Natural Gas Trucking is Inevitable

This morning brings news that General Electric and Clean Energy have enetered into a deal under whick GE will sell two natural gas liquification plants to Clean Energy. GE is also financing the sale which will total about $200 million. Clean Energy will use the LNG produced to supply the filling stations that are part of its "natural gas highway", a string of locations across the country at which natural gas vehicles can refuel.

Many folks will just look at this as another move of little importance, but this deal has great significance way beyond the $200 million involved. First let me say that $200 million is significant in and of itself, so don't send email or write comments telling me that..please.

The importance of the deal is that General Electric is putting at risk this huge amount of money on a sale to a company that is unlikely to succeed if the transition to natural gas vehicles never takes place. That means that GE is now reasonably convinced that the conversion to nat gas is a done deal. One can criticize the management of GE for all sorts of things, but no one believes that it would put a fifth of a billion at risk unless it believed that the deal would be a success.

The truth is that the entire natural gas vehicle infrastructure and marketing model is coming together faster and faster. Clean Energy itself announced the other day that it remains on schedule for the roll out of its filling stations across the country. It also has signed more companies to deals testing some of their fleets of trucks on natural gas. The Cummins-Westport engine for long haul truckers is due out in February and recent reports has confirmed that the roll out is on schedule.

Once all this has occured, basic economics will move the conversion to natural gas forward. After all, by using natural gas, a long haul trucker can reduce its cost of fuel per truck by a minimum of 25%. That is an enormous savings. Further, if some truckers convert, the cost advantage that they will achieve will quickly force their competitors to make the transition just to keep up.

It is worth keeping in mind the difference between the flop which is electric vehicles and the looming success of natural gas vehicles. Electric vehicles cost substantially more than gasoline or diesel powered vehicles. The cost differential is so great that the fuel savings achieved do not make it up. Further, the operation of the electric vehicles has a great number of shortcomings. For example, the Chevy Volt will only go 28 miles on an electric charge. Even heavy subsidies from the government has not brought success to the electric vehicle market. On the other hand, natural gas vehicles make economic sense; they cut the costs of operation to such a great extent that any additional cost for the vehicles is made up within the first year of operation. Even without government help, the move towards these nat gas vehicles is proceeding apace.