Two Challenges Holding Back Natural Gas Vehicles: Waste Management, Inc. (WM), Navistar International Corp (NAV)

Limited refueling capacity
The paucity of refueling stations across the country reflects a fundamental problem that has to do with incentives. Why should consumers go out and buy NGVs if there are hardly any refueling stations? And why should companies invest millions of dollars in building these stations if nobody owns NGVs? It’s a tricky dilemma.

Currently, there exist just over 1,000 natural gas stations in the U.S., as compared to nearly 160,000 gasoline stations. Of these natural gas stations, the vast majority are equipped for CNG-powered vehicles. But fewer than half of them are available to the public and more than a fifth are located in California.

Limited refueling capacity is also a bigger issue for some types of vehicles than others because of the physical properties of natural gas. One of the major drawbacks of using natural gas as a transportation fuel is that it’s not very dense.

For instance, CNG is only about a quarter as dense as diesel and liquified natural gas, or LNG, is about 60% as dense. Hence, trucks need more storage space for natural gas in either form, which requires either more tanks or bigger ones. Otherwise, they have to refuel quite often.

For delivery trucks or city buses, this doesn’t pose much of a challenge, since most of them usually return to home base – where there are refueling stations – at the end of each day. But for long-haul truckers that often have erratic routes, the lack of refueling stations remains a major issue.

Clean Energy Fuels Corp. (NASDAQ:CLNE) is aiming to change this, though. The largest provider of natural gas as a transportation fuel in the U.S., it already boasts more than 300 natural gas refueling stations across the country. Roughly 80% of these stations are equipped to refuel passenger cars and light-duty trucks that run on CNG.

And recently, the company announced its plans to develop a network of 150 LNG stations at Flying J truck stops throughout the country by the end of this year. In doing so, the company’s goal is to allow long-haul trucks to get to any major city in the country on LNG alone. Given that long-haul trucks already have major financial incentives to switch to natural gas, the addition of new refueling stations should provide an additional boost to demand.

The article Two Challenges Holding Back Natural Gas Vehicles originally appeared on Fool.com and is written by Arjun Sreekumar.

Fool contributor Arjun Sreekumar has no position in any stocks mentioned. The Motley Fool recommends 3M, Clean Energy Fuels, and Waste Management. The Motley Fool owns shares of Waste Management and has the following options: Long Jan 2014 $20 Calls on Chesapeake Energy, Long Jan 2014 $30 Calls on Chesapeake Energy, and Short Jan 2014 $15 Puts on Chesapeake Energy.

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