Must-know: Natural gas vehicle market’s problem

Market Realist

Why natural gas vehicles could be the future of natural gas (Part 5 of 10)

(Continued from Part 4)

Natural gas vehicle’s problem

Making natural gas vehicles (or NGVs) viable for road transport would require associated infrastructure dedicated to refueling purposes.

According to the International Energy Agency’s (or IEA) World Economic Outlook 2014, ~$55 billion needs to be invested in natural gas refueling infrastructure by 2035, most of which would go into expanding the use of compressed natural gas (or CNG) in passenger cars.

 

Current infrastructure

Today, there are ~1,000 natural gas stations in the U.S. In comparison, there are ~120,000 retail gasoline stations in the country. Companies that build and maintain these refilling stations will need more NGVs on the road, as customers, to be viable.

According to the NGV Journal, there are ~ 3,000 CNG re-fueling stations in the European Union (or EU). There are ~220 more CNG re-fueling stations that will be constructed in the EU.

Which came first—the car or the gas station?

Buyers may refrain from buying NGVs, fearing a lack of refueling points for their long road-trips.

This creates a chicken and egg problem. Some companies are building the gas refueling stations (See Part 1 of this series), while others are already making cars that can run on gas (See Part 3 of this series). So, both may actually grow together.

Also, there’s significant potential to increase the natural gas refueling infrastructure capacity anyway. According to the study by TIAX, the total number of refueling stations may increase up to 16,000, or more, in the future. TIAX is a lab-based technology development company focused on commercializing innovations in transportation and building technologies.

U.S. legislators are now considering giving tax credits for purchase of NGVs. Companies investing in refueling stations would also receive incentives.

According to America’s Natural Gas Alliance (or ANGA), the South Coast Air Quality Management District and United Parcel Service of America Inc. (or UPS) are completing a 700-mile natural gas corridor from Las Vegas to Ontario, which would cater to refueling of all kinds of NGVs. In addition, local governments in Utah and Seattle have planned gas corridors and fueling stations for municipal fleets.

But which “gas” station?

So, you never know when this trend of NGVs might take off. Companies betting on this happening will get their rewards. However, it may cause some confusion as to which “gas” stations NGV drivers are asking directions for!

Key stocks and ETFs

Higher usage of natural gas by vehicles could also benefit natural gas producers like Chesapeake Energy (CHK), Southwestern Energy (SWN), and Range Resources (RRC)—many of which are components of energy exchange-traded funds (or ETFs) such as the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and the broader SPDR S&P 500 (SPY).

To know about the NGV industry in other major demand areas around the world, please continue reading the next section in this series.

Continue to Part 6

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