,000). The federal fleet inventory includes 250,000 passenger cars and over 400,000 trucks, as well as nearly 10,000 other vehicles. The vast majority are in the United States itself, according to the General Services Administration (GSA). Federal vehicles drove 5.2 billion miles in 2010, about 7,850 miles each, and consumed the equivalent of 414 million gallons of gasoline. The fleet used 322 million gallons of actual gasoline (accounting for 77 percent of the total) and 75 million gallons of diesel (18 percent), with just 8 million gallons (2 percent) each of low-blend biodiesel and E85. In fact the government has a large number of alternative fuelled vehicles. Of the total stock of more than 650,000 vehicles in the federal fleet, almost 160,000 (23 percent) could run on E85, but most were actually run on conventional gasoline and low ethanol blends, mostly because appropriate fuelling facilities were not available. Another 85,000 were diesel hybrids and 10,000 gasoline hybrids, with less than 6,000 able to run on CNG and just 7 on LNG, according to GSA's annual Federal Fleet Report. But it could all be about to change. In October 2009, President Barack Obama signed Executive Order 13,514 which directs GSA to issue government-wide guidance on fleet management, including acquisition of alternative fuelled vehicles and purchase of alternative fuels, improvement in fuel economy and limits on the overall size of the fleet as well as cutting miles travelled and other strategies to reduce petroleum use. That has now been backed up by a Presidential Memorandum on Federal Fleet Performance issued in May 2011. It directs that by the end of 2015 all new light duty vehicles purchased by the federal government must be alternative fuelled vehicles, and they must be operated on the fuel for which the vehicle was designed. The memorandum also instructs the Energy Department to work with the United States Postal Service to evaluate the best alternative fuels for the post office fleet. Policy is developed and enforced by the GSA and the Federal Fleet Policy Council (FEDFLEET), which brings together representatives from agencies and functional bureaus that operate federal motor vehicle fleets. Uptake of alternative fuelled vehicles has been swift, even if most of them are E85 vehicles (up from 96,000 to almost 160,000 between 2006 and 2010), and not yet actually running on alternative fuels. But the federal fleet turns over relatively rapidly. The average age of civilian passenger vehicles is just 4.4 years, while for trucks it is 6.8 years. For all vehicles in the federal fleet, military as well as civilian, the average age is 10.5 years (basically reflecting the much greater average age of postal service vehicles at 15.5 years). The federal government buys more than 60,000 vehicles per year. Almost half were E85 vehicles in 2010, up from a third in 2006. If agencies comply with the president's direction, almost the entire fleet except postal vehicles will switch to alternative fuels by 2025. CONCENTRATION IS CRITICAL Potentially, the conversion of the federal fleet, as well as large private fleets, could provide the critical mass for a more extensive roll out of the alternative fuel delivery network. But concentration is crucial, and it may prove difficult to achieve. While private fleet operators contemplate converting to gas (either CNG or LNG), the federal fleet is converting to E85. It has actually been buying fewer CNG vehicles over the last five years (purchases dwindled to just 60 in 2010 from 243 in 2006) and there is no widespread LNG conversion programme in place yet. The postal service might be the most promising place to start but the agency's financial problems present a tough barrier. The federal government and big private operators will probably support roll out of private fuelling stations, at least initially. That could still help build out the necessary marketing and distribution infrastructure, but only if there is some rationalisation of the alternatives supported in each region. Link this Share this Digg this Email Reprints

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