Natural Gas Vehicle Opportunities
Natural Gas Vehicles Will Kill the Electric Car
He told me natural gas would eventually kill the electric car.
A cocky Wall Street analyst with an Ivy League education and a deep yellow tarnish on his forked tongue from years of silver spoon abuse made this bold declaration at a fund-raising lunch I attended in New York last week:
Nothing's cheaper than natural gas. You can run your car on it for half the price.
Forget electric cars. Nobody's buying electric cars when you can fill your tank with natural gas at $2.00 a gallon.
Despite the fact that this guy had about as much likability as Kim Jong Il in a Speedo, he was right about one thing: With a natural gas-powered car, you can fill your tank for about $2.00 a gallon.
But is that enough to...
Kill the Electric Car?
Although I'm a long-time supporter of electric vehicles, it would be irresponsible as an investor to ignore potential threats to this market.
Maybe that Wall Street nimrod had a point.
So for the sake of clarification, I've decided to take a closer look at the benefits of natural gas-powered vehicles to see if they are, in fact, enough to close the lid on electric car development.
The first benefit is fuel price.
The most recent EPA report of compressed natural gas (CNG) prices indicates $2.13 per equivalent gasoline gallon. In some parts of the country, that's half the price of 87 Octane.
Of course, natural gas won't be dirt cheap forever... but neither will gasoline.
Quite frankly, I suspect there will be a 40 to 50 percent cost advantage for a natural gas-powered car over a conventional gasoline-powered car for the foreseeable future.
Now how does this compare to electric vehicles?
This one can get tricky because the price of electricity by kWh varies depending on when you charge and where you charge.
In other words, if you live in Connecticut, you're probably paying about $0.17 per kWh, while those living in Wyoming are only paying $0.06. And typically, electricity will run you more if you're using it during peak hours.
For the sake of objectivity, I'll just refer to an analysis presented by Edmunds.com, which used an electricity rate of $0.11 per kWh (the national average) to figure this out.
Based on that $0.11 per kWh and using the popular all-electric Nissan LEAF as the sample, Edmunds shows it will cost about $3.74 to go 100 miles. Not bad.
So how does the natural gas-powered car stack up?
For this, we'll use the Honda CNG Civic as our sample. This is the primary natural gas-powered passenger vehicle available to consumers today. It delivers a fuel economy of about 31 mpg combined.
Based on the EPA's $2.13 per equivalent gasoline gallon, it'll run you about $6.88 to drive the same distance.
Looking only at fuel costs, the electric car definitely comes out ahead.
However, before you electric vehicle lovers get too excited, consider that an all-electric Nissan LEAF will run you about $28,000 (after the tax credit), while the Honda CNG Civic will run about $26,000 — with no tax credit.
That's not to say fuel savings can't change that balance a bit, but out of pocket, the CNG car is cheaper.
Natural gas tends to be less energy intensive than gasoline.
The Civic CNG car will give you less horsepower than the regular Civic, and it doesn't even come close to the torque you'll get with the LEAF — or any other electric car, for that matter.
That being said, I would argue that range limitations fall into the “performance” category, as well.
The bottom line is that I cannot take a long road trip in a LEAF. And for long road trips in the CNG Civic, you will have to make sure you have access to a CNG station at least every 220 miles (the conservative range for this particular vehicle).
Now, fueling infrastructure is certainly an issue for both electric cars and CNG passenger vehicles, though electric car infrastructure is expanding rapidly, particularly in the Pacific Northwest and throughout California.
Many of the new electric car charging stations are also being equipped with level-3 chargers that can charge a 45-kilowatt battery from 20% to 80% in less than 30 minutes.
This doesn't mean we won't also see rapid expansion of CNG stations as well, but for now, electric vehicle infrastructure is ahead of the game. (Some of this may have to do with the simplicity of these chargers, though; it's much easier to connect a charger to the grid than it is to build a CNG fueling station.)
Electric cars also have a charging advantage in that nearly all can be charged at home.
Plug it in at night and wake up in the morning to a fully-charged car.
If you have natural gas at your home, you can have a natural gas fueling station installed at your home, too. This is, however, a pricier option than a dedicated electric car charger.
When it comes to performance, it's mixed.
There's definitely less of a range anxiety issue with the CNG Civic, however, I think the actual driving performance in a LEAF would be superior. (For the sake of full disclosure, I have not actually driven the CNG Civic, so I'm merely going by reports.)
On the infrastructure end, electric cars have definitely taken the lead — so far.
That could change... But the convenience and ease of plugging in at home far outweighs installing a natural gas fueling station in your garage.
And the Winner Is...
Sorry to disappoint, but there is no winner or loser here. It really just boils down to driving habits, electricity prices, and personal preferences.
And let's be honest — although both can (and will) make steady gains in the market place, it'll be decades before electric vehicles or natural gas-powered passenger cars even make a dent in a market that continues to be dominated by gasoline and diesel. That's just the reality of it all.
Of course, I know that the next car I buy will be electric. It just works better for me...
I don't have any daily long commutes to worry about, and quite frankly, they're just fun to drive: great power, smooth rides, and the immense joy I get from knowing that I'll never have to pull into a gas station again.
That being said, as an investor, I see no real opportunities right now in the electric car space — except for Tesla Motors (NASDAQ: TSLA), which I was fortunate enough to pick up for a steal last summer.
Tesla's got a good thing going, and it's pretty much the only pure electric vehicle play (including all those battery plays), that I have any faith in over the long term.
To a new way of life and a new generation of wealth...
@JeffSiegel on Twitter
Jeff is the managing editor of Energy and Capital and contributing analyst for the Energy Investor, an independent investment research service focusing primarily on stocks in the oil & gas, modern energy and infrastructure markets. He has been a featured guest on Fox, CNBC, and Bloomberg Asia, and is the author of the best-selling book, Investing in Renewable Energy: Making Money on Green Chip Stocks. For more on Jeff, go to his editor''s page.