4.1 Life-Cycle Operating Costs

The research team concluded that:

“Propane as a transportation fuel is:

• 25% less expensive than conventional gasoline;
• 28% less expensive than E10 ethanol-blended gasoline;
• 50% less expensive than E85 ethanol-blended gasoline;
• 11% less expensive than diesel; and
• 9% less expensive than natural gas

when evaluated on a full life-cycle basis, with consideration for all costs of conversion.”

4.1.1 Propane is cheaper than conventional gasoline, on a net fuel cost basis adjusting for energy content and consumption.
Propane, on a per litre basis, has less energy content than a litre of gasoline. Proper comparisons of costs must be completed on a consumption equivalent basis. Chart 1 below illustrates the 11-year historical cost advantage of propane over conventional gasoline in Ontario. The grey area details the price of a litre of propane and the orange area demonstrates the adjustment of the propane cost to an energy equivalent basis with gasoline, to facilitate proper comparison. The light yellow area shows the cost advantage of propane on a net energy equivalent basis when compared to conventional gasoline. The comparison clearly indicates that the cost of propane, on average, is approximately 40% cheaper than the cost of gasoline. It is important to note that the savings, on an energy equivalent basis, between propane and ethanolblended gasolines will be larger than it is with conventional gasoline, as ethanol by volume has less energy content than the volume of gasoline it has replaced. As ethanol percentages rise within a litre of gasoline, the savings offered by propane in comparison will rise as well.

CHART 1

Fleet Fuel Cost Comparisons - Historical Monthly Averages

January 1994 to October 2005, monthly average costs per litre in Ontario⁷

4.1.2 Costs of conversion and capital expenditures must be factored in to the overall fuel cost equation.
The use of propane or natural gas requires the installation of equipment to enable the vehicle to operate on the alternative fuel. The costs of converting the vehicle to operate on an alternative fuel have been factored into the lifecycle cost calculations in this document. Diesel-powered vehicles demand a capital cost premium over gasoline-powered vehicles. Average costs of the diesel engine option have been considered in the same manner as alternative fuels conversion costs when used to calculate the overall life-cycle costs of diesels. Flex Fuel Vehicles have minimal incremental costs to the OEM’s and typically, there is no purchase premium.

4.1.3 After all costs of conversion are factored in; propane offers the lowest life-cycle fuel costs in light-duty fleet applications.

4.1.3.1 Fleet Application
The life-cycle fuel costs were developed for a typical high consumption fleet such as a police or urban delivery fleet. The costs were based on a vehicle life of three years for a vehicle travelling 60,000 kilometres per year. The consumption per kilometre included idle time. Fuel costs were based on the Ontario Ministry of Energy, Fuel Prices database published on their website for the month of May, 2007 for regular unleaded gasoline, propane, diesel and compressed natural gas. E85 and E10 costs were based on pricing obtained from the supplier in South-western Ontario as of October 2007.

4.1.3.2 Gasoline
The results of the comparison show that over the three-year life-cycle, propane is 25% less expensive than gasoline. A fleet operating on propane instead of gasoline, under the conditions described above, would save approximately $5,650 per year in fuel costs and pay for the conversion cost within the first 12 months. The savings would be even greater when compared to ethanol-blended fuels, as this fuel is higher in cost relative to gasoline and produces few kilometres per litre (or miles per gallon) than conventional gasoline. Although favourable to propane’s economic evaluation, the premium that fleet owners are able to receive on the disposition of a used propane-powered vehicle to the secondary purchaser has not been factored into the life-cycle cost calculation. An additional benefit to fleet operators is that propane is not easily pilfered from in-yard refuelling dispensers.

4.1.3.3 Diesel
While diesel fuel costs are comparable to propane fuel costs over the life of the vehicle, the higher cost of the diesel option increases the diesel life-cycle costs over that of propane. Biodiesel was not evaluated in the comparison but the cost of biodiesel will be higher than conventional diesel and will increase the overall life-cycle costs to the fleet operator.

4.1.3.4 Natural Gas
Natural gas also offers fuel cost savings when compared to gasoline, but it has limited application in passenger cars and light-duty trucks because of the limited range of the vehicle. CNG storage cylinders equivalent in size to a gasoline tank would hold approximately the equivalent of 27 litres of gasoline. Adding cylinders to increase range will also increase weight, reduce performance, reduce payload, and reduce available cargo capacity. Natural gas is more ideally suited to urban transit buses where a large number of storage cylinders can be mounted on the buses and the vehicles are centrally refuelled during offhours (minimizing the disadvantages of long refuelling times). LNG was not evaluated as its applications are limited to heavy-duty vehicles and the cost of conversion is approximately an additional $10,000 for the specialized cryogenic tank.

4.1.3.5 Blended Gasolines and Diesel Fuels
E85 will significantly increase the fuel costs to the fleet operator. While there is no additional cost for a FFV, the fuel costs are significantly higher for ethanolbased fuels, even after consideration of the excise tax and road tax reductions. Any blend of ethanol will increase fleet operating costs and will reduce the range of the vehicle compared to conventional gasoline. Availability of E85 may be a significant challenge as there are currently only three refuelling stations in Ontario.

While E85, E10 and biodiesel all have the potential to reduce GHG emissions compared to gasoline, each represent additional fuel costs to the fleet operator. Diesel can reduce GHG emissions and life-cycle costs to the fleet operator but diesel emissions contribute significantly to air quality issues and health concerns as explained in section 4.2.2. The diesel engine option for trucks and vans is limited to vehicles of ¾ ton and heavier. In passenger car applications, diesel is only currently available in premium European passenger cars, although it is anticipated that more diesel-powered passenger vehicles will bemade available to the North American market in the future.

4.1.3.6 Propane
Propane offers the lowest overall life-cycle fuel costs, while at the same time reducing GHG emissions and improving air quality. Propane has the further advantage of offering fuel-operating ranges similar to its gasoline and diesel counterparts. Propane technology has been developed and is available for the most popular fleet vehicles such as large passenger cars, vans and trucks.

4.1.3.7 Quantitative Comparison of Life-Cycle Fuel Costs
Table 1 compares total life-cycle fuel costs, including upgrade or conversion costs, for fleet vehicles running on different fuels.

TABLE 1

Comparative Costs for Fleet Vehicles
Diesel, Natural Gas and Propane versus Gasoline and Ethanol Blends

The total fuel cost to fleet operators can be dramatically different between fuel choices, after accounting for all costs of conversion. Based upon the analysis in Table 1 above, Chart 2 below illustrates the total fuel costs of each fuel option.

CHART 2

Total Fuel and Conversion Costs over 180,000 Km's
(Based upon Assumptions defined within Report)

Note: Conversion costs shown in lighter colour

An important benchmark for fleet operators is their cost per distanced travelled. The following table shows the relative costs per 100 km travelled, based on the data in Table 1. Propane clearly has the overall lowest cost for fuel including the cost of conversion.

TABLE 2

Fuel Cost per 100 km of Travel (Includes conversion cost)

While the economic benefits of diesel, CNG and propane appear relativelyclose; there are other factors that become significant differentiators. For example, the following are just a few of the other factors that need to be considered: natural gas vehicle performance is not identical to gasoline in terms of responsiveness; natural gas vehicle range is typically much less than gasoline; natural gas refuelling time is significantly longer than gasoline (and could be more difficult to locate); diesel model choices may not be available for the particular fleet application; and, the environmental emissions footprint for diesel is greater when compared to natural gas or propane.

4.1.4 The following four case studies demonstrate that propane, as a transportation fuel, has delivered, and continues to deliver, significant cost-savings, equivalent vehicle performance, and a number of other benefits on a consistent basis over long periods of time.

4.1.4.1 Case Study: The London Police Service, London Ontario
A decision by the police force in London, Ontario, to convert much of its fleet to run on propane has saved taxpayers millions of dollars in fuel costs over the past 20 years.

In 1982, the London Police Service tested propane as an alternative fuel in two of the Service's Fleet vehicles. The results were so encouraging that today close to 65 percent of the vehicles in the Fleet have been converted to run on propane. This includes 71 full-sized sedans and 20 trucks and vans.

According to Gar Irwin, who manages the London Police Service fleet, the remaining vehicles have not been converted because they either have low annual mileage or are used in surveillance projects and, as propane vehicles, cannot be adequately camouflaged. However, 41 unmarked cars run on a fuel blend of ethanol and gasoline.⁸

Based on twenty years of environmentally responsible operations, no discernible difference in vehicle performance, a perfect safety record and operating savings in the millions of dollars, the London Police Service continue to maintain and update their fleet with propane-powered automobiles.⁹

4.1.4.2 Case Study: Peel Region’s TransHelp (Para transit service)
The Peel Region of Ontario is one of Canada’s fastest growing communities with a population of 1.1 million covering 480 square miles. It includes the cities of Mississauga and Brampton. TransHelp was founded in 1981 in order to provide para transit service to individuals unable to use conventional transit, such as those with a physical disability or confined to a wheelchair. The TransHelp’s vehicle Fleet consists of 40 buses: 3 with 7.5 litre engines, 9 with 6.8 litre engines and 28 with 5.4 litre engines, all of which use the Ford E-350 chassis. Annually, this Fleet makes over 220,000 one-way trips to and from residences, hospitals, therapy centres, shopping, and other destinations. This Fleet travels on a combination of major highways, urban streets, and rural roads. Each vehicle serves for 7 years in front line service, followed by 3 years of backup service, and has a typical life span of between 375,000 and 425,000 kilometres.

While in service, TransHelp vehicles are often waiting for users for long periods of time, idling in emissions-sensitive areas such as hospital laneways and community centres. Though there is a fuel cost penalty, idling is unavoidable. The vehicles’ engines have to be left running to keep the interior warm in winter and cool in summer. Due to the areas in which the vehicles operate and the individuals they serve (who are often in need of health care), vehicle emissions must be monitored so that the health of those in close proximity – either on board or in the surrounding area – is not adversely affected.

The successful deployment of propane technology has enabled TransHelp to continue to deliver a high level of service to its customers while ensuring health and safety concerns are minimized. Through its Green Tree Project, and the associated logo displayed on each of its vehicles, TransHelp has increased the visibility of environmentally friendly fuels. In addition to the environmental benefits, TransHelp has been able to realize a fuel savings of 15-20% over gasoline (dependant on fuel price), and receives an additional federal transit rebate of 15% for the conversion cost.¹⁰

4.1.4.3 Case Study: United Parcel Service (UPS) Canada Ltd., Mississauga, Ontario
United Parcel Service (UPS) Canada Ltd. began testing propane as annalternate fuel source as early as 1985. A major commitment to propane was made in 1989 and a conversion program was completed in conjunction with an engine replacement program undertaken during the same time frame.

Propane conversions were implemented as UPS Canada converted its Fleet from 292 CID carbureted engines to 4.3 litre electronically controlled engines. This not only reduced the cost of conversion, but also allowed for implementation at a much faster rate.

EIGHTEEN-MONTH PAYBACK ON PROPANE CONVERSIONS. The conversions cost a total of CAN$1 million, for both the purchase and installation of the engines and the propane conversion. All work was done by in-house mechanics to control quality and cost. Savings have been $1.3 million per year. This reflects savings in operating costs based on the lower cost of propane versus gasoline. Operating efficiency has not been affected as the engines and vehicles operate as they did with gasoline engines. Payback on the project was less than 18 months.

NEWER ALTERNATE FUEL TECHNOLOGIES. UPS Canada continues to explore and test other alternate fuels. The company currently operates 912 Compressed Natural Gas and Liquid Natural Gas vehicles in 17 locations in the United States, with plans to add more sites and vehicles in 1999.¹¹

Propane's low pollution characteristics and positive performance have made it a viable choice for inclusion in UPS's alternative fuel Fleet.¹²

UPS was satisfied with its decade-long experience with a propane-powered Fleet and announced, on October 8, 2007, an expansion of its North American propane Fleet by 23%. Propane powered vehicles now account for almost 45% of UPS’s global fleet of alternative-fuel vehicles.

4.1.4.4 Case Study: Propane vs. Diesel: Operating Savings at Northside ISD, San Antonio, Texas.
Northside Independent School District has a service area of 360 square miles, encompassing North West San Antonio and nearby Bear County. The bus fleet transports over 32,000 students daily in 472 vehicles, 94% (430) of which have run on propane since 1980.

“Northside ISD saves $1,335.00 per year, per vehicle in fuel and maintenance costs using Propane versus Gasoline according to the Texas Railroad Commission’s Life Cycle Cost Benefit Analysis. Cost savings using Propane versus Diesel are $1,100.00 per year, per vehicle. Conversion costs are paid back in approximately 1.4 years. Northside ISD operates an 18 year retirement program on its vehicles.”¹³

Comparing propane to diesel and assuming a 16.6 year life expectancy, after the conversion costs are recouped, Northside can expect savings of over $18,000 per vehicle. That amounts to over $8.4 million in savings over the life of the fleet. Cost savings of a similar magnitude are being reaped by other school districts all over North America.

As the case studies above demonstrate, propane as a transportation fuel can be deployed with great success, unlocking significant fuel savings and many other benefits.