Issue: Oct 2011


Natural Gas network coming on stream



by Jon Knox

Demand for Natural Gas-powered vehicles is growing strongly. According to U.S. Natural Gas Vehicle (NGV) As¬sociation, more than 12 million NGVs are in use worldwide, with 110,000 of those in the United States. The International Association of Natural Gas Vehicles estimates that more than 50 million NGVs, or about 9% of the world’s transpor¬tation fleets, will be on the road within the next 10 years. 

On September 1, 2011, a major step toward making natural gas a mainstream transportation fuel in the U.S. was taken. The Integrys Energy Group — a U.S. Fortune 500 company — acquired Salt Lake City, Utah-based Trillium USA and Midland, Texas-based Pinnacle CNG Systems from Wagner & Brown. Trillium USA, the second largest provider of compressed natural gas (CNG) in the U.S., is now coupled with Pinnacle CNG, a manufacturer and provider of CNG fueling solutions, under a new division, Integrys Transportation Fuels, LLC. 

“Expansion into this business (CNG) is consistent with our mission of providing customers with the best value in energy and related services. Our decision to enter this market is in response to customer needs, and is complementary to our existing skill sets in regulated and non-regulated natural gas and electric services,” said Charlie Schrock, Chairman, President and Chief Executive Officer of Integrys. 

Automotive Industries (AI) asked Mark Radtke Executive Vice President and Chief Strategy Officer for Integrys to tell our readers about the Integrys strategy in the CNG fuel market. 

Radtke: All signs point to CNG becoming a mainstream transportation fuel for the country in the next decade. These include a vast supply of domestic natural gas, forecasts for low and stable long-term natural gas prices, the environmental benefits of a clean-burning, low-carbon fuel, and an increasing supply of competitively priced NGV products for consumers. But perhaps one of the biggest reasons the market is ready is that CNG is a comfortable choice when compared with gasoline and diesel. Gasoline and diesel are driven by global market demand and can be affected by disruptions related to that. Moving toward something more predictable is attractive to customers. 

Our strategy aims to build market share through our demonstrated capability in the energy delivery business, and by capitalizing on the proven expertise of Trillium USA and Pinnacle CNG. The acquisition provides Integrys with the resources it needs to execute a customer-focused CNG strategy immediately. The companies provide 20 years of experience, and bring to the portfolio a network of existing refueling stations, operating infrastructure, and a market reputation built on their years of demonstrated capability and reliable performance. Today, Trillium USA and Pinnacle CNG provide fuel for thousands of natural gas-fueled vehicles, amounting to about 45 million gasoline gallon equivalents of CNG annually. 

Going forward, the goal is to build on the expertise of these two companies and expand our presence across the U.S. This will mean a continued focus on Trillium’s and Pinnacle’s very successful business lines, which include transit, retail fuel sales, and proprietary customer fueling solutions, while adding new resources in growth markets to service fleets through networks of efficient and well-operated stations. 

AI: How optimistic are you about the growth of CNG in the U.S. transportation industry?
Radtke: Everything we see in terms of market fundamentals points to a rapid adoption of the fuel in transportation in the near term. The primary drivers for NGV adoption are the spread between petroleum fuels and CNG, and the availability of efficient and cost-effective NGV products for consumers. On the fuel side, the industry is in full agreement that natural gas prices in the U.S. will continue to be low relative to petroleum for the foreseeable future. The experts have shown that the U.S. has vast domestic reserves of natural gas, and technology has advanced to the point where we can develop these resources safely and cost effectively. 

Regarding the availability of NGV products for consumers, we have seen an increased interest by manufacturers in NGVs, and we are confident this trend will continue. Most of the automobile, truck and engine manufacturers have NGV products available overseas, but there has been little interest in bringing these products to the U.S. up to this point. We believe this is at least in part driven by a lack of available refueling infrastructure to support consumer confidence, and regulatory barriers that increase the cost of the vehicle. We see both barriers being addressed. 

Our strategy is to eliminate this chicken-and-egg dilemma by deploying additional infrastructure, increasing consumer confidence and paving the way for more rapid NGV adoption. On the regulatory front, the USEPA has taken steps to reduce the cost of bringing NGVs to the U.S. market, but the real key is increasing consumer demand so as to reduce vehicle costs on a per-unit basis. We see it this way: With the spread between natural gas and petroleum fuels growing, and additional refueling solutions bolstering consumer confidence, NGV adoption rates will rise. This will result in demand for more NGV components, which can be delivered at more competitive prices to manufacturers, allowing them to deliver a lower per-unit cost to consumers. This cycle will accelerate as NGVs move into the mainstream over the coming decade, thereby allowing for a more diverse and cost-effective line-up of NGV in the U.S. 

AI: How will your strategy integrate with the OEMs and their distributors? 

Radtke: Our strategy with OEMs, qualified vehicle manufacturers (QVMs) and distributors is to continue working jointly with them to deploy both vehicles and CNG infrastructure into various markets. Trillium USA and Pinnacle CNG have excellent working relationships with these groups that we will continue to foster and expand. We believe providing the customer with a complete, turnkey solution is vitally important. Changing fuels is not an easy task for any fleet, let alone the average consumer. Our strategy focuses on presenting customers with everything they need to evaluate CNG – the vehicle, a refueling solution and excellent customer service. The key is to make it easy for the customer. Presenting an integrated platform that covers everything from the vehicle to the refueling solution eliminates the need for customers to have to figure it out on their own. Their business is running their business. Ours is to present them with a cost-effective turnkey solution that makes their business more efficient and profitable. 

AI: What are some of Trillium’s and Pinnacle’s strengths that will help Integrys achieve this plan? 

Radtke: Certainly, an important factor in our decision to acquire the two companies was their reputation within the industry, and with their customers. Their attention to detail, ability to deliver customer-focused solutions and exceptional level of customer service sets them apart. 

From a technical perspective, the companies have a demonstrated expertise in developing reliable systems for a wide range of customers. From the high-capacity, fast-fueling needs of transit agencies and large trucking operations, to the less intensive time-fill operations of the refuse and school transportation sector, to both large and small unattended retail sites - these companies cover the spectrum. In our view, it was the perfect combination of skills and capabilities. 

We also learned in our research that exceptional customer service in the CNG industry goes a long way. While not all customers demand what we call “on-site” service, being there “on-demand” when the customer needs assistance clearly distinguishes Trillium USA and Pinnacle CNG from the pack. Lastly, as a company, Integrys takes great pride in the values we have established for our business and employees. These include integrity, innovation, safety, collaboration, respect for our employees and customers, customer service, providing value for our owners, and supporting the communities which we live and work in. These same values are and have been espoused by Trillium USA and Pinnacle CNG throughout their 20-year history. In addition to everything else, this made the companies a great fit into the culture of Integrys.

 



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