September 11-15, 2017
Category: Fleet

The Cost Conundrum

Looking at the big picture of investing in alternative fuels, the cost to beverage distributors will vary widely, but it can be very worthwhile.

Beverage companies need to consider a host of factors, including: how long they run their trucks, driver acceptance, how big their fleets are, how long they keep their vehicles, how many miles they put on them, the sizes in their vehicle fleet, whether they travel any long distances or just do local deliveries, the cost of infrastructure, the up-charge for alternative fuel vehicles, the cost of the fuels, what kind of fuel, creating an environment image in the community, the possibility of leasing, and how to handle maintenance.

It’s a major calculation that for most largely comes down to the cost of getting in vs. the savings from fuel costs.
“The total investment is probably five-fold, not only the vehicle and the infrastructure, but the fuel, the maintenance of the vehicles, the maintenance and operation of the infrastructure, and then some of the soft intangibles like driver acceptance, mechanic acceptance, and that type of issue,” says Tucker Perkins, chief business development officer, Propane Education & Research Council. “With propane autogas, you have a competitive advantage in nearly every one of those areas.”

There’s no one-size-fits-all answer, says Jeffry Swertfeger, director of marketing, TruStar Energy. “It’s a tough thing to answer. It comes down to what do they want their fueling strategy to look like,” he notes.

“Customers say: ‘We just don’t think it will pencil out.’ But if you don’t call us, you will never know. There are a million different scenarios out there that we can look at. There is not just one way to put in a station, not just one way to provide fuel to a fleet. There’s a million different ways to look at that equation.”

But overall, “there’s never been a better time to get into alternative fuel with the daily expense of infrastructure, as well as new higher torque engines for Class A trucks. It makes more sense now than ever,” Swertfeger says.

“It depends on the number of vehicles that you are talking about, how fast you want to convert your fleet, whether you want to buy new vehicles or if you are thinking of converting existing vehicles to natural gas, whether you want to own your own station or have someone else own it. There’s no set answer,” agrees Rich Kolodziej, president, NGVAmerica. “But if a fleet is interested, there are many companies willing to work with them.”

Challenging Economics
At Ryder System, Scott Perry, vice president of supply management, says: “The economics for a beverage distributor may be a bit of a challenge, depending upon their return horizon, and that’s where we’ve seen some of the organizations that we’ve talked to that are considering making this change.”

The cost of a fueling station is going to vary “depending on the equipment packages, and how many dispensers,” among other factors, says Scott Magnus, director of marketing, Trillium CNG. “More and more, you are going to see beverage distributors turn to CNG for a variety of reasons. One is, CNG is a great fuel for those return-to-base fleets, which a beverage company would be. They load their product, they distribute it to their customers, they come back, and they refuel at night. The fuel is certainly affordable and economical. It is abundant. And it obviously has the environmental benefits to it as well,” Magnus says.

Trillium CNG is working with Golden Eagle Distributors to build two private/public stations; one just opened. “You will see more of those private/public situations where it benefits their fleets, but the public can also use it, and other companies can use it as well. But it is going to be during their hours of operations. So I see that as becoming more and more widespread,” Magnus says.

Good Public Relations
In calculating the investment in clean fuel, beverage companies also have to factor in the public relations benefit, along with the savings in oil changes, Perkins notes. “They want and need to be able to talk about how they are a part of the community. It is an image-conscious business, and it is exceedingly good for your image when you switch to a domestic alternative fuel that, in addition, saves your CFO money,” he says.

This is more than just an investment in fuel.

“You not only have the initial cost of the vehicle, you have cost of the infrastructure, you have the cost of the maintenance,” Perkins says.

Training tools for the staff is another part of the cost. Adds Perkins: “Anytime you do this, you don’t want to affect your operation. The business of a beverage operator is to provide as many products as they do to their customers as fast and as cheaply as they can. While fuel is a significant piece of it, fuel is just a necessary evil. That’s not their business. So when they choose propane autogas, they get a significant competitive advantage in each of these categories: The initial cost of the vehicle; the cost of the fuel; and the cost of the infrastructure.

“So if you look at the lifecycle cost of the investment they are making, it is relatively low, compared to the savings they get,” Perkins says.

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