The European road transportation industry is being thrust into a decarbonisation journey at breakneck speed, particularly as governments implement expensive road tolls and clean air zones to foster environmentally-friendly fleet upgrades. As this drive towards greener logistics accelerates, the role that biofuel could play is seemingly being pushed further up the agenda.
Given the somewhat urgent need to upgrade fleets and bring CO₂ emissions down now, thereby also lowering road toll costs, a number of major road transport operators have turned to biofuels, whether it be biomethane or HVO.
A supplier of the former is CNG fuels, who were founded back in 2014. The company now sports 12 sites in the UK that are used by around 1,400 CNG trucks. CNG fuels also has plans to expand this number to between 30-40 by 2026.
Availability of both fuel/energy and fueling/charging infrastructure is of course key to giving fleets the confidence to upgrade. As are factors such as fuel costs and total cost of ownership.
Taking all of the above into account, we caught up with Philip Fjeld, CEO of CNG fuels, to get his thoughts on the HVO vs biomethane discussion, as well answers to pressing questions on supply, pricing, and the influence that regulatory frameworks may be having on fleet purchase decisions.
Read on to learn:
- The pros and cons of biomethane and HVO
- Why CNG fuels are confident of there being plentiful supply of biomethane in the relatively near future
- How biomethane is produced
- How attitudes towards biofuels are changing
Thanks for joining us Philip. How has CNG fuels grown since its foundation, and what is the state of play when it comes to your UK network today?
We founded the company back in 2014 with the goal of decarbonising UK road freight, particularly the HGV segment. It’s fair to say that it took us 6 years to really start to get lift off with regards to adoption rates for UK fleets running on biomethane.
However, in the last three years, we have not been constrained by demand from fleets, but rather the amount of public access refuelling stations.
Building infrastructure across the UK is very hard; it takes a long time to negotiate with the landowners. Then you need to get surveys done. Environmental surveys can take 6-12 months, after which you submit a planning application that can take 12 months to get through. Next you need to discharge conditions and start building.
Realistically, it can take you anything from 3-5 years to build a public access refilling station. This means that it takes a long time to actually put a station where customers want one.
Today we have over 1,400 trucks running exclusively through our station network that run on biomethane. I think there are about 135,000-140,000 articulated trucks in the UK, so we have about 1% of that market.
How does biomethane compare as a biofuel to HVO? What factors should carriers consider when opting what biofuel route they should go down?
When it comes to biomethane, it is a 100% renewable and sustainable gas produced from a waste feedstock. It’s a very broad feedstock base that itself can be produced from sewage, manure, food waste, agricultural waste and residue, and so on. There’s a very broad spectrum of feedstocks that can be used.
This is important from a sustainability perspective, as well as supply volume perspective, as it means when there is a lot of feedstock, there is a lot of production potential for biomethane.
If you are a transport manager and are looking at your choices today, then battery electric is not really an option. Yes, you can theoretically go and buy one, but it’s expensive. Charge times are longer than desired, and they cost more too. Moreover, we are hearing from a lot of customers that they can’t get the electrical capacity they need on the grid to actually charge them
Hydrogen isn’t quite here yet either. You can’t really get trucks, while there is hardly any green hydrogen production. That’s something for the future. Until the point when, or if, that emerges, two options remain – HVO and biomethane.
Now, we don’t provide HVO, but I’m not going to knock it in any way because we want to see transport decarbonised as quickly as possible.
The big advantage with HVO is that you can take your regular diesel truck today, stop using fossil diesel, and immediately start using HVO.
If you use the so-called B100 blend, you don’t have to do anything to your truck other than have a different diesel tank I believe. That’s easy to fix though, and you can immediately go from running on predominantly fossil fuel to running on something 100% renewable and sustainable. From a vehicle perspective, this is the best option because you can switch over immediately.
However, the challenge with HVO is that it’s more expensive. Currently, it’s about 40 to 50% more expensive than regular diesel. Also, from what we are told, it’s very hard to get a long term contract.
That means that if HVO is your long term strategy, you clearly need to know that there is a good probability that you will have a long term supply. From what we hear, it’s not just the cost that is an issue, there’s also the need to lock down a long-term supply of HVO at a certain price point.
Moreover, there’s the potential challenge around feedstocks. HVO can be produced from palm oil, which has been an issue in the past. What we understand is that today HVO is predominantly produced from used cooking oil and tallow. This is still an issue though, because there is a limited supply.
We have a lot of customers that run both biomethane and HVO trucks. From what we see, they have more ambitious ordering plans for biomethane trucks than for HVO ones – purely because of cost and availability of supply.
On the other hand, biomethane requires a new truck. So you can’t just take a diesel truck and convert it to run on biomethane. When your diesel truck gets to end of life, either you scrap it or you sell it on to the second or third owner. You would then go out and buy a brand new CNG truck.
The CNG truck does cost a bit more than a diesel truck – currently about £20,000 on average. So you have a slightly more expensive truck, but maintenance costs are the same – and the fuel is cheaper.
At this point in time [September 2023], it’s probably 30 to 35% cheaper than regular diesel. That means the pence per mile saving is quite considerable compared to diesel. Therefore, the typical payback period of the additional cost of your vehicle is 1-2 years. A typical fleet keeps the gas truck for 5-7 years. So there is actually a strong Total Cost of Ownership argument to be made for running on biomethane as opposed to diesel.
This is one of the main reasons that we’re now starting to see mass adoption occur. The availability of biomethane feedstock is increasing too, as is biomethane production capacity.
In comparison, the feedstock that’s used to produce HVO is mainly used cooking oil and tallow – at least in terms of the HVO that we use here in the UK and across Europe. The issue with used cooking oil and tallow is that it is also seen as the main feedstock that will be used to produce sustainable aviation fuel in the future.
There are mandates coming in from the 1st of January 2025. The exact same feedstock used to produce HVO today will be used to produce the vast majority of SAF in the future.
So there’s great competition for that feedstock. Therefore, both the price and security of supply of HVO in the future is potentially challenging. That’s something that our customers are aware of.
Many of them are potentially running both fuels, but have concerns around the availability and supply of HVO in the future.
What about biomethane supply? Are there any concerns about it being impacted and thus its price rising?
We have the ability to source biomethane not just in the UK, but also from European countries.
The EU has put a plan in place called Repower. As part of that plan, the EU wants to increase tenfold their production of biomethane over a 10 year period.
Now, a lot of people might say targets are just targets, that targets are set, then missed and that nobody really cares.
I can see why some people say that, but the reality is that the Repower plan for biomethane is actually realistic. There are currently billions and billions of euros being invested into new production capacity across the EU. There will be lots of new projects here in the UK as well.
There’s a lot of waste feedstock out there that can’t be used for anything other than either being left outside to rot, or driven to a landfill. You can’t use it to produce biodiesel, you can’t use it to produce bioethanol. Therefore, it only has one home, and that is to an anaerobic digestion or a biomethane production facility.
There are also 20,000 biogas facilities in the EU, and around 400 in the UK. These are facilities that produce biogas and generate electricity with it. However, the majority of them will lose their feed-in tariff subsidy sometime between 2025 and 2032. These subsidies are highly unlikely to be renewed. I would say that 90 to 95% of those will not get any more subsidies. So then you have to make a choice.
Do they want to produce biogas and continue to produce electricity, but only get the market price for that electricity, which is volatile?
Although everyone believes that prices won’t be as volatile as in the past couple of years, if such companies are not going to get that subsidy, then they will sit back and ask themselves how they can make more money out of their gas. The answer is by cleaning it up by either injecting it into the grid, or by putting it in a trailer and taking it somewhere where it can go into the grid, thereby producing biomethane.
We’ll see a massive shift all across Europe and lots of interest in the UK, for biogas facilities to be re-engineered. It doesn’t take a lot to produce upgraded gas and to put that into the grid. Then it just needs to find a home that can pay more than just the grid price of gas.
Transport today is likely to be the largest market that will attract gas from such producers. So to summarise, we don’t really see a biomethane shortage on the horizon.
We don’t believe there is necessarily going to be a huge upward pressure on pricing. But as we all know, pricing is volatile. With regards to this, HVO probably has more systemic issues ahead with regards to feedstock supply and cost of feedstock than biomethane does.
How are policy decisions impacting the growth of biofuels in the road transportation market in the UK and Europe?
There’s no doubt that greater policy clarity and greater policy support would have led to an even stronger biomethane uptake.
That said, eventually the laws of physics don’t bend, and reality sometimes comes in and actually overtakes ambition and grand plans for the future.
The UK has said that all new rigids need to be zero tailpipe by 2035, and that all new articulated lorries (artics) need to be zero tailpipe by 2040. That is incredibly ambitious.
Now, I won’t say it’s impossible to meet, because we as a society and as humanity have managed to put people on the moon and what have you.
Even so, 2035 is just 12 years away. In the meantime, there is little happening with regards to a hydrogen refuelling station nationwide network, or charging infrastructure that can support tens of thousands of new zero-emission rigids in time for 2035. It’s not happening.
As for the vehicles themselves, I’m sure they can be ordered. We are reliant on the European truck manufacturers though.
The UK is a big market, yes, but it is not the main market, we are reliant on European manufacturers wanting to comply and build trucks to regulations that may be out-of-sync with the EU. Whenever a new model is launched, it is always available in left-hand drive first. The right-hand drive version is typically available some 6,12 or 18 months later.
It is bordering on naive for policymakers to believe that manufacturers will just have their own production lines for something that might be out of sync with what the EU is doing.
Also, in the last 6-12 months, there has been a clear push amongst certain EU member states to support sustainable fuels – both liquid and gaseous biofuels. In other words, fuels that can be used by an internal combustion engine.
This is happening as people are seeing what we’re seeing – that the targets some wishful policymakers had at one point in time are very hard to meet.
Based on what we’re seeing, we believe over time there is a slow but growing realisation that we need biofuels and liquid gases for a lot longer than what the current narrative says.
So, getting back to your question, how is the policy backdrop impacting fleet renewals?
As I’ve said, we have fleets with ambitious decarbonisation targets and commitments they need to meet. That means they can’t wait for something to come in the future – they must act today to get moving.
Typically, the large blue chip fleets renew their vehicles every 5-7 years. This means they aren’t worried about an artic zero tailpipe ban in 2040 because that date is between 2-3 cycles away when it comes to truck ordering.
Although we’ve seen fleets sitting on the fence for the last two years, now they’re very much off the fence as they can no longer wait. As long as they don’t have to build their own biomethane refuelling stations, a biomethane truck is still a truck.
Battery artics don’t really work for fleets, because of the charging infrastructure. There’s also limited range and loss of payload to consider as well. Therefore, they say they need to go with something that works today.
Photo: CNG fuels
How is your UK network growing?
It took us over 8 years to grow to 1,000 trucks exclusively using our CNG network. We will go from 1,000 to 2,000, 12-15 months later, which shows you how we’re now on this hockey graph when it comes to adoption rates.
This is being driven by the fact that we’ve now reached a critical mass of fleets that have been trialling trucks for years and maybe had 10-30 biomethane trucks in their fleet of around 1,000 trucks.
Now these companies are finding the trucks work just as well as a diesel one, the drivers love them, and they can carry out the same work. Moreover, the economics work, the stations are reliable, and now they’re going big on orders. In addition to this, our station network has matured – we’ve now got 12 large public access stations.
12 stations isn’t a lot, but we’ve got one in Scotland for instance, and now we’ve one in the southwest as well. We’re just about to open a station in Wales too. So we’re slowly but surely filling in dots on the map that were missing.
Our site in Newton Aycliffe in the northeast is a typical example of one of our stations. As many as 14 trucks can refuel there simultaneously. That’s 80 trucks per hour during the day, so about 800 trucks a day. We’re expanding on that number of stations as well.
Today we have the capacity to refuel about 6,000 trucks across our network, and we’re at about 25% utilisation. So we’ve got lots more spare capacity within our existing network for customers to have the confidence to continue to order trucks.
We also have a pipeline of new station locations that are now coming through, which puts us in a position next year to really hit the ground running. We could start to build 2-3 stations per quarter going forward. So whilst it’s taken us nine years to get to 12 stations, we expect that by 2026 we will be at somewhere between 30 to 40 stations.
That is key to unlocking even greater growth and even greater adoption. Right now, you can’t just order a CNG truck and get down to the local shell garage and fill up. You need to know that there is infrastructure in place.
Fleets now are convinced that our infrastructure is reliable and that it works. This means they can just go ahead and order trucks as long as we have stations in the area.
We’ve reached a tipping point now where we ourselves are holding back growth. We would have fleets order a lot more trucks, but they are lacking stations in certain key locations, which we are now busy developing.
Finally, It’s easy to get the impression that the big policy makers in the EU and various national governments across Europe are giving biofuels the cold shoulder. There’s lots of talk about hydrogen and electric trucks being the solution, with biofuels arguably left in the shade. Do you feel similarly, and is it frustrating at all?
I wouldn’t say it is frustrating, but I’ve given up on it all. We’ve spent the last nine years trying to educate policymakers and politicians about what we do. The sad reality is biomethane fuel is not seen as sexy enough.
Policymakers and politicians seem to prefer something that’s going to happen in the future that’s shiny and new.
Often I try to think why this is the case. I’d say it’s because it erodes accountability. If you bet on a horse that is gonna do well, 5 or 10 years in the future, as policymaker, you will likely have been moved around in government by then.
Politicians seem to back solutions that aren’t really here today, because it’s impossible to judge you on success or failure because you will be long gone anyway.
