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NGVs battle zero-emissions rivals in EU transport sector

Fuelling vehicles with natural gas is often cost-effective, but a push to use even greener alternatives is holding the sector back

The use of natural gas in Europe's transport sector has slowed in 2019, reversing a previous upward trend, as competition with zero-emissions vehicles intensifies. The best growth prospects now lie in the commercial vehicles segment, industry observers say.

New registrations of natural gas vehicles (NGVs) in the EU fell 50pc year-on-year to 9,546 in Q1 2019, according to European automobile manufacturers' association Acea. That contrasts with healthy growth seen in 2018, when new NGVs registrations were up 31.4pc year-on-year to 65,092.

Nevertheless, NGVs still have a strong and growing appeal. "A greater focus on environmental emission limits supports the increasing penetration of natural gas in the transport sector, with a 20-30pc reduction in CO2 and 75-95pc less NOx compared to diesel and gasoline," says Iain Mowat, senior refining research analyst at consultancy Wood Mackenzie.

And Martina Conton, EU policy manager at the European Natural and Bio Gas Vehicle Association (NGVA) tells Petroleum Economist that a high number of gas-fuelled vehicle registrations in Germany and the Czech Republic in 2018 reflects "a growing interest from car makers, and policy measures introduced by governments to align with EU legislation".

Those policy measures include the Renewable Energy Directive (Red), which is in force to 2020 before being superseded by Red II to 2030. The latter stipulates that a minimum of 14pc of the energy consumed in road and rail transport by 2030 must come from renewable energy, such as biomethane.

However, while the penetration of natural gas vehicles in the passenger car market has been supported by government incentives in some parts of Europe, these are now waning as the public policy focus shifts towards zero-emission vehicles, Mowat says.

In it for the long haul?

Overall, the NGV market accounts for less than 1pc of the total European fleet. Currently, there are 1.3mn natural gas-fuelled cars registered in Europe as well as 16,000 buses, 9,000 small vans and 6,000 trucks, according to NGVA Europe. That includes vehicles fuelled by CNG, LNG and their bio equivalents. CNG and LNG refuelling stations now total 3,530 and 200 respectively.

While take-up remains relatively low, factors such as cost will continue to support interest in gas-powered transport, particularly in the commercial sector.

Gas vehicles are "very attractive to customers, particularly in the truck segment, given the affordability of the fuel", Conton says, noting that, for trucks, LNG is competitive with traditional fuels. "Electricity for long-haulage is not really an option, so there is greater demand for this type of truck and for refuelling stations."

"The commercial freight sector is expected to be the key driver of increasing penetration of natural gas in the road transport sector," Mowat agrees. This will be focused primarily on LNG in the long-haul freight sector and also CNG for buses and light commercial vehicles usage.

NGVA Europe estimates that by 2030, CNG-fuelled vehicles will account for 12pc of new passenger car registrations, and for 25pc and 33pc of new truck and bus registrations respectively.

Italy leads the way

Italy, Europe's biggest market for NGVs, with around 1mn vehicles registered, is expected to remain the key outlet for CNG passenger cars in Europe, albeit at a low level, according to Mowat.

He forecasts that CNG cars will account for nearly 3pc of Italy's passenger car stock, compared to 2pc now, helped by a switch from LPG-fuelled cars to CNG—assuming natural gas prices remain low relative to LPG, as they currently are as Europe receives record deliveries of LNG import.

The commitment of Italian carmaker Fiat to developing LPG vehicles for the passenger car market in recent years has also driven NGV growth, as the creation of an LPG market also supported the roll out of CNG cars, Mowat says.

A 68pc increase in NGVs in Italy since 2008 was also driven by tax cuts and government subsidies, Conton says. This growth led to a doubling in the number of refuelling stations, particularly in the north.

"Another trend is an increasing focus on biomethane use, especially in northern Italy, on the back of EU legislation on climate change," says Conton. Greater consumer awareness of the environmental impact of transport fuels has led to more calls for wider availability of biomethane in both gaseous (bio-CNG) and liquefied (bio-LNG) forms, she says.

Across Europe, as many as 420 CNG refuelling stations now offer biomethane exclusively, which accounts for around 15-16pc of all gas used for transport, or roughly 2bn m3/yr, NGVA Europe says.

Zero-emissions challenge

But competition from electric vehicles (EVs) remains strong, given legislation favouring zero-emissions transport. "Given, currently, emissions are accounted for at the tailpipe, electricity along with hydrogen are considered as zero-emission fuels, while CNG and LNG are considered a full fossil fuel even when they are of bio origin. So, the legislation is giving an advantage to electric mobility, which makes it attractive to carmakers," says Conton.

In addition, limited public access to gas refuelling infrastructure and the relatively high cost of home refuelling are "major constraints to its future adoption in Europe", while the need for a large tank in CNG vehicles, reducing interior space, also makes the fuel less attractive, Mowat says.

However, he sees the strategic development of LNG refuelling infrastructure supporting demand growth in the commercial freight sector: "A number of long-distance freight routes across Europe have been designated as ‘Blue Corridors', stipulating that LNG refuelling will be developed for the full length of these routes." The LNG Blue Corridor project, constructed between 2013 and 2018, was aimed at establishing LNG as an alternative medium- and long-distance transport fuel.

Conton expects electric and gas fuels to continue to develop in parallel in coming years, rather than one winning out. "From a cost… perspective, CNG, LNG and their bio equivalents have a very strong advantage compared to electricity," she says. "The other issue is that of investment. The gas infrastructure is already in place, while for greater deployment of electromobility you would need a substantial investment to develop the electricity grid and recharging infrastructure."

Hydrogen network drive

Other clean fuel options are also being developed, such as hydrogen. The Hydrogen Mobility Europe initiative, launched in 2015, aims to deploy as many as 1,400 fuel cell hydrogen cars and create "the world's largest network of hydrogen refuelling stations", with 45 refuelling points across eight European countries by 2022.

The project, funded by the EU through the Fuel Cells and Hydrogen Joint Undertaking, led to 360 hydrogen vehicles and 15 hydrogen refuelling stations being deployed up to September 2018, across Norway, Sweden, Denmark, UK, Germany, France, the Netherlands and Iceland.

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