New Transportation Fuels: Trends and Developments

Report Highlights

• Alternative-fuel vehicles (AFVs) run on natural gas, propane, electricity, ethanol, and even recycled frying oil from the local fast-food joint. Some even run on gasoline -- sort of. They range in size from small buses to glorified golf carts, and in purpose from mail delivery to commuting. All are built to burn less petroleum while producing less pollution. Which alternative motor fuels, however, will be in common use tomorrow? Which criteria should be used to assess them? No simple answers exist. Complex trade-offs are involved in the decision-making process. But the most important ingredient for making informed choices is sound information. And, that is the focus of this report.M
• This report provides an overview of the essential issues in deciding among alternative fuels. Fuels such as compressed natural gas, LPG, or alcohols (methanol, ethanol, and other minor alcohols), and biodiesel derived from different feedstocks are considered. They are analyzed in terms of environmental effects, safety, availability, and cost. Their weaknesses and strengths are judged against the yardsticks of established gasoline and diesel technologies.

INTRODUCTION

STUDY GOALS AND OBJECTIVES

This BCC report provides a comprehensive examination of the market for alternative transportation fuels. Transportation accounts for 67% of the petroleum consumed in the United States, and the transportation sector is 97% dependent on petroleum. Given the inevitable continued growth in transportation, the only feasible alternatives for reducing emissions and improving energy security are vehicles with high fuel economy and the widespread use of clean, nonpetroleum fuels. This report focuses on the area of nonpetroleum fuels.

Alternative-fuel vehicles (AFVs) run on natural gas, propane, electricity, ethanol, and even recycled frying oil from the local fast-food joint. Some even run on gasoline -- sort of. They range in size from small buses to glorified golf carts, and in purpose from mail delivery to commuting. All are built to burn less petroleum while producing less pollution. Which alternative motor fuels, however, will be in common use tomorrow? Which criteria should be used to assess them? No simple answers exist. Complex trade-offs are involved in the decision-making process. But the most important ingredient for making informed choices is sound information. And, that is the focus of this report.

This report provides an overview of the essential issues in deciding among alternative fuels. Fuels such as compressed natural gas, LPG, or alcohols (methanol, ethanol, and other minor alcohols), and biodiesel derived from different feedstocks are considered. They are analyzed in terms of environmental effects, safety, availability, and cost. Their weaknesses and strengths are judged against the yardsticks of established gasoline and diesel technologies.

Changes in gasoline reformulation, aided by current re-evaluation of oxygenates and other energy regulations and global environmental agreements such as the Kyoto Protocol, presents alternative transportation fuels with an unprecedented opportunity to significantly impact both the quality and economics of conventional energy sources in the coming years. For example, if 10% ethanol was blended with all U.S. gasoline, it would reduce U.S. petroleum demand by 565 million barrels annually (1.5 million barrels per day).

Around 600 million vehicles roamed the world's streets and highways in 1995, almost 80% of them passenger cars, the rest trucks and buses. The number probably will reach 1 billion before 2010. Vehicle use rises even faster than the vehicle stock; during the 1980s, road traffic in OECD countries increased by 40%, 3.5% per year -- this was 3.5 times as fast as the vehicle fleet expanded. More than 99% of today's energy supply for road transport in OECD countries stems from crude oil (69% gasoline and 30% diesel), while the most important alternative fuels, LPG (0.9%) and natural gas (0.05%) hold minuscule shares.

THE FUELS OF INTEREST

This report compares the conventional and alternative fuels currently in use or under consideration and active research, with due recognition that some fuels need evaluation for different feedstocks. The list includes:

• Gasoline and reformulated gasoline from crude oil;
• Diesel oil and reformulated diesel oil from crude oil;
• Liquefied Petroleum Gas (LPG) from refineries and associated gas;
• Natural gas;
• Methanol from natural gas or cellulosic material;
• Ethanol from starch-rich or sugar-rich crops or from cellulosic material;
• Biodiesel (esterified oil from crops containing vegetable oil);
• Hydrogen by electrolysis of water; and
• Dimethyl-ether (DME) from natural gas.

Alternative fuels may be blended with conventional fuels. Using blends enables a gradual increase of production capacity of the new fuel as well as the use of existing vehicle technology and distribution infrastructure. For example, methanol and ethanol may be blended with gasoline, and biodiesel with conventional diesel oil, in any mixing ratio. To distinguish clearly the characteristics of each fuel and to avoid blurring the picture, this report does not stress fuel blends or consider them in the same detail as the fuels themselves.

DIRECTION OF POLICY

Local circumstances and issues determine fuel policies. Air pollution, for example, may take precedence over acid rain and require different fuel choices. Abundant gas reserves or the availability of large amounts of biomass in a given region may lead to fuel choices other than those in regions with abundant oil reserves. Many other factors may affect fuel policies in different regions or countries. This report cannot take all of these local effects into account, however readers should keep these issues in mind.

Another caveat is that the technologies for using conventional fuels are still advancing as well. Increasingly stringent emissions legislation, for example, will result in reduced emissions, particularly sulfur, from gasoline and diesel vehicles. Comparing alternative fuels against conventional fuels today becomes a comparison against a moving target, and alternatively fueled vehicles will have to keep up. Because the future is unpredictable, handling technological possibilities in a report like this becomes a delicate matter. One probably can say that technology on the market today may well develop further and current vehicle prototypes probably will gain maturity in the study's long term; but such generalizations can easily slip into excessive optimism. Also, without wide service-station availability and continued strong government subsidies, most consumers are unlikely to switch to AFVs. Other factors, such as the future cost of gasoline versus alternative fuels and taxation levels, complicate forecasts.

This report provides an up-to-date analysis of the pertinent technical and economic forces affecting the rate of market penetration of the various alternative transportation fuels. The report provides market forecasts for each of the separate markets and technologies involved. Important statistical and analytical information is provided for markets, applications, industry structure and dynamics, major players, and technology developments.

CONTRIBUTION OF THE STUDY

This guide to the alternative fuels is designed to benefit those companies already involved in the either as end users of equipment or manufacturer/service providers, as well as vehicle manufacturing companies.

This study report_highlightss trends in fuel output, technical utilization in vehicles, and R&D, and identifies the current players and their major products and contributions within the context of the entire market.

METHODOLOGY

Market forecasts and historical data are presented for the fuels discussed in this report for the period 1999-2004.

FORECASTS

The study contains forecasts of alternative fuel product sales by major category, such as low-sulfur gasoline, MTBE, ethanol, methanol, hydrogen, and synthetic fuels.

INFORMATION SOURCES

Information for this report has evolved from a wide variety of sources, including interaction with companies active within the industry. Information gathered from telephone interviews and a comprehensive review of all the technical, patent, and literature available make this technical/marketing report unique in its global perspective of the alternative fuels industry and, hence, valuable to individuals in industry, government, academia, and R&D.

Sources include the Department of Energy, International Energy Agency, American Methanol Institute, Ballard Power Systems, Pure Energy Corp., Renewable Fuels Assn., as well as hundreds of , trade, and technical journals and newsletters.