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COMPRESSED NATURAL GAS VEHICLES FOR THE CITY OF MILWAUKEE'S DEPARTMENT OF PUBLIC WORKS: A COST BENEFIT ANALYSIS

COMPRESSED NATURAL GAS VEHICLES FOR THE CITY OF MILWAUKEE'S DEPARTMENT OF PUBLIC WORKS: A COST BENEFIT ANALYSIS. Erika Cheng, Lael Grigg Erika Jones, and Adam Smith May 9, 2011. Overview. Project Scope – Erika Jones Cost-Benefit Analysis – Erika Cheng

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COMPRESSED NATURAL GAS VEHICLES FOR THE CITY OF MILWAUKEE'S DEPARTMENT OF PUBLIC WORKS: A COST BENEFIT ANALYSIS

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  1. COMPRESSED NATURAL GAS VEHICLES FOR THE CITY OF MILWAUKEE'S DEPARTMENT OF PUBLIC WORKS: A COST BENEFIT ANALYSIS Erika Cheng, Lael Grigg Erika Jones, and Adam Smith May 9, 2011

  2. Overview • Project Scope – Erika Jones • Cost-Benefit Analysis – Erika Cheng • Model, Analysis and Results – Adam Smith • Conclusions and Recommendations – Lael Grigg

  3. Problem Statement • Challenges • Cost-effective service delivery • Fluctuating fuel costs • Environmental emissions • Opportunities • CMAQ funding • Green the Fleet while reducing costs

  4. Research Question • Focus on Compressed Natural Gas (CNG) • Cost-Benefit Analysis: • What are the marginal costs associated with purchasing CNG fueled refuse packers?

  5. Natural Gas • Natural gas most feasible, available option • Lower carbon content, clean-burning • Compressed versus liquefied natural gas

  6. DPW Fleet Services Vehicles • In 2010: • 705 on-road vehicles using diesel • 966,700 gallons of fuel consumed • $2.8 million spent on fuel • Per vehicle, diesel vehicles are most costly

  7. DPW Refuse Packers • Account for roughly 5 percent of fleet • In 2010, 127 standard diesel refuse packers • 30 percent more than ten years old • Ideal vehicle life eleven years

  8. Assumptions • Section maintains current fleet size • Packers replaced after twelve year life • Ten new packers purchased in 2012 • Packers used until 2023

  9. Cost-Benefit Analysis • Compare costs of CNG and diesel packers between 2012 and 2023 • Estimate Net Present Value of choosing CNG

  10. Factors Considered Included in Model Not Included in Model • Vehicle Purchase Price • Fuel Costs and Fuel Economy • Tax Credits, Incentives, and Reimbursements • Environmental Emissions • Health Impacts • Project Life and Salvage Value • Energy Dependence • Garage Facilities • Fuel Safety • Fueling Stations • Labor and Training • Maintenance and Operations

  11. Factors Included in Model • Vehicle Purchase Price • Fuel Costs and Fuel Economy • Tax Credits, Incentives, and Reimbursements • Alternative Fuel Infrastructure Tax Credit • CNG and Diesel Fuel Excise Tax Credits • Federal CNG Vehicle Tax Incentive • Environmental Emissions and Health Impacts • CO2 and PM10

  12. Model Specifications and Analysis Notes Model Specifications • Four specifications • Results based on static point estimates • Results based on parameter ranges, random sampling

  13. Results Based on Point Estimates Net Present Value of 2012 CNG Refuse Packer Purchases Notes • 2010 dollars • Positive net present values • Large impacts of incentives • 343 tons of avoided CO2 emissions

  14. Results Based on Parameter Ranges Mean Net Present Value of 2012 Refuse Packer Purchases Notes • 2010 dollars • Positive net present values • Negative ranges

  15. Results, Continued Probability of Positive Net Benefits Probability of Net Loss Greater than $100,000

  16. Conclusions • Large impact of incentives • Modest impact of environmental benefits • Also found three very influential factors • Vehicle purchase price • Fuel cost • Fuel economy

  17. Conclusions • Relative vehicle purchase price • CNG initial vehicle price will likely decrease • Diesel vehicle cost may increase • The difference in up front costs significantly impacts our Net Present Value estimates

  18. Conclusions • Relative fuel cost • Fuel costs are not stable • Diesel prices change over time, sometimes from day to day • CNG prices also fluctuate

  19. Conclusions • Relative fuel economy • CNG fuel economy for refuse packers may increase

  20. Recommendations • Purchase ten CNG refuse packers in 2012 • Monitor vehicle performance and fuel costs • Continue pursuing grant opportunities and other incentives

  21. Special Thanks To the City of Milwaukee staff for their guidance and interest in alternative fuel vehicles. In particular, we thank Thomas Bell, Budget and Management Special Assistant; Michael O’Donnell, Quality Assurance Coordinator; Paul Klajbor, Administrative Services Manager; Jeffrey A. Tews, CPFP, Fleet Operations Manager. Professor Andrew ReschovskyThe LaFollette faculty and staff Stephen Collins, Peter Dermody, Sarah Hurley,Emily Ley, and Ted Schuster

  22. Questions?

  23. Hydraulic Fracturing • Process for recovering natural gas from shale • Wastewater contains known carcinogens • Exempt from Clean Water and Clean Air Acts • 2009 bills (HR 2766 and S 1215) introduced to remove exemption and protect groundwater

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