Within the Industry

GROWING GALLONS WITHIN THE INDUSTRY

Propane autogas is the leading alternative fuel in world — powering more than 25 million vehicles worldwide. The U.S. propane-autogas-powered vehicle market lags in acceptance with just over 200,000 vehicles. The propane industry fleet accounts for a small, but growing, percentage of the overall population. Thanks to recent improvements in propane autogas fuel system technology, a growing number of propane marketers are choosing propane autogas rather than diesel and gasoline powered engines when they specify and purchase vehicles. The original objective of this paper was to define the status of converting the propane industry’s fleet to our fuel and identify barriers that were obstructing growth in this industry and others. In this edition, we want to share an industry status update as well as recent successes in the expansion of propane autogas. Today, more marketers are choosing propane autogas for their fleets. As this report outlines, propane autogas is providing significant overall total cost-of-ownership (TCO) savings that translates into profits for all marketers regardless of fleet size. PROPANE AUTOGAS VEHICLES of the current propane vehicles requires an investment, but that Like other transportation markets, the propane industry follows investment is paying off in many ways. Pickup trucks, manager and standard practices when specifying and purchasing class 1-8 service vehicles, bobtails, and cylinder rack trucks all are available vehicles to safely transport payload, optimize vehicle performance, from multiple brands in both dedicated and bi-fuel models. These and provide the highest possible returns for their stakeholders. options provide comparable performance to conventional fuels with Propane autogas is becoming the choice for many marketer fleets a much lower TCO and much quicker ROI. when the preferred class 1-7 propane autogas vehicles meet the need for their required application. TODAY’S PROPANE AUTOGAS FLEET In some cases, especially involving class 7 and 8 vehicles, propane Propane marketers own and operate bobtails, transports, service autogas cannot always provide a viable solution. For example, with trucks, rack trucks, and other light- to medium-duty vehicles (LDV) the propane industry trending towards larger capacity (3,499–5,500 — all of which are candidates for replacement with propane-autogas- gallon) bobtails with heavier payloads, a viable propane autogas powered models or propane conversions. Based on modified 2016 option is not yet available. Outside of these exceptions, propane data prepared by ICF International, the changeover of these vehicles marketers can now purchase certified OEM and aftermarket propane offers a significant opportunity for the propane industry to increase autogas vehicle equipment that fits most applications. annual demand and will increase with each adoption. Industry fleet data reveals similarities between propane and other To calculate the 2016 load growth potential, ICF estimated the total industries. Despite recent advancements in propane autogas fuel number of vehicles owned and operated by propane marketers based system technologies, most propane marketers continue to specify on available industry data and the LP Gas “Top Retailers” survey. diesel- and gasoline-powered engines. These marketers expect Service trucks, and rack or cylinder exchange trucks, were estimated diesel-like durability for their engines and are reluctant to believe based upon industry data published by the major marketers. that propane autogas models can provide comparable performance. For LDVs, ICF assumed at least one vehicle per marketer, scaling Plus, some standard features for the propane industry — such as LDV ownership for the larger marketers based on normal business transmission, PTO, and brake options — are not available in today’s parameters. Using that total, ICF estimated average miles per class 6 and 7 propane autogas offerings. gallon and total miles driven per year to calculate the total potential Yet some marketers are successfully operating daily with the current propane consumption. For 2017, PERC updated ICF’s 2016 numbers class 1-7 options. They’re moving away from traditional thinking using the latest LP Gas Top 50 Survey Results; the table below shows for the opportunity of reduced total cost-of-ownership. In turn, the results of the analysis. that choice is increasing their gross profit margins and making them more competitive in their respective markets. Acceptance

POTENTIAL PROPANE INDUSTRY DEMAND FOR PROPANE AUTOGAS IN VEHICLES OWNED BY PROPANE MARKETERS (ESTIMATED)1

Total # of Vehicles Average Miles Average Propane Average Gallons per Total Potential Propane Owned by Propane per Year MPG Vehicle Per Year Consumption (Gallons) Marketers (2017)

Bobtails* 18,704 30,000 4 7,500 140,280,000

Service Trucks ** 20,651 20,000 8 2,500 51,627,500

Rack Trucks** 2,184 30,000 4 7,500 16,380,000

Other LDVs*** 9,132 30,000 11 2,727 24,905,454

Total Vehicles Owned by Propane 50,671 233,192,955 Marketers

Source: ICF and LP Gas “Top 50” Survey Results (2016). *Based on LP Gas “Top 50” survey data, scaled to the full industry. ** Based on limited industry data available. *** No propane industry-specific data available. Estimated by ICF based on normal business parameters.

© 2018 by the Propane Education & Research Council SERVICE TRUCKS Limited data is available on class 2-5 service trucks. PERC estimates the total population to be 20,651 based on ICF and LP Gas data. Service trucks typically are driven the least of all the vehicles — up to 20,000 miles per year. With an average propane consumption rate of eight miles per gallon, purchasing OEM or converting service trucks to run on propane represents 2,500 gallons of propane demand per service truck each year. Overall service truck conversions could total over 50 million gallons of propane demand per year for the industry.

TOTAL CLASS 2-5 POPULATION BOBTAILS As the primary transport vehicle owned by propane marketers, bobtails account for the largest fleet expense: fuel. According to 20,651 the survey, the top 50 marketers own and operate a total of 8,218 bobtails. Applying this across the industry and using ICF’s 2016 ADDS UP TO estimates, PERC calculates the total bobtail population to be about 18,704. Bobtails travel up to 30,000 miles per year and have an average propane consumption rate of four miles per gallon. Each bobtail consumes approximately 7,500 gallons of propane per year. 50 MILLION In total, this translates to over 140 million gallons of increased propane demand from converting bobtails to propane internal GALLONS OF PROPANE DEMAND combustion engines.

RACK TRUCKS TOTAL BOBTAIL POPULATION OF Although data on the number and usage of rack or cylinder exchange trucks is limited, PERC estimates the total to be about 2,184. Rack trucks travel on average 30,000 miles per year at four miles per gallon. Therefore, each rack truck presents over 7,500 gallons of 18,704 potential propane demand growth, which equates to just over 16 TRANSLATES TO OVER million gallons added for the whole industry. LDVS There is no available data on population or consumption estimates for LDVs in the propane industry. To estimate LDV demand growth 140 MILLION potential, ICF calculated the 2016 population based on normal GALLONS OF INCREASED PROPANE DEMAND business standards. PERC updated ICF’s estimate for 2017. This technique resulted in a total population of 9,132 vehicles. Each LDV is estimated to travel around 30,000 miles per year at an average TRANSPORTS rate of 11 miles per gallon. This equates to a demand growth potential of over 2,700 gallons per LDV, or almost 25 million gallons Transports are not included in the Potential Propane Industry Demand for the entire industry. For Propane Autogas in Vehicles Owned By Propane Marketers (Estimated) chart because class 8 has been a limited focus market of Purchasing OEM or converting all bobtails, service trucks, rack PERC’s commercialization strategy, and there isn’t a class 8 product trucks, and LDVs owned by propane marketers is an overall demand available today. For the sake of comparison, the estimated transport growth potential of more than 233 million gallons annually. Current population is 2,176; PERC, using ICF 2016 calculations, estimates yearly U.S. retail propane demand for all markets is about nine billion that to be 3,830 for the whole industry. While transports only make gallons, so the conversion of industry fleet vehicles could be a 2.6 up a small percentage of the total vehicle population, they drive percent increase of total propane demand each year. Within the the most miles annually. Assuming that each transport travels up to domestic internal combustion engine market segment alone, ICF 50,000 miles per year and consumes propane at the rate of eight estimates current demand to be about 736 million gallons per year. miles per gallon, each transport represents 6,250 gallons of added Converting propane industry fleet vehicles to our own fuel could propane demand per year. That could add up to nearly 24 million increase demand in that market segment by over 30 percent. gallons for the industry.

© 2018 by the Propane Education & Research Council THE CASE FOR PROPANE AUTOGAS VEHICLES How do these calculations apply to each marketer? How can they benefit from the adoption of propane autogas? Let’s begin with performance and cost comparisons that are negatively impacting budgets and profits for many marketers today.

Diesel is the preferred engine fuel for many industries, including the propane industry. However, diesel engines are more complex and costly to own and operate. Here are a few well documented facts about the challenges with diesel engine and emissions technology today: • Diesel engines do not perform well in cold weather and, depending on the ambient temperatures, may not perform at all.

• Diesel engines require block heaters, which can significantly increase electric costs and are reliable only when drivers remember to plug them in each night.

• Diesel engines require the added expense of fuel conditioners to perform in the cold.

• Diesel engines with Selective Catalytic Reduction (SCR) systems require diesel emission fluid (DEF) that drivers Numerous OEM and certified aftermarket propane fuel systems must monitor during operation. are available to meet propane delivery and service needs today. PERC has partnered with Roush CleanTech, Freightliner Custom • Fleets that rely primarily on diesel-powered vehicles are Chassis Corp., Isuzu, ICOM North America, Alliance Autogas, and experiencing more downtime, increased maintenance and others to develop, certify, and commercialize dedicated and repair bills, and lost profits due to their reliance on a bi-fuel propane autogas fuel systems that can work for your familiar fuel. fleet. These options offer compelling business reasons for Unlike legacy engines that could idle unrestricted 24 hours a propane marketers to consider when contemplating to choose day, today’s diesels have maximum idle periods of five minutes. propane autogas for their fleet vehicles: Excessive idling increases emissions regeneration frequency and can create problems that can render a vehicle inoperable. Lowest total cost-of-ownership: Even when Failure to regenerate emissions as required will clog the diesel 1 conventional fuel prices are low, propane autogas particulate filter (DPF), de-rate the engine RPMs, and eventually saves fleet managers in fuel and does not require render a vehicle inoperable and awaits an expensive tow to the additional costs of diesel vehicles, such as fluids, the closest garage or dealership. These challenges don’t filters, fuels, and unexpected repairs. Propane autogas even address common issues created by the many sensors, vehicles are not flawless, however, numerous schools turbochargers, EGR valves, coolers, and other components. and businesses benefit from their reliable operation and realize savings year after year. Marketers increasingly are realizing that there is a proven, reliable, sustainable, and affordable fuel that eliminates all these Positive brand ripple effect: “Propane delivering headaches. Propane vehicles crank reliably, warm up quickly, and 2 propane” is a strong message and a great endorsement have no engine idle restrictions. They are enhancing profits for of your fuel. Marketers who choose propane autogas for fleets of all types. There are about 2,100 OEM propane-autogas- their fleets are demonstrating their confidence in the powered bobtails plus an unknown number of aftermarket fuel to their customers. conversions on the job nationwide. That’s about 10 percent of the industry’s delivery fleet using propane to deliver its own fuel.

© 2018 by the Propane Education & Research Council A GROWING LIST OF PROPANE AUTOGAS OPTIONS The propane autogas vehicle and certified fuel systems portfolio includes many respected OEM and aftermarket companies. From class 1-7, propane marketers have a growing number of vehicle and fuel system options from which to choose. For a complete list of certified fuel systems, go to propane.com/on-road-fleets.2

PROPANE AUTOGAS VEHICLES AND CERTIFIED FUEL SYSTEMS

Vehicle Type Propane Autogas Options

Bobtails Ford F650, Ford F750, FCCC S2G, Alkane Class 7

F250, F350, F450, F550, GMC 2500/3500, Ford Transit, E350, E450, Isuzu NPR-HD Service Trucks and Vans (Class 3-4 Truck), Greenkraft G2-G3-G3, multiple GM vehicles

Rack and Cylinder F650, F750, S2G, Isuzu NPR, Alkane Class 7 Delivery Trucks

F150, F250, F350, GM/Chevy 1500, 2500, 3500, GM Silverado/Sierra, GM Tahoe, Pick-ups and LDVs Yukon, Suburban, Ford Taurus, Ford Explorer, Greenkraft 61

ESTABLISHED INDUSTRY STANDARD DIESEL ENGINE COMPARED WITH CURRENT PROPANE AUTOGAS ENGINE OFFERINGS

Cummins Ford 6.8L PSI 8.8L V-8 PI 8.0L V-8 ISB V-10

Displacement 6.7L 8.8L 6.8L 8.0L Rated 240 hp 270 hp 362 hp 350 hp CONVERTING ALL PROPANE MARKETER VEHICLES Horsepower @ 2400 @ 2600 @ 4750 @ 4000

@ 1000 RPM 107 hp 103 hp 71 hp 71 hp

@ 2000 RPM 213 hp 215 hp 160 hp 162 hp

560 ft-lb 566 ft-lb 457 ft-lb 500 ft-lb Rated Torque @ 1600 @ 1600 @ 3250 @ 3100 CREATES THE POTENTIAL FOR OVER @ 1000 RPM 560 ft-lb 540 ft-lb 375 ft-lb 375 ft-lb

@ 2000 RPM 560 ft-lb 564 ft-lb 420 ft-lb 427 ft-lb

Bore / Stroke 4.21" x 4.88" 4.35" x 4.50" 3.55" x 4.17" 4.27" x 4.25" 233 MILLION Compression ADDITIONAL GALLONS PER YEAR 17.3:1 10:1 9.2:1 9.6:1 Ratio

Alternative Fuel Systems

BARRIERS TO MARKETER ADOPTION OF PROPANE AUTOGAS Higher upfront costs: Purchasing OEM-dedicated propane 4 autogas engine options and certified aftermarket fuel In the first edition of this white paper, a barrier was defined as a systems require an initial investment. While the initial hindrance faced in trying to enter a market or industry. Whether real purchase price is higher than comparable gasoline and diesel or perceived, market entry is impacted until there are demonstrated engine options, most — if not all — lifetime costs are much resolutions to the following six barriers: lower. The relative total cost-of-ownership equates to a quick return on investment and more profits at the end of the year. Proven durability: More marketers are becoming comfortable 1 with the durability of today’s propane autogas platforms Inconsistent dealer support: After an extended two-year compared to diesel. 5 review period, PERC staff is convinced that in most cases dealer service and support is as reliable as that offered on Lack of preferred products: Marketers are brand loyal and diesel trucks. Current users are experiencing similar delays 2 prefer to purchase Navistar, Hino, Peterbilt, and Kenworth with diesel truck service that are directly linked to the trucks. Yet propane autogas is earning respect and unreliable and costly performance of today’s diesel engines. consideration with our portfolio of propane autogas options. Lack of confidence: Past negative experiences with Limited options on current vehicle offerings: Even within a 6 aftermarket vehicle performance and post-sales support 3 marketer’s preferred brand, some of the options for optimal concerns are dwindling as PERC OEM and aftermarket performance are lacking — transmission and brake offerings, partners create and expand large professional conversion for example. and support networks.

© 2018 by the Propane Education & Research Council STRATEGY FOR THE FUTURE The propane industry receives maximum benefits when using propane autogas to power the company fleet. The impacts for the propane SAVINGS TO THE marketers are also significant — reduced operating costs, increased INDUSTRY COULD EXCEED profit margins, improved corporate brand, reduced emissions, quieter vehicle operation — the same expectations of any fleet manager when $ specifying a company’s fleet. 150 MILLION To move the industry forward at a faster pace, PERC must continue IN FUEL COSTS ALONE to develop technologies, engines, and chassis with qualified original equipment manufacturers and aftermarket providers that meet the needs of the propane industry. Areas of focus will be: Creating equipment that performs for the propane marketer with • Continue to work with existing propane autogas chassis OEMs the same durability and torque of existing vehicles is the initial step to offer vehicles equipped with the propane industry standard in increasing propane industry demand. Having a dealership that options and specifications. commits the resources for tools and training of service providers is the second critical element in spurring industry demand. Coupled • Continue to support aftermarket fuel system providers to with the price advantages of propane autogas over competing fuels, emissions-certify engines/chassis combinations used in the the internal consumption of propane autogas will rapidly escalate, propane industry. providing benefits to the industry and the communities they serve. • Continue to provide technician training and certification to dealership mechanics involved in the service of propane autogas systems. • Provide technician training and certification to propane marketers’ mechanics. • Support component manufacturers of propane autogas equipment (injectors, fuel pumps, tanks, valves, etc.) to continue advances in component quality, price, and innovation. • Identify and support engine OEMs to develop efficient and durable engines for use in medium duty applications such as bobtail and crane truck service. • Identify and support additional chassis OEMs to include propane autogas options in their vehicle platforms. • Promote direct-injection technology into all engine platforms. • Continuously evaluate opportunities for cost effective propane RESOURCES autogas deployments into class 8 applications. 1 Estimating Potential Propane Industry Demand for Propane • Work with the U.S. Department of Energy and the National Propane Autogas For Vehicles Owned by Propane Marketers, ICF Gas Association to seek outside funding for new technologies, International March 27, 2017 enhancements to codes and standards, and equity with other 2 propane.com/uploadedFiles/PropaneMain/Propane/On_Road_ fuels for local, state, and Federal tax incentives. Fleets/Propane_Conversions/Contents/AftermarketConversions.pdf