Natural gas for vehicle fuel costly to make
There are plenty of hurdles to building a network of compressed natural gas filling stations in Colorado, but the cost of a burst of electricity is proving to be a hindrance.
The cost of the electricity needed to fire up a compressor for a few minutes’ work to compress natural gas into a holding tank before it’s fed into a vehicle’s fuel tank is prohibitive for an industry that’s trying to get a toehold.
Some western Colorado companies, such as Grand Junction-based Monument Clean Fuels and Rifle-based Swallow Oil Co., are hoping to get the state Public Utilities Commission to work on making allowances to help them get started.
Swallow Oil President Kirk Swallow is seeking a system that would allow start-up compressed natural gas (CNG) suppliers a three-year break in the demand rate.
Commercial businesses pay per kilowatt-hour of usage, but they also “are given ‘speeding tickets’ based on how fast they used energy,” said Mike Ogburn of Carbondale-based Clean Energy Economy for the Region. “Just like police who give tickets based on your peak miles per hour, electricity companies measure kilowatts of peak electricity demand during any single 15-minute period during the month and then charge a fee based on that peak for the entire month’s bill.”
It’s true that Xcel Energy charges for “burst” demand such as that needed to compress natural gas, spokesman Mark Stutz said, but those charges are needed to assure the constant supply of electricity when it’s needed.
“There are system costs associated with being able to provide them enough electricity at the time they want it,” Stutz said, adding that he hoped that affected businesses would negotiate directly with Xcel.
“We have other CNG operations across the state, so it’s not without precedent,” Stutz said.
As a business is trying to take hold, though, that demand cost can be prohibitive, said Jason Farrington of Monument Clean Fuels, which is associated with Monument Oil in Grand Junction.
Factoring in the demand rate brings that cost to 10 to 15 percent of the cost at the pump, which was $2.59 per gallon on Friday, Farrington said.
The demand charge is part of the reason that natural gas prices tend to run about 10 cents per gallon more in western Colorado than on the Front Range, Farrington said.
The customer base so far is small, amounting to fueling government vehicles and some passenger vehicles used by energy company employees who commute between Grand Junction and Parachute, Farrington said.
“In my opinion, the critical mass to bring manufacturers and auto dealers is still three to five years out,” Monument Oil President Paul Brown said.
In the meantime, Monument is hoping to persuade fleet owners to convert to natural gas and save over the long term by paying less for natural gas than they would for traditional fuels, such as gasoline or diesel.
“When a CNG station is filling many cars per month, there is less of an issue,” Ogburn said in an email.
“Their utility bill might look much like a normal business. But when a CNG station is brand new and is filling just a few cars per month until more customers buy CNG vehicles, the electricity cost for those first few cars is mostly caused by the kW peak charge and the cost per gallon to compressor for those few gallons can be disproportionately high.”
As demand for CNG grows, the demand cost will become less of a concern, Farrington said.
Already some of the costs of providing natural gas to consumers with equipment at traditional service stations is falling.
It’s down from about $800,000 a few years ago to the $400,000 to $500,000 range now, Farrington said.