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Tuesday, 10 July 2012 12:20

CNG station expands alternative fuel options in West Michigan

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CNG station expands alternative fuel options in West Michigan Courtesy photo
WYOMING — Fleet owners in search of a more sustainable alternative to petroleum fuels find the marketplace has few options that are both scalable and economical. That search has companies increasingly turning to compressed natural gas (CNG) as their fuel of choice.

Fleets in West Michigan now have more access to CNG with the addition of the region's third filling station in Wyoming. A multilayered partnership helped secure $1 million in grant funding from the American Recovery and Reinvestment Act to install the station at 450 44th Street at property owned by Louis Padnos Iron and Metal.

DTE Energy's wholly owned subsidiary MichCon Fuel Service Co. operates the public station, which the utility built thanks in part to a commitment from commercial recycling hauler UBCR LLC, which will be the station's primary user. MichCon and UBCR had a prior relationship because the recycler has a fleet of CNG trucks that use a MichCon filling station in Wixom, near Novi. MichCon also operates the other two CNG stations in West Michigan with locations in Grand Rapids and Muskegon.

Proponents base CNG's attractiveness as an alternative fuel on its similarity to diesel and gasoline applications, its comparable range and power, and lower emissions.

But with only 13 public CNG stations spread throughout the state, potential customers need to account for the relatively sparse distribution of fueling stations, which has turned off some companies with larger service areas extending outside Michigan, sources said. While the options for fueling stations is also limited, companies must also overcome the higher initial costs associated with buying CNG-ready vehicles or conversion kits. Business owners can either convert their vehicles and add additional CNG tanks at about $4,000 per tank, or buy new CNG-burning vehicles, which cost a premium compared to diesel-powered trucks.

UBCR bought 16 brand new semi trucks at a cost of roughly $150,000 per vehicle, about $50,000 more than a new diesel semi truck. Funds made available through the Ann Arbor-based Clean Energy Coalition helped the company offset the cost of replacing its entire fleet. UBCR also has a partnership with Ryder System Inc. for fleet maintenance.

As a recycling company, UBCR is not only interested in the expected fuel cost savings, but also in the environmental attributes of switching to CNG, said Jeff Schram, general manager of UBCR.

"There are a lot of companies out there now looking at ways to improve their environmental impact," he said. "(Recycling) is a good profitable business to be in, but we're doing this to contribute to the overall improvement of our environment."

Schram said UBCR burns about 350,000 gallons of diesel fuel per year. With the new CNG fleet, he said the company should save an estimated $300,000 this year in fuel costs. UBCR signed a 10-year fuel purchase agreement with DTE.

Schram said UBCR began looking at CNG as a viable option about two years ago. The company's desire to reduce its reliance on diesel fuel motivated it to consider a handful of options before eventually settling on CNG, he said.

The significant cost difference from diesel and the ability to lock in longer-term contracts to purchase fuel made CNG the right option for UBCR, Schram said. According MichCon's figures, CNG costs nearly 40 percent less than diesel at the pump and helps companies cut emissions by 70 percent or more. Also, since CNG burns cleaner than diesel, UBCR can realize savings with maintenance costs, Schram said.

"Even without the grant funding, this was a business decision we were going to make," he said.

After converting the fleet, UBCR needed to educate its employees about CNG's safety, Schram said. Many people unfamiliar with the fuel have misconceptions about it and how it reacts if the tanks leak or are struck in an accident, he said, noting CNG is safer than a traditional gasoline or diesel tank.

"For the most part it was a seamless transition for our drivers," Schram said. "It's the kind of learning curve you like to work with. Each of the drivers went through about an hour of training."

DTE and MichCon are betting that more companies will go through a similar analysis as UBCR. DTE expects to double its CNG sales this year, according to Jerry Norcia, COO of MichCon and president of the DTE Energy Group. Two years ago, just as DTE began to focus its efforts on CNG fueling stations, the company sold about 200,000 gallons of CNG fuel. The following year it sold 500,000 gallons.

"This year, we'll sell a million gallons, and we expect to sell two million next year," Norcia said.

Increasing demand has also driven engine manufacturers to get out in front of the new fuel technology.

Greg Boll, president of Cummins Bridgeway, a New Hudson, Mich.-based distributor for Cummins, said the company's next two engine platforms run on CNG; diesel versions will come later. The changing marketplace caused Cummins to reposition itself as an energy company, not just a diesel engine distributor, Boll said.

"You can expect to see a long line of products that use this fuel," he said.

Natural gas fuels are putting people to work in Michigan, from drilling to production to the drivers who service the stations, said Sean Reed, founder and executive director of Clean Energy Coalition.

"Because (the fueling station) is open to the public, it is going to serve as a gateway for other fleets to get involved in the CNG game in a way that might have been prohibited to them in the past," he said. "With this project, UBCR and DTE Energy are positioning themselves solidly as industry leaders by using domestically produced CNG in place of foreign oil."

Rodney Knudsen, senior engineer for DTE, said the utility is looking at nearly a seven-year cost-recovery period with the new station. CNG stations have more upkeep than diesel stations because they require more frequent maintenance, he said. The company's strategy for building more stations hinges on finding primary users like UBCR that are willing to sign on to a 10-year contract, he said.

"Initially, stations will get built where I can find a dedicated fleet that can help subsidize the cost of the stations," he said. "Once the public and others start coming and create some more capital, then I can go and build stations on a more exploratory basis."

AT&T, which runs a fleet of CNG vehicles in the region, now uses the station and Knudsen said other fleets are starting take an interest. More users at the station also helps UBCR because the company gets a rebate for the amount of natural gas others use, he said.

 

Read 2834 times Last modified on Saturday, 28 July 2012 18:26

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