AGENDA #5e
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Cost-Benefit Comparison for Alternative Fueled Vehicles
DATE: April 9, 2001
This information report responds to the Town Council’s request for information on the costs and benefits of alternative fueled vehicles. We apply the term “alternative fueled vehicle” to any vehicle that uses a fuel or power source other than gasoline or diesel.
Based on guidance from the Mayor and Town Council, the staff submitted a Mobile Source Emissions Reduction grant application to the Division of Air Quality, Department of Environment and Natural Resources, State of North Carolina, on about December 17, 1998. Our grant application requested $100,100 to support two electric vehicles and four compressed natural gas (CNG) vehicles. In a letter dated April 5, 1999, the North Carolina Department of Environment and Natural Resources notified us that our grant application had been approved for $85,100, which funded about 85% of our request.
The staff subsequently developed a request for proposals for the installation of compressed natural gas refueling equipment to be installed at the Public Works Compound and the Parks and Recreation Administration building. We also ordered six vehicles, including two electric Ford Ranger pickup trucks (Engineering and Public Works), two dedicated CNG Ford Crown Victorias (Police and Parks and Recreation), one bi-fuel Ford F-150 pickup truck (Parks and Recreation) and one dedicated CNG Dodge Van (Police Department). We have completed installation of all refueling equipment and have placed three vehicles in operation. We are waiting for delivery of the two electric Ford Ranger pickups and one of the dedicated CNG Ford Crown Victorias. The vendors are anticipating delivery of these vehicles within the next 60 to 90 days. In the current fiscal year, we have ordered three dedicated CNG Ford F-150 pickup trucks, two for the Solid Waste Services Division and one for the Parking Services Division.
Since August 1999, the Internal Services Superintendent, Public Works Department, has been a member of the Triangle Clean Cities Designation Project Steering Committee sponsored by the Triangle J Council of Governments. On March 19, 2001, Mayor Waldorf attended the Clean Cities designation ceremony and signed the Clean Cities Coalition memorandum of understanding committing the Town to continuing our participation in the Clean Cities program and continuing our efforts to increase the use of alternative fueled vehicles. We expect that the Clean Cities designation for the Triangle region and our continued participation in this effort will lead to the availability of grant funds for which we were previously ineligible.
This paper will discuss the costs and benefits of several types of alternative fueled vehicles, some of which the Town is already using. The primary benefits associated with all of these alternative fuels are reduced harmful exhaust emissions, improved outdoor air quality and reduced reliance on foreign oil for fuel supplies. In almost every case, there is a trade-off between the cost of vehicles, the cost of fuel and the range of the vehicles. As a general rule, the decision to use alternative fueled vehicles would be based on concerns over reducing air pollution and reducing reliance on foreign oil, not on reducing the cost of purchasing and operating the vehicles and not on reduced energy consumption.
Energy Policy Act of 1992 (EPACT)
The Energy Policy Act of 1992 authorizes the Department of Energy (DOE) to pursue a rulemaking concerning alternative fueled vehicle acquisition requirements for private and local government fleets. Federal, State and utility company fleets are already under EPACT mandates for alternative fueled vehicle acquisition requirements. DOE has published an “Advanced Notice of Proposed Rulemaking and Notice of Public Hearings” on this matter with respect to private and local government fleets. The public hearings were conducted within the past year. DOE is currently analyzing the issues surrounding this proposed rulemaking, including input received at the public hearings. The DOE has the authority to issue a rulemaking that is less stringent than the maximum allowed. If they issue a rulemaking that uses their entire authority, the acquisition schedule for local government light duty motor vehicle fleets would be:
20 % of purchases in model year 2002
40 % of purchases in model year 2003
50 % of purchases in model year 2004
70 % of purchases in model year 2005 and thereafter
Compressed Natural Gas (CNG)
The Town now has three CNG vehicles in operation and four more on order. Some of the reasons that we selected this technology over others are:
· Natural gas is piped to most of our facilities. The fuel is readily available.
· A variety of CNG vehicles is available on the State contract.
· The reserves of domestically supplied natural gas are reported to be very large.
The attached “Comparative Life-Cycle Cost Analysis” shows cost estimates for two types of CNG vehicles currently in the Town’s fleet. The increased purchase price for the CNG vehicles is about $3,000 to $4,000 per vehicle. A few months ago, the operating costs for gasoline and CNG vehicles were about the same; however, recent increases in natural gas prices have made it about 60% more expensive to use CNG over gasoline. The literature on CNG vehicles suggests that there may be some minor savings on maintenance costs; however, we have not had our vehicles long enough to test this theory. For the purposes of our analysis, we are assuming that maintenance costs will be about the same. The overall analysis shows that, depending on the make and model of the vehicle, it is about 16% to 22% more expensive to purchase and operate CNG vehicles. This equates to about $5,000 over the 7-year service life of the vehicles. About 75% of this cost on our first four CNG vehicles will be reimbursed by our Mobile Source Emissions Reduction grant. The additional cost for the three Ford F-150 pickup trucks ordered in fiscal 2000/2001 will be borne by the Town.
The Town entered into a three-year lease agreement for two electric Ford Ranger pickup trucks in April 2000. Due to production difficulties and product recalls, Ford Motor Company has delayed the production and delivery of these vehicles several times. The dealer is now projecting delivery of these vehicles during May or June of 2001. The primary advantage of these, and any other electric vehicles, is that they produce no harmful emissions. The purchase price of these vehicles is extremely high at about $36,500 per vehicle, as compared to about $11,300 for comparable gasoline-powered pick-ups. The cost of ownership includes replacement of the battery packs every three years at an additional cost of about $14,000 per vehicle. Based on advice from the Ford Motor Company, we elected to lease these vehicles for three years for a total of $15,300 per vehicle.
As shown in the attached analysis, the cost of acquiring and operating these vehicles is about 222% of the cost of owning and operating a comparable gasoline fueled vehicle. This includes the fact that there is very little maintenance cost with the lease agreement and that the cost of fuel (electricity) is estimated at about half the cost of gasoline for the same miles traveled. The incremental cost of operating these vehicles equates to about $20,200 per vehicle over the 7-year service life of the vehicles. If we elect to extend the lease beyond the initial three-year period to the full 7-year service life of the vehicles, about 75% of this cost will be reimbursed by our Mobile Source Emissions Reduction grant.
Ethanol (Marketed as E-85, a mixture of 85% ethanol and 15% gasoline)
Some manufacturers have begun
producing “flexible fuel” vehicles that can run on more than one kind of fuel
without modifications to the vehicle.
One such vehicle is the flexible fuel Ford Taurus, which can burn either
E-85 or gasoline. The Town now has
about eight of these vehicles in the fleet and more are on order in fiscal
2000-2001. The primary advantages of
these cars are reduced harmful emissions and the fact that there is no
increased purchase price over a standard gasoline model. The primary disadvantages are
non-availability of fuel, high cost of fuel and reduced travel range. The fuel availability problem may be
eliminated in the near future. The
University of North Carolina has applied for a Mobile Source Emissions
Reduction grant for the installation of an E-85 fuel tank. The terms of the grant will require that
they make E-85 fuel
available for purchase by other tax-exempt agencies in the region. If they are successful, we will be able to
begin buying E-85 from UNC-Chapel Hill within about one year from the time of
the grant award.
As shown in the attached analysis, the current market price of E-85 is about 1.8 times as much as gasoline. This cost differential is compounded by the fact that E-85 is only about 80% as efficient as gasoline, resulting in reduced mileage and vehicle range. At current market prices, we estimate that the cost of operating an E-85 vehicle would be about 9.2% over the cost of a comparable gasoline vehicle. This equates to about $2,200 over the 7-year service life of the vehicles.
Biodiesel is a vegetable oil product, typically made from soybeans. It is usually marketed as blended B-20, a mixture of 20% biodiesel and 80% regular diesel fuel. It can be burned in any diesel engine equipment, including transit buses, without vehicle modifications. According to major suppliers, B-20 is readily available in the market and can be delivered to our existing diesel fuel tanks without tank cleaning or tank modification. As with other alternative fuels, the primary benefits are reduced harmful emissions and reduced reliance on foreign oil.
Under EPACT, for every 2,250 gallons of blended B-20 used, the user gets credit for one alternative fueled vehicle acquisition, up to 50% of your obligation. Earning one of these “credits” allows an organization to reduce the required number of purchases by one vehicle in any given year. If the Town began using B-20 for the entire fleet (excluding transit buses), we would consume about 100,000 gallons per year, thus earning about 44 alternative fueled vehicle acquisition credits. Since B-20 costs about $0.15 per gallon more than regular diesel fuel, the annual cost to the Town would be about $15,000. Including our transit bus fleet would increase the cost and the number of alternative fueled vehicle credits earned.
In the event that EPACT mandates are expanded to include municipal governments, the Biodiesel option would be one way to achieve compliance quickly with little or no capital equipment costs. Because there are no specialized vehicles to buy and no specialized fuel storage tanks to buy, this decision could be implemented by simply ordering B-20 for delivery to our existing diesel tanks. This course of action would permit us to take time to analyze all of our options more thoroughly before making a long-term commitment to a particular alternative fuel technology.