Alternative Fuel

Alternative Fuels
As Seen In
WasteAdvantage
The Advantage in the Waste Industry
Alternative Fuels and Managing a Diverse Fuel Portfolio

Ryan Mossman
AlternAtive fuels Are becoming more prevalent in the marketplace at large and particularly within the waste industry. For example, Waste Management recently added its 1,000th 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 regionallybased 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 todays diesel. 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 B1 to B10, with blends above B10 receiving full exemption of the State sales tax of 6.25 percent.
OutsOurcing reduces fuel cOsts and wOrking capital requirements, and drives greater financial and operational predictability while allowing organizations to take advantage of favorable regional alternatives for fuel choices.
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. With greater complexity comes a greater operational cost, which can offset any savings gained from adopting a more diversified supply portfolio that includes alternatives. The best path towards reducing the impact of this complexity is through fuel management automation, which will help automate the additional tasks associated with a diversified portfolio, such as supplier invoice reconciliation, additional product procurement and dispatch, and automated monitoring of tank levels. For fleet-based
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 $2.33 versus the national average price for diesel of $3.81 (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.1 Other alternatives to traditional diesel fuel that are increasingly more prevalent are the various blends of biodiesel. Factors to consider center around greater
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WasteAdvantage Magazine January 2012
Saddling Up to Cng
To realize these savings, infrastructure investments are needed. Converting or repowering a conventional diesel collection vehicle can cost from companies, turning to third-party providers, or outsourcers, gives immediate access to needed fuel buying and managing expertise.
As Seen In
$30,000 $100,000
to nearly per vehicle, with the average cost of a new vehicle being more than $170,000. In addition to this, fueling station construction costs have to be considered. Installing a bulk CNG fueling station is estimated to cost between $500,000 for a fleet of 15 trucks to $1.5 million to support a fleet of 100 vehicles.2
Finding the Right Provider

When examining fuel management outsourcers, fleet managers should examine some key areas to find the provider that is right for them. First, find out if the outsourced suppliers supply fuel themselves. Sometimes, waste companies will not get the best supply arrangements due to conflicts of interest inherent if the supplier owns the fuel. Supplier independence ensures that you get an outsourcing provider that has the companys best interest at heart. Second, examine whether the outsourcer has the ability to evaluate the multitude of supply options including alternative fuels, available prices indices, historical pricing trends, regional pricing differences and other factors that will create a truly strategic, cost-reducing supply portfolio. Waste industry fleet managers are under pressure to reduce costs, increase efficiencies and gain predictability in their budgets. The advent of alternative fuels actually presents an opportunity to help achieve these goals; however, managers need to guard against the hidden costs associated with a more
complex supply portfolio. By looking towards outsourced fuel management, they not only The Advantage in the Waste Industry mitigate risk associated with fuel supply complexity, but they also leapfrog into best-in-class fuel management capabilities. Outsourcing reduces fuel costs and working capital requirements, and drives greater financial and operational predictability while allowing organizations to take advantage of favorable regional alternatives for fuel choices. | WA Ryan Mossman is the General Manager and Vice President of Fuel Services for FuelQuest (Houston, TX). He leverages his years of experience applying technology and business process improvements to help energy, retail, commercial and industrial clients. Ryan leads FuelQuests outsourced fuel service, Fuel Center. His FuelQuest experience includes leading large-scale supply chain optimization, technology and business process implementations at large fleet and energy companies including UPS, U.S. Freightways and Chevron. Ryan can be reached at [email protected].
WasteAdvantage
Notes 1. Source: U.S. Department of EnergyClean Cities Alternative Fuel Price Report October 2011. 2. Source: American RecyclerDemand Grows for Natural Gas Waste Hauling July 2011. 3. Source: U.S. Department of EnergyAlternative Fuels and Advanced Vehicle Data Center/Federal and State Incentives and Laws/Minnesota Incentives and Laws.
2012 Waste Advantage Magazine, All Rights Reserved. Reprinted from Waste Advantage Magazine. Contents cannot be reprinted without permission from the publisher.
WasteAdvantage Magazine January 2012
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Alternative Fuels

Alternative Fuels and Managing a Diverse Fuel Portfolio

Your Supply Portfolio

WasteAdvantage Magazine January 2012

Finding the Right Provider

WasteAdvantage Magazine January 2012

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