LNG Continues to Make Inroads as a Transportation Fuel Across the Globe

Electricity is moving quickly in commercial vehicle markets. Subsidies in China have sparked an overnight transition in the bus market and established suppliers and startups are commercializing medium and heavy duty plug-in electric trucks. Guidehouse Insights’ recent report, Market Data: Electric Trucks and Buses, predicts the market for plug-in electric medium and heavy duty (HD) vehicles to grow by a compound annual growth rate of 9% per year between now and 2030. This market transformation is being driven by declining technology costs and increased government scrutiny of heavy vehicle emissions. The electrification of HD trucks presents a significant opportunity to reduce greenhouse gas (GHG) emissions, as these vehicles make up about 10% of the overall vehicle fleet but are responsible for almost 40% of road-transport emissions. There are significant challenges to electrifying HD trucks, however, creating an opportunity for alternatives. 

Competition for Electric HD Trucks

The most critical challenge for HD truck electrification is the lack of a sufficient charging solution. This challenge is similar to those of the light duty vehicle market, the main difference being HD trucks (particularly the ones driving the most miles) need to charge fast—faster than any vehicle or charger can supply. Solutions are possible but expensive and will take a long time to deploy. This places electrification on a more level playing field with other potential alternatives, like liquified natural gas (LNG). 

LNG has significantly lower carbon intensity, particulate matter, and NOx emissions relative to diesel. The GHG characteristics of LNG can be further improved through use of renewable natural gas feedstocks, also known as biogas. Additionally, low oil prices, advantages of scale, and relatively short refueling times all make for a competitive business case against electrified long-haul freight. 

LNG HD Truck Market Around the World

China is the leading market for LNG HD trucks thanks to a government push to reduce vehicle emissions. Between 2016 and 2017, Chinese production of LNG HD trucks grew by almost 500%. It is also reported that China is developing new policies, to come into effect in 2020, that would replace up to 1 million HD trucks with more modern ones running on cleaner fuels. 

Outside of China, there are LNG efforts taking shape around the world. In the US, public fueling corridors are already being established. In Europe, a consortium including Shell, Disa, Scania, Osomo, and Iveco called BioLNG EuroNet is committed to expanding LNG as a transportation fuel. The group is leasing 2,000 new LNG HD trucks, building 39 new retail fueling stations for a pan-European network, and constructing a bioLNG plant in the Netherlands. These endeavors are part of an effort to help meet the European Union’s goal of 60% emissions reductions by 2030. Additionally, in the Netherlands, Volvo delivered 14 LNG trucks to a logistics provider in January 2019. Also in January, Argentina fueled up its first LNG HD truck fleet and is looking to build LNG fueling stations across the country.

Guidehouse Insights expects interest in LNG to continue to grow as an alternative to long-haul diesel trucks, and for electrification to permeate in use cases with predictable and manageable routes. Unless electricity can deploy a competitive charging solution before a virtuous cycle for LNG HD truck market growth emerges, it will be extremely difficult for electricity to completely take over this market even in scenarios where carbon pricing is aggressive.