Alternative fuels and managing a diverse fuel portfolio

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Courtesy of Waste Advantage Magazine

Alternative fuels are becoming more prevalent in the marketplace at large and particularly within the waste industry. For example, Waste Management recently added its lOOOth natural gas fueled truck to its fleet this past summer. The alternative fuels that are going to work best for your fleet will take some investigation and research, but the prevailing data indicates that these solutions will be regionally-based and a particular alternative that is most attractive in one region may not work as well in another. The regional aspect of these solutions is going to create a more complex fuel portfolio that will need automation to manage its intricacies fully and effectively.
The more popular choices among alterative fuels include CNG, LNG and biodiesel. Each has its pros and cons to weigh depending on the makeup of your fleet, local availability of supply and capital costs to undertake these changes. Fleet managers must also examine the energy content of these alternatives to make sure that they get the same mileage from each gallon of fuel. All of this goes into a fuel cost analysis, which can show that alternative fuels may be quite a bit lower than today's diesel.

Comparing Fuels
There has been a lot of publicity around CNG (compressed natural gas) and LNG (liquefied natural gas) powered vehicles, primarily due to the price disparity when compared to diesel. To illustrate, the national average price for CNG in October 2011 was $233 versus the national average price for diesel of S3.81 (average diesel price being roughly 64 percent higher by comparison). These savings are significant but the price of CNG varies even more greatly by region than diesel and requires significant investment from the organization in terms of fleet conversion (see Saddling Up to CNG sidebar). For example, in New England the average price was $2.74 for the same period versus a price of $1.66 in the Rocky Mountain region.

Other alternatives to traditional diesel fuel that are increasingly more prevalent are the various blends of biodiesel. Factors to consider center around greater regional price differentials and tax benefits rather than the infrastructure and distribution issues with regard to CNG. The advantages and supply options to each can vary greatly by location or region as with CNG.

With the exception of States with biodiesel mandates or tax incentives, such as Minnesota (which has the requirement that all diesel sold contain 5 percent biodiesel3), there is little price discovery in the market for biodiesel, so an investigation of regional options and benchmarks to conventional fuels are needed to purchase optimally. Other things to examine are the tax incentives and rebates provided in certain States. For example, in Illinois there is currently a 20 percent exemption on the motor fuels tax for biodiesel blends from Bl to BIO, with blends above BIO receiving full exemption of the State sales tax of 6.25 percent.

Your Supply Portfolio
As options are explored and decisions made to take advantage of these alternative fuels, the complexity around determining the proper supply portfolio mix and managing fuel forecasting, ordering, dispatching and financial reconciliation will rise greatly due to the newly diverse supply portfolio. Fleet managers must also look at historical pricing trends and local availability of supply, along with some knowledge of where the market is heading when making fuel decisions. For example, deciding to invest in CNG using 2008 economics might differ from making the same decision with 2012 economics. It is important to factor in whether an alternative fuel will become more expensive or if the more conventional alternative is less expensive over the lifetime of your fixed asset investment.

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