Economics

Propane offers fleet operators distinct economic advantages over conventional fuels (gasoline and diesel). The Battelle Memorial Institute found that propane is the most economical alternative fuel for fleets (on a per mile basis) when operating, ownership, and infrastructure costs are all taken into consideration (Source:http://www.amistadpropane.com/onmove.html). Operating costs associated with propane fleets typically range from 5-30 percent less than those of gasoline fleets (Source: National Propane Gas Association).

From an economic perspective, propane is the most cost effective alternative to conventional transportation fuels when capital costs (vehicle and infrastructure) and operation and maintenance costs are all taken into consideration. Of all available alternative fuels, propane offers the best mix of vehicle driving range, durability and performance.

Infrastructure Costs

The capital structure needed for production, storage, and bulk distribution of propane for traditional uses already exists. Some additional investments may be required for automotive uses to accommodate the higher throughput. The majority of incremental infrastructure costs however, relates primarily to the expansion of the distribution network.

Existing service station infrastructure used for conventional fuels can be modified to dispense propane. The additional costs of adapting a station for propane use is low compared to the requirements for other alternative fuels. For example, the cost of installing the necessary equipment for dispensing propane (tank, pump and metering equipment) is about one-third of that for dispensing CNG (dedicated supply lines, high-pressure compression, storage cylinders, and special dispensers) (Source: World LP-Gas Association).

Capital Costs

 

The majority of propane vehicles on the road today are converted vehicles. The offerings from OEMs (original equipment manufacturers), although increasing, are still relatively few. Fleet vehicles can be conveniently converted to propane use. Conversion costs vary, depending upon the type of original vehicle and equipment installed. According to the Alternate Fuels Data Center, factory conversions of light-duty trucks typically cost about $2,500 over the conventional vehicle base price. Conversion costs generally range from $1,500 to $3,000. Other fees may be applied, such as the cost of EPA testing and documentation. On the other hand, there may be tax deductions or other incentives available to offset the up-front capital cost. Some dealers lease the conversion equipment, which virtually eliminates upfront costs.

A significant advantage to fleet owners is the fact that part of the conversion costs may be deducted from federal taxable income. State and local tax incentives are also available, and details can be obtained from local propane dealers, conversion companies, and/or government tax agencies.

Operating Costs

The upfront costs of propane fleet vehicles can be offset by lower operating and maintenance costs over the lifespan of the vehicles. The time it takes for these savings to offset the capital costs (payback period) depends on vehicle usage patterns, specifically, the average distance traveled monthly or annually. Fleet vehicles typically travel long distances and have very high fuel consumption, so the payback period on propane fleet vehicles can be very reasonable.

Fuel Costs

Fuel is the principal operating cost for fleets. On average, a gasoline gallon equivalent (gge) of propane is generally less than that of gasoline (Source: US Department of Energy ) and federal excise taxes on propane (13.6 cents/gal) are lower than for gasoline (8.4 cents/gal) and diesel fuel (24.4 cents/gal).

Propane can deliver up to 90 percent of gasoline's miles per gallon with significantly less environmental pollutants. Its fuel efficiency relative to gasoline surpasses those of all other alternative fuels - 70 percent for ethanol, 54 percent for methanol, and 21 percent for compressed natural gas (see chart below).

This comparison uses identical vehicles optimized for their specific fuel. The baseline is a gasoline-fueled vehicle with enough fuel to travel 100 miles. Distance shown is based on the relative energy content (British Thermal Units - BTUs) of each fuel gallon.

If all vehicles were fitted with equal volume tanks, propane gas would require the least fill-ups on a trip, followed by ethanol, methanol and CNG. Source: Michigan Propane Gas Association

 

Maintenance Costs

Lower maintenance costs are one of the prime reasons underlying propane's popularity for use in delivery trucks, taxis, and buses. Propane's high octane rating (104-112 compared with 87-92 for gasoline) and low carbon and oil contamination characteristics have resulted in documented engine life of up to three times that of gasoline or diesel engines (Source: National Propane Gas Association). Many fleets have also reported extended intervals between required maintenance. Spark plugs from unleaded gasoline engines typically have to be replaced after 30,000 miles, but those in a propane vehicle can last 80,000-100,000 miles.