Building a Business Case for Compressed Natural Gas in Fleet Applications George Mitchell National Renewable Energy Laboratory
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Building a Business Case for Compressed Natural Gas in Fleet Applications George Mitchell National Renewable Energy Laboratory NREL is a national laboratory of the U.S. Department of Energy Office of Energy Efficiency & Renewable Energy Operated by the Alliance for Sustainable Energy, LLC Technical Report NREL/TP-5400-63707 March 2015 Contract No. DE-AC36-08GO28308 Building a Business Case for Compressed Natural Gas in Fleet Applications George Mitchell National Renewable Energy Laboratory Prepared under Task No. VTP2.0200 NREL is a national laboratory of the U.S. Department of Energy Office of Energy Efficiency & Renewable Energy Operated by the Alliance for Sustainable Energy, LLC Technical Report NREL/TP-5400-63707 March 2015 Contract No. DE-AC36-08GO28308 NOTICE This report was prepared as an account of work sponsored by an agency of the United States government. Neither the United States government nor any agency thereof, nor any of their employees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of any information, apparatus, product, or process disclosed, or represents that its use would not infringe privately owned rights. Reference herein to any specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply its endorsement, recommendation, or favoring by the United States government or any agency thereof. The views and opinions of authors expressed herein do not necessarily state or reflect those of the United States government or any agency thereof. This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications. Available electronically at http://www.osti.gov/scitech Available for a processing fee to U.S. Department of Energy and its contractors, in paper, from: U.S. Department of Energy Office of Scientific and Technical Information P.O. Box 62 Oak Ridge, TN 37831-0062 phone: 865.576.8401 fax: 865.576.5728 email: mailto:[email protected] Available for sale to the public, in paper, from: U.S. Department of Commerce National Technical Information Service 5285 Port Royal Road Springfield, VA 22161 phone: 800.553.6847 fax: 703.605.6900 email: [email protected] online ordering: http://www.ntis.gov/help/ordermethods.aspx Cover Photos by Dennis Schroeder: (left to right) NREL 26173, NREL 18302, NREL 19758, NREL 29642, NREL 19795. NREL prints on paper that contains recycled content Author George Mitchell, National Renewable Energy Laboratory Acknowledgments This report was produced with funding from the Clean Cities activity in the U.S. Department of Energy Vehicle Technology Program. The author is grateful for the contributions of the following individuals involved in developing the Vehicle Infrastructure and Cash-flow Evaluation (VICE) model that is the basis of this report: Rob Adams, Marathon Technical Services Andy Burnham, Argonne National Laboratory Caley Johnson, National Renewable Energy Laboratory Margo Melendez, National Renewable Energy Laboratory All assumptions and inaccuracies are the responsibility of the author alone. iii This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications. Table of Contents 1 Introduction ........................................................................................................................................... 1 2 General Overview ................................................................................................................................. 2 2.1 Baseline Parameters ...................................................................................................................... 2 2.1.1 Project Type ..................................................................................................................... 2 2.1.2 Investment Type ............................................................................................................... 2 2.1.3 Tax Exemption Status for Fuel ......................................................................................... 3 2.1.4 Vehicle Data ..................................................................................................................... 3 2.1.5 Infrastructure, Fuels, Operations, and Incentives ............................................................. 4 3 Compressed Natural Gas Project Development ................................................................................ 9 3.1 Upfront Project Decisions ............................................................................................................. 9 3.1.1 Understanding the Financial Soundness of a Compressed Natural Gas Project ............ 10 3.2 Results From the Base Case ........................................................................................................ 11 3.3 Simple Payback ........................................................................................................................... 12 3.4 Rate of Return ............................................................................................................................. 12 3.5 Project Net Present Value ........................................................................................................... 13 3.6 Fuel Consumption and Cost ........................................................................................................ 15 3.7 Fleet Composition ....................................................................................................................... 16 3.8 Additional Considerations Affecting Project Profitability .......................................................... 17 3.8.1 Station Cost .................................................................................................................... 17 3.8.2 Incremental Vehicle Cost ............................................................................................... 19 3.8.3 Vehicle Maintenance Costs ............................................................................................ 21 3.8.4 Compressed Natural Gas Station Electricity and Maintenance Costs ............................ 22 3.8.5 Subsidies and Tax Credits .............................................................................................. 23 4 Conclusions ........................................................................................................................................ 24 4.1 Most Influential Parameters ........................................................................................................ 24 Glossary ..................................................................................................................................................... 29 iv This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications. List of Figures Figure 1. CNG station costs .......................................................................................................................... 5 Figure 2. Investment strategy visualization—fuel use and availability ........................................................ 9 Figure 3. Investment timing effect .............................................................................................................. 10 Figure 4. Example of cumulative cash flow, by year .................................................................................. 11 Figure 5. Relationship between fleet size and simple payback period ........................................................ 12 Figure 6. Effect of fleet size on the project ROR ........................................................................................ 13 Figure 7. Fleet size effect on project NPV, discount rate = 6% .................................................................. 14 Figure 8. Fleet size and VMT sensitivity .................................................................................................... 15 Figure 9. Fuel price differential effect on simple payback ......................................................................... 16 Figure 10. Effects of CNG station cost on simple payback (diesel) ........................................................... 18 Figure 11. Effects of CNG station cost on simple payback (gasoline) ....................................................... 19 Figure 12. Effects of vehicle incremental cost on simple payback (diesel) ................................................ 20 Figure 13. Effects of vehicle incremental cost on simple payback (gasoline) ............................................ 20 Figure 14. Vehicle M&O cost effects on simple payback .......................................................................... 21 Figure 15. CNG station M&O cost effects on simple payback ................................................................... 22 Figure 16. CNG station electricity cost effects on simple payback ............................................................ 23 List of Tables Table 1. Project Investment, NPV, and Break-Even Point ......................................................................... 14 Table 2. 100 Vehicle Mixed Fleet Comparison .......................................................................................... 17 Table 3. Effect of Tax Credits on Simple Payback ....................................................................................