Marketers got their first glimpse last week at the NACS Show expo of a new compressed natural gas (CNG) retailing system that will allow them to offer CNG at their stores through simple “plug-and-play” equipment and traditional-looking Wayne dispensers, complete with hoses and credit card reader.
The CNG In A Box system is being unveiled by General Electric (GE) in partnership with Chesapeake Energy Corp. and should give marketers easy access to the growing CNG light vehicle market—passenger cars, pickups, vans, SUVs, and taxicabs, as well as buses, garbage, and delivery trucks.
However, retailers who sell gasoline as a loss leader at their stores will need to rethink their marketing strategy when it comes to CNG, says Kent Wilkinson, an executive with Peake Fuel Solutions, an affiliate of Chesapeake that is helping bring GE’s CNG tech to market. “In many operations today, a marketer’s retail price is a commodity price and a small portion of his capital costs, and he makes his money from in-store sales,” says Wilkinson. “With CNG, it’s the other way around — it’s a high-margin product that you can use to drive people to your store.”
Marketers who have hesitated to embrace alternative fuels may find the CNG box concept improves their comfort level. There’s no need for complex spec sheets, because almost everything needed is included in the 8.5 ft. by 8.5ft by 20 ft. long box, including the compressor and gas cooler. Only two pieces are shipped separately: the Wayne dispenser and the motor control center.
Of course, marketers will need access to a natural gas line, the kind that runs into millions of U.S. homes, in order to retail CNG. The wholesale cost of natural gas runs about 40 cents per-gasoline-gallon-equivalent (gge) and commands a retail price of around $2.09/gge, providing a $1.69 gross margin for utility and operating costs and capital recovery. Retailers will often conclude that 15,000 gge/month is sufficient demand to initiate investment, Wilkinson notes.
The market for CNG has been growing steadily, especially with gasoline prices on the increase. Ford, General Motors, and Chrysler are all coming out with light-duty pick-up trucks and overall production is expected to be around 4,000-plus vehicles a year per OEM.
Currently, there are approximately 1,100 CNG fueling locations in the U.S. serving a total 125,000 to 150,000 vehicles. In a light-duty pick-up market, a customer base of 150 to 200 vehicles would be enough to pay off your investment in terms of cash flow, he says.
Obviously, cost is a major factor, and it will vary, depending on how fancy the marketer wants to get. Generally, a CNG in A Box system will run from $700,000 to $1.2 million, depending on the dispenser options chosen, or whether a marketer wants a canopy. Local jurisdiction requirements for spacing and public amenities, site conditions, and whether it will be an attended or unattended operation also play a part. (Carole Donoghue, NACS: www.nacsonline.com)