General Electric Company (GE), Caterpillar Inc. (CAT): Is This Natural Gas’ Next Big Market?

The relatively low price of natural gas and its clean image have made it a favorite fuel source for an increasing number of industries. Add trains to that list, with General Electric Company (NYSE:GE) and Caterpillar Inc. (NYSE:CAT) looking to get into the market.

Regulations

The world is increasingly concerned about the emissions produced from using carbon-based fuels. That’s led to a crackdown on power plants that use coal, as well as increasingly stringent rules on trucks and cars. While some have pushed alternative fuel sources as an answer, Clean Energy Fuels Corp (NASDAQ:CLNE) is suggesting new uses for an old fuel—natural gas.

While some may balk, the idea is starting to catch on. For example, Waste Management, Inc. (NYSE:WM) has been increasingly using natural gas-powered trucks in its fleet. It has more than 2,000 such vehicles and around 40 natural gas fueling stations, some of which are open to the public or are shared with other fleet vehicles. It has plans to build dozens more natural gas stations.

Clean Energy Fuels Corp (NASDAQ:CLNE), meanwhile, has relationships with around 350 such stations that it either owns, operates, or supplies with fuel in 32 states. However, the money-losing company has bigger aspirations. It knows that switching over the country’s consumer vehicle market is a non-starter because of the scale of the gasoline infrastructure. So, it has built around 70 natural gas fueling stations on the U.S. interstate highway system.

The goal is to get trucking companies to shift to the fuel. No long-haul trucker, however, is going to buy a natural gas powered rig if he can’t find enough fuel stations. So, Clean Energy is making the big upfront investment. If truckers do make the shift, the company will be well positioned. That said, since natural gas is the company’s only business and it isn’t making any money right now, it is a risky and leveraged play on a shift to natural gas on U.S. roads.

A Different Kind of Fleet

However, natural gas can be used to fuel a lot more than just cars and trucks. In fact, General Electric Company (NYSE:GE) and Caterpillar Inc. (NYSE:CAT) are both working on natural gas powered locomotives for the train industry. William Ainsworth, CEO of Caterpillar Inc. (NYSE:CAT)’s Progress Rail Services unit, recently told Bloomberg that customers have “already run models on the fuel savings. It’s not that we have to pitch the fuel savings. We’ve just got to get the technology right.”