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Behind the Costs of CNG Conversions

In my recent post – How Much Natural Gas to Replace Gasoline? – I mentioned that it is quite expensive to convert a gasoline-powered vehicle to natural gas. If you drive a tremendous number of miles each year – as many fleets do – the conversion will pay for itself relatively quickly. For most of us, the savings wouldn’t be enough to justify the conversion.

Today I received an e-mail from Marc J. Rauch, Exec. Vice President/Co-Publisher of The Auto Channel, who shed a bit more light on why the conversion is so expensive. I found this information quite useful, and I received his permission to post his e-mail, seen below.

———————————————-

Hi Robert –

Thanks for the work you did on figuring out how much natural gas we actually seem to have (according to current knowledge) and for the related cost comparisons. It’s a great and value tool for those of us that believe in CNG (and propane) as a viable engine fuel alternative.

One thing that I would like to add (assuming that you didn’t already know this or learn it since posting your piece), is that the cost of CNG conversions for existing vehicles is as high as it is because of EPA licensing requirements. For an individual (or shop) to be licensed to do a conversion, the person must pay $10,000 per year, per engine type, per year of manufacture. So that if a conversion shop wanted to do conversions in 2009 for Camrys for the years 1995 to 2005, the shop owner would have to pay the government $100,000 in licensing fees. Then, if he wanted to do conversions on the same models in 2010, he would have to pay the $100,000 again, even though they are the exact same models and engines that he has been licensed on already. And if there is more than one engine involved, i.e., a 6-cylinder and 8-cylinder, the cost would double.

Therefore, if a shop owner wanted to do 10 model years of Camrys and Corollas and Celicas, and well as Honda Accords and Civics, unless there were common engines being used in these five models the licensing cost (for just one engine per) would be a half million dollars, which would have to be paid again in 2010. These fees are, needless to say, ridiculous and are only there to ensure that many don’t get done (thanks to the gasoline lobby). The cost of the conversion kits are actually relatively inexpensive. If there was a sensible licensing fee (or no fee) the cost for the work could be just a few hundred dollars.

To be fair, there is a second part of the cost equation that has to be addressed: trained CNG conversion mechanics. An argument is typically made by those that want to make argument against CNG that there aren’t enough trained mechanics. This is somewhat true, but of course there really is no shortage of new and old mechanics that would be willing to learn. So the issue is where can they be trained? The University of West Virginia has a great automotive program that they’ve “syndicated” to other colleges around the country. In California, two schools (Rio Hondo in So. CA and Yuba College in No. CA) teach the UWV curriculum. They can and do teach CNG conversions.

I hope the above wasn’t too redundant for you. If you have other information or newer information I would love to hear of it.

Regards.

Marc J. Rauch
Exec. Vice President/Co-Publisher
THE AUTO CHANNEL
www.theautochannel.com

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July 21, 2009 - Posted by | CNG, natural gas

25 Comments

  1. If Marc J. Rauch's letter is even roughly true, obviously this is a area in need of immediate reform. I would think the EPA would be subsidizing the process, not hamstringing it (NG burns more cleanly than gasoline). I wonder what the EPA says? I wondered why the cost of conversion was $10k or whatever, when many, many taxis in Bangkok had converted.Looks like we have a great future in NG, if oil does become more expensive (I just heard tonight on the news that Iraq is talking about exporting enough to rival KSA in 10 years)..

    Comment by Benny "Boom, No Doom" Cole | July 22, 2009

  2. Maybe the Pickens legislation could use an amendment or two. Are there any companies out there catering to do-it-yourselfers? A few hundred sounds like a hellified bargain. I've already got a spot picked out for my PHIL device.

    Comment by Maury | July 22, 2009

  3. Intereting series of articles at Forbes….Twenty Dollars Per GallonHalf the world's oil comes from just .03% of its oil fields (the mega ones). When the megafields' production begins to ebb, it's likely we'll have entered an irreversible supply decline. It's a reality that's here. Consider this: Oil fields typically enter decline after 50 years of pumping. And the average age of the world's largest 14 fields? Forty-nine years.http://www.forbes.com/2009/07/14/20-dollar-gallon-business-energy-oil.html

    Comment by Maury | July 22, 2009

  4. Government interference in the market place can clearly be a problem — and in a lot more areas than CNG conversions. Still, there is more than government interference involved in the difficulty of getting Compressed Natural Gas acceptance.It is always useful to follow RR's example and look at the data. A number of countries have made large scale use of CNG over the years (driven by local availability of gas) — e.g., Italy, Russia, New Zealand, Iran. Historically, when such people have had the choice, they have switched from CNG to gasoline.There are a number of reasons for this. Range between refueling is a big one, as is availability of refueling stations, and the ease/time to refuel. To say nothing of the loss of trunk space to a humping great gas cylinder.Another factor is that gasoline vehicles converted to run on CNG are sub-optimal while on CNG.The answer is dedicated CNG vehicles, designed from the ground up to run on CNG, with smaller high compression engines and integrated gas cylinders. But then the owner is committed to CNG, without the option to go back to gasoline on a long trip.Europe of course is totally dependent on the kindness of Russia for its already large gas demand; eventually the other shoe will drop there. It does not make sense for Europe to convert to CNG, switching Middle East oil for more Russian gas.But as Benny often points out, the US has several decades of natural gas. A true stimulus package might involve a massive build-out of CNG stations along with a re-energized US vehicle manufacturing sector building dedicated CNG automobiles. But that would take political leadership and a commitment to creating good jobs for US citizens — both of which are in short supply in Obama's America.

    Comment by Kinuachdrach | July 22, 2009

  5. "For an individual (or shop) to be licensed to do a conversion, the person must pay $10,000 per year, per engine type, per year of manufacture."Why is the bureaucracy making it more expensive to be more efficient? As "Deep Throat" said, "Follow the money."Obviously an area that Obama's Auto task Force needs to look into and correct immediately.

    Comment by Buck Slocombe | July 22, 2009

  6. Those EPA license costs sound plain nuts. What exactly do they do for the money?… is there some huge inspectorate that checks each mechanic for each engine type, each year? And is it a safety issue? If not, why not just emissions test each converted vehicle — you already have emissions testing in the US, do you not?[Kinuachdrach]: Europe of course is totally dependent on the kindness of Russia for its already large gas demand; eventually the other shoe will drop there. It does not make sense for Europe to convert to CNG, switching Middle East oil for more Russian gas.It could make sense from a pure cost point of view. And if it's a security of supply issue, then if the Nabucco and Trans-Caspian pipelines come to fruition, then Russia won't be the only game in town. It'll be Turkmen/Azerbaijani/Iranian/Turkish gas instead, which is … er … so much more secure. 😉

    Comment by PeteS | July 22, 2009

  7. CNG in South America"CNG vehicles are commonly used in South America, they represent 48% of the world's total fleet,[9] where these vehicles are mainly used as taxicabs in main cities of Argentina and Brazil.[9] Normally, standard gasoline vehicles are retrofitted in specialized shops, which involve installing the gas cylinder in the trunk and the CNG injection system and electronics. Argentina and Brazil are the two countries with the largest fleets of CNG vehicles,[9] with a combined total fleet of more than 3 million vehicles by 2008.[13] Conversion has been facilitated by a substantial price differential with liquid fuels, locally-produced conversion equipment and a growing CNG-delivery infrastructure.Argentina has some 1.69 million NGV's as of 2008, with 1767 refuelling stations across the nation, or 15% of all vehicles. By July 2008 there were 1.56 million retrofitted vehicles in Brazil, or about 5% of the total light vehicle fleet, with 1585 refueling stations, and most of the fleet is comprised of taxis operating in the cities of Rio de Janeiro and SĂŁo Paulo.[9][13]Bolivia has increased its fleet from 30,000 in 2004 to 90,163 units in April 2008, Colombia has an NGV fleet of 257,468 vehicles, and 378 refueling stations as of June 2008. Peru has 41,411 NGV as of July 2008, but that number is expected to skyrocket as Peru sits on South America's largest gas reserves.[9]A 'Blue-network' of CNG stations is being developed on the major highways of the Southern Cone (including Chile and Bolivia) to allow for long-haul transportation fueled by CNG."Lots of statistics and info about world-wide CNG use at:http://en.wikipedia.org/wiki/Compressed_natural_gasJohn

    Comment by Anonymous | July 22, 2009

  8. These fees are, needless to say, ridiculous and are only there to ensure that many don't get done (thanks to the gasoline lobby). Does Mr. Rauch have something specific to back up this claim? The biggest US energy companies all have substantial investment in natural gas. The implication is that the "gasoline lobby" has some influence over the EPA. That would come as a surprise to those of us who actually have dealt with the EPA. More likely, EPA is a big bureacracy with its own inflexible rules. If you think this is bad, wait until you get ObamaCare for your medical!

    Comment by KingofKaty | July 22, 2009

  9. It would also seem to me to be overkill. Most states require tailpipe emissions testing. If a CNG conversion passes, then there isn't any reason for a certification program. Let the producer of the conversion program warrant that the CNG conversion will pass inspection. From what I've seen, the kits including tank run $2,000 to $3,000.

    Comment by KingofKaty | July 22, 2009

  10. off topic but this comment was made about EXXON-Mobil Algae Venture. A rather bold statement. By the barrel, algae fuel provides three to four units of energy for every unit used to make it–a ratio that approaches petroleum's 5-to-1 level of efficiencyFound here:http://www.technologyreview.com/energy/23039/page1/#comment-212193Jim Takchess

    Comment by Anonymous | July 22, 2009

  11. "These fees are, needless to say, ridiculous and are only there to ensure that many don't get done (thanks to the gasoline lobby)"…is this really true? As KofK says, oil companies also tend to be nat gas companies.Never attribute to malice that which can be adquately explained by stupidity.

    Comment by David | July 22, 2009

  12. Regulatory CaptureEconomics A-Z"Regulatory capture: Gamekeeper turns poacher or, at least, helps poacher. The theory of regulatory capture was set out by Richard Posner, an economist and lawyer at the University of Chicago, who argued that “REGULATION is not about the public interest at all, but is a process, by which interest groups seek to promote their private interest … Over time, regulatory agencies come to be dominated by the industries regulated.” Most economists are less extreme, arguing that regulation often does good but is always at RISK of being captured by the regulated firms."Works for cotton farmers!

    Comment by Anonymous | July 22, 2009

  13. I am a little skeptical of Rauch's claims about regulations because it is just too easy to cite a regulation when making a case. Also Rauch is a journalist and for RR likes to quote journalists.The reason POV will not switch to NG is because it is not a very good transportation fuel. Ditto hydrogen and electricity.Gasoline and diesel are excellent transportation fuel which is why we use them. I do not have a problem with incentives to increase the use of NG as a transportation fuel any more than I do incentives for ethanol and biodiesel blended into existing fuel stocks.

    Comment by Kit P | July 22, 2009

  14. POV = privately owned vehicleKit P is correct in that NG and propane are not as energy dense as gasoline and diesel. So they are less desirable fuels for transportation. For those of us who have commuter vehicles, NG could work very well. I could convert the King of Katy Hybrid to NGV because it has never been driven farther than about 40 miles from my house.

    Comment by KingofKaty | July 22, 2009

  15. My scanty research into the cost of various conversions shows that refitting a vehicle for NG is roughly as expensive as simply buying a Honda Civic GX – about $6-7k. Natural Gas Conversion Kits – CNG Interstate: is an example. Here is a Global Gallery Natural Gas | NGVs Available World Wide, it would be great to have more info on how much of a premium NG or other AF capability adds to the base cost. As it stands, in the US the cheapest conversion by far is FFV – ca. $600 generally. Now if we could just get a hold of 400 million gallons of ethanol…

    Comment by The Dude | July 22, 2009

  16. The point about CNG vehicles is not that they are competitive with gasoline, when oil is abundant and domestically produced.The point is that we can convert to CNG, when oil is expensive, unreliable, and controlled by thug states.The latter case may be true, or true in 10-40 years.The last point is that the epic supply of natural gas (100 years in the USA and still growing by leaps and bounds, thanks to shale gas)completely destroys any doom scenarios. The worst case scenario is that we drive PHEVs and CNGs, and tolerate a minor decline in living standards and convenience, although I argue the benefits of cleaner air are well worth it.

    Comment by Benny Boom No Doom Cole | July 22, 2009

  17. Marc Rauch…if you see this, could you supply a link providing definitive information on the licensing requirements & fees? I would like to post on this, but want to ensure accuracy.

    Comment by David | July 23, 2009

  18. David, if you are interested why not research the information yourself rather than ask a journalist?I would do the research myself if I was interested. For POV, fueling with NG an electricity are astoundingly bad idea. They are interesting things for journalists to write about and futurists to blog.It is a bad idea based on simple math. Like most American I do not commute very far. The capacity factor of my POS POV PU is about 5%. I tis either parked beside my house or at work. The availability factor is 99%. My starter broke and I had to have it towed. So do the math. I used about 15 gallons of gas a month. Tell me how much I can save with marginal cost savings but expensive initial costs?If I happen to have a long commute, I am going to buy a new POV suited for that specific purpose and not convert an old one. The cost of certifying that design will be divided by thousands of cars. As a private citizen I have a certain expectation that I will not be endangered by loons trying to save a buck. When it comes to energy, most loons are not really saving any money they just do not have a clue about economics and the engineering and legal ramifications. If you want to do something with energy that could effect others, it has to be reviewed bu engineers and lawyers. The application has to be sent to the regulators for review by their engineers and lawyers. Since we live in a democracy, the application goes to the public for comment. If there are comments, more engineering and lawyering. All that engineering and lawyering is expensive and someone has to pay for it. The solution to expensive regulations to move to a country that does not have them.

    Comment by Kit P | July 23, 2009

  19. Kit P…I spent about 15 minutes searching for the regulations & couldn't find them. If Marc has already located them and feels strongly about the issue, what is wrong with asking him for a link? As a general matter, people who make assertions should provide links, whenever possible, to back them up.If the assertion about the licensing requirements is indeed correct, and if this problem was not fixed in the "energy" bill, it provides an interesting example of Congressional irresponsibility.

    Comment by David | July 23, 2009

  20. “people who make assertions should provide links”That would be nice but I would not expect journalists like Raush to provide a link. One of the marks of a good journalist is providing links. If I hold journalists in low esteem it is because of lazy and dishonest reporting. I can not provide a link because it is an observation. For example, remember Bush secret plant to invade Iraq before he was elected complete with quotes? It took me a short time to find the report that was the source if the quotes. It has nothing to do with Bush and it has nothing to do with invading Iraq. It was a very cleaver lie demonstrating the art of taking quotes out of context. I never found one journalist who did more that past the story on. So much for fact checking what is an obvious erroneous story.“Congressional irresponsibility”Now David let me get you started on your research since you gave up too soon. http://www.afdc.energy.gov/afdc/vehicles/conversions.htmlCertificates of Conformity for "aftermarket" converters are signed by EPA and certify that the appropriate sections of the Code of Federal Regulations (40 CFR Parts 85 through 88) have been met.40CFR85http://frwebgate4.access.gpo.gov/cgi-bin/PDFgate.cgi?WAISdocID=383792141803+3+2+0&WAISaction=retrieve

    Comment by Kit P | July 23, 2009

  21. Rauch isn't far off. Last year I looked into this very topic. It's all wrapped around the Clean Air Act and the hassle regarding modification to the OBDII system on cars. In order for CNG to work, you have to change how the O2 sensor works, which is considered tampering with the emissions system and illegal. Certification through the EPA requires complete re-testing of the emission controls in various conditions (not just a simple tailpipe test you get during your state inspection). This is why the certification is tied to a specific engine class.

    Comment by epoortinga | July 24, 2009

  22. David, if you're getting "This PDF file is not available", you might try http://www.epa.gov/otaq/url-fr/fr11my04.pdfI found it a couple of days ago from http://www.epa.gov/otaq/fees.htm when trying to fact check. I find section II F. What Are the Reduced Fees Provisions? interesting. EPA will allow manufacturers to pay a fee based on 1.0 percent of the aggregate retail sales price (or value) of the vehicles covered by a certificate…In the case of vehicles or engines which have originally been certified by an original equipment manufacturer (OEM) but are being modified to operate on an alternative fuel, the cost basis for the reduced fee amount is the value-added by the conversion, not the full cost of the vehicle or engine.It seems to me that if a conversion costs $6K, then no more than $60 of that is needed for the certification fee. It seems to me the only way the certification could cost $10,000 for a vehicle, (assuming only one unit of that model is converted) is if the vehicle costs $1 million.But the last time I quoted an EPA official notice, there turned out to be a state rule that overrode it and was more applicable to the particular case. So if Rauch would provide a link supporting his $10,000 per year per engine-type per year-of-manufacture claim, I too would appreciate it.

    Comment by Clee | July 24, 2009

  23. Clee, I think what you are missing is the cost incurred by the manufacturer to have the EPA required testing performed prior to submitting the application for certification. On the EPA website is a list of certified labs that can do the testing. Here is a link to an older document that goes through the process in a higher level description…Guide A good forum with lots of info…CNGchat

    Comment by epoortinga | July 24, 2009

  24. epoortinga, thanks for the info. I suspected that tampering with the tailpipe O2 sensor may enable me to hack around engine controls and burn CNG. I'm one step closer towards my plan to convert a junker (post the usual emissions testing) Maybe Pickens can spend some dough restructuring EPA's "modification to the OBDII system on cars" regulations. Lots of people need jobs these days. Time to mail letters (and resumes) people.

    Comment by evan | July 24, 2009

  25. epoortinga, Page 8 of that document or page 15 out of 71 of the PDF says:the term "model year" refers to the model year of the certified aftermarket conversion, not the vehicle's original model year. EPA Certificates of Conformity are good for one model year… Each Certificate of Conformity applies to a specific engine family named on the certificate.Take Rauch's example. If a conversion shop wants to do conversions in 2009 for 1995-2005 Camry's, if the same engine family is used for all the conversions, then the fee for the conversions done in 2009 will be a total of $10,000. The model year is for all of them is 2009 the year the conversions are done, not the vehicle's original model years of 1995-2005. Next year, 2010, the conversion shop would have to pay the $10,000 all over again, not the $100,000 that Rauch mentioned. At least that's how I interpret that document you linked to.The EPA document keeps refering to fees per engine family. I see no extra fees per vehicle make or model. So if a shop installs a single CNG engine family in Camry's, Corollas, Celicas, Accords and Civics, it seems to me the fee is still $10,000/year, not $50,000 or the half a million dollars Rauch mentions.If a shop converts over 10,000 vehicles a year, and they use 5 different engine families for a total annual fee of $50,000, the fee comes out to $5 per vehicle, which is pretty negligible.The 1998 EPA guide to Emissions Certification Procedures also says:A small volume manufacturer is defined as a company that will sell or convert fewer than 10,000 vehicles or engines during the model year in question….A small volume manufacturer may qualify for a partial waiver of the certification fees…The alternative fee is based on 1% of the total value of all vehicles to be converted. This includes both the value of the vehicle and the value of the conversion kitThat last part is a bit different from the 2004 version that said:"In the case of vehicles or engines which have originally been certified by an original equipment manufacturer (OEM) but are being modified to operate on an alternative fuel, the cost basis for the reduced fee amount is the value-added by the conversion, not the full cost of the vehicle or engine. But I'll assume full value. If a small volume conversion shop converts an above average-cost $50,000 vehicle, it has to pay a reduced fee of 1% of the value of the vehicles converted, or $500 for this one vehicle. That's a noticeable amount, but it's less than the CNG tax credit and much less than the $8,000 to $18,000 conversion cost that your linked CNGchat mentions.So, what am I missing? Is it yet another state rule overriding the EPA rules?

    Comment by Clee | July 25, 2009


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