POTENTIAL BIODIESEL USE IN THE NATION S SCHOOL BUS FLEET

Transcription

1 POTENTIAL BIODIESEL USE IN THE NATION S SCHOOL BUS FLEET Prepared for National Biodiesel Board in cooperation with the United Soybean Board Sparks Companies, Inc. July 1995

2 Potential Biodiesel Use in the Nation's School Bus Fleet Contents Executive Summary..,...,... i I. Introduction Ix. Alternative Fuels Legal Requirements Concerning Alternative Fuels State Alternative Fuels Programs School Bus Fuel Market III. Fuel Characteristics and Factors Affecting Use Natural Gas Factors Affecting Competitive Position of Fuels Cost of Fuels Iv. Biodiesel Competitive Position Observations from School Bus Fleets Using Alternative Fuels School Bus Fuel Cost, A Competitive Algorithm Observations Potential School Bus Fuel Market References Appendices... 46

3 Potential Biodiesel Use in the Nation's School Bus Fleet Executive Summary This study examines the market potential for biodiesel fuel use by the U.S. school bus fleet. The market is attractive because it is large. Nearly 394,000 publicly supported buses travel more than 4.25 billion miles each year transporting 23.4 million students throughout the 50 states. The potential for alternative fuels to penetrate this market is being stimulated by more stringent anti-pollution requirements. Many school bus fleets, like other centrally fueled vehicle fleets, are subject to the 1992 Clean Air Act (CAA) requirements that an increasing share of new vehicles meet clean fleet requirements after School buses in 22 Consolidated Metropolitan Areas (CMAs) are expected to be required to reduce emissions significantly below current levels. The 22 CMAs are large and populous, with just under one-third of the nation s people. Fuel consumption in the 22 clean fleet cities is about 180 million gallons per year, one-third of the total national bus fleet utilization. Not only is this market large, but it is being contested vigorously by several alternative fuels. The Alternative Fuels Diesel engine emissions (using diesel fuel) likely will be unacceptable in the future, at least in certain CMAs and some other areas, as well. Alternative fuels thus will compete for shares of this market on the basis of their ability to comply with air quality standards and their cost and efficiency. This report examines four fuels and compares them to low-sulfur #2 diesel fuel in terms of their likely competitive position in the school bus market. The fuels are: biodiesel, compressed natural gas (CNG), liquefied natural gas (LNG) and liquefied petroleum gas (LPG). The analysis recognizes that most engines have been developed primarily for efficient use of diesel fuel, placing the alternatives at some disadvantage for such engines. Relative to diesel, each of the four fuels considered has significantly lower emissions. However, under Section 211(f) of the Clean Air Act, the sale of any fuel or fuel additive for general use in motor vehicles manufactured after model year 1975 which is not substantially similar to fuels utilized in certification of [those motor vehicles] is prohibited unless the manufacturer of that fuel obtains a waiver from EPA by demonstrating that the fuel or fuel additive will not cause or contribute to the failure of any emissions control system or device. CNG, LNG, and LPG each have very clean combustion profiles and are certified by EPA as substantially similar to diesel for use in cities under CAA programs (although final regulations are not complete). To date, EPA has not formally defined substantially similar diesel fuels.

4 ii Until EPA issues its final rules defining substantially similar for diesel fuel, it is not enforcing Section 211 (f) and is, in effect, treating all registered diesel fuels as if they were substantially similar. However, once EPA publishes final rules defining substantially similar, it must then determine whether biodiesel is substantially similar to diesel fuel, or whether biodiesel qualifies for a waiver to the substantially similar requirement. Natural gas and propane-based fuels now are being tested widely in school bus use, despite having some significant disadvantages. Natural gas, for example, is generally available under low pressure (the form used in most homes and industries). But, when used in vehicles, it must be condensed into CNG or liquefied into LNG. This requires new processing and handling equipment, bus engine and fuel tank modifications, new fueling equipment and storage tanks, and additional investment in crew training, safety equipment, and maintenance and repair facilities. LPG use raises safety concerns because it is heavier than air and leaks will not always dissipate harmlessly into the atmosphere, potentially forming explosive pools of dangerous materials in workshops, around refueling and storage areas, and around bus tanks. Biodiesel, by contrast, has technical properties very similar to diesel fuel. Its use in school buses requires only very minor engine changes, and it can be readily blended with diesel fuel or used neat. And, it can be stored and handled easily in available diesel equipment. As a result, no additional initial investment is required for a system converting to biodiesel as an alternative fuel. A continuing problem for biodiesel, adversely affectin,g its competitiveness in the school bus market, is the lack of final regulations concerning competing fuels. The three other fuels are being tested more widely than biodiesel, in part because fleet administrators are uncertain of biodiesel blends standing for use under CAA rules. Factors Affecting Competitive Position of Fuels A growing body of engineering and economic literature has focused on the relative technical and economic performance of fuels that can reduce emissions, including primarily biofuels and natural gas. The major considerations include: basic fuel efficiency; infrastructure needs to accommodate alternative fuels; and cost of vehicle modifications. Basic fuel efficiency. This reflects both the differing energy levels per unit for each fuel and the fact that only modified diesel engines are available, rather than engines specifically designed for alternative fuels. Thus, currently available engines realize a lower share of the potential energy in alternative fuels than they do for diesel fuel. Infrastructure needs to accommodate alternative fuels. The vehicle market for biodiesel and for gaseous fuels is almost completely undeveloped. Costs depend heavily on state and local regulations and local conditions, including access to natural gas, transportation facilities, and many other factors including other fleet users of alternative fuels who can share costs.

5 One major advantage of biodiesel relative to other low-emission fuels is it can use the current diesel technology and equipment without modification. By contrast, changes in infrastructure required for alternative fuels are enormous. In addition to the on-bus changes, these require: o o o o Compressors, liquefiers or other equipment to convert and condition (as necessary) the gas to a more usable state; New storage equipment such as tanks that are fundamentally different than used for diesel: New dispensers; New safety equipment; c~ New or additional maintenance equipment to test and repair the on-board system, and the on-ground fuel conversion and handling system; and n Special gas detection and fire suppression equipment, plus additional ventilation. Even for centrally fueled fleets, the cost of the facilities required to accommodate the use of CNG or liquefied gas can be substantial, and vary widely. For example, the cost of LNG differs dramatically depending on whether the gas is compressed on site or in a larger, more efficient regional facility and trucked to the site. The infrastructure investment costs for CNG also are very substantial. Fueling is very slow unless a direct compressor system is used, requiring several compressors depending upon the size of the fleet. Example costs for a moderate-sized fleet, including site preparation, equipment and storage tanks are $1.4 million, with annual operating cost of $114,000. However, experience with such facilities is so limited and so dependent on design, scale and local conditions that cost estimates vary widely. National experience with transit or school fleets using LPG is very small. Specific estimates of infrastructure costs are not available but for purposes of this study were assumed to be 40% those of LNG facilities. Cost of Bus Modifications. Experience with vehicle modifications still is sparse, but costs vary depending on whether the bus is new or used, the fuel system to be accommodated, and the daily operating range required. However, administrators generally estimate costs to be between $4,000 and $6,000 per vehicle. An estimate of $5,500 was used for this study.

6 iv Biodiesel Competitive Position There is little actual experience with alternative fuel use by school buses, especially for school bus fleets. And, although several school bus experiments are underway around the country (and discussed in the report), most are small scale and generally linked to the availability of a particular fuel source (where part of the cost of the investment and operation is borne by gas companies, Department of Transportation or another government agency). Because of this, the study first contacted bus fleet managers who had experience with alternative fuels, and then considered transit bus experience. Finally, a theoretical fleet was described in order to compare life-cycle cost performance for school buses using competing alternative fuels. Observations from School Bus Fleets Using Alternative Fuels. In most cases observed, fleet managers were interested in discussin,g the experiment and their general impressions of the advantages and disadvantages of the fuels used. None was recording or evaluating life-cycle costs. In Texas (and a few other places), specific cost evaluations were required, but these typically compared fuel cost and bus modification costs to one base fuel (often gasoline). None fully evaluated initial investment costs of alternative fuel use to biodiesel use. However, the fleet managers are generally well informed and highly interested in alternative fuel performance. Observations from Transit Bus Fleets Using Alternative Fuels. Several detailed studies of transit bus experience with alternative fuels were examined. Each concluded that diesel fuel is less expensive than any of the alternative fuels considered. However, the studies are less conclusive regarding the likely competitive position of biodiesel compared with natural gas-based fuels. For these competing fuels, the studies observe: Biodiesel (like diesel) requires no initial investment in the modification of either engines or facilities as the competing fuels do. As a result, its use implies significantly lower capital costs. Biodiesel use implies more expensive annual operating costs than natural gas fuels, and, under some assumptions regarding biodiesel costs, more expensive operations than LPG. For systems that can avoid the investment in facilities or buses (through special grants, arrangements with gas companies, or through other arrangements), the alternative fuel is in a strong competitive position. CNG appears to be the most competitive alternative fuel on the basis of operating cost. However, its use implies a substantial penalty in terms of bus modifications required to provide adequate range. As a result of the additional weight of the tank, performance suffers. Where range is a significant concern, additional capital investment may be required to offset the capacity loss from the size and weight of the fuel tank. Recognizing that school buses are quite different than transit buses, this study developed an illustrative school bus fleet with infrastructure requirements similar to those evaluated for transit

7 V buses. This information was used to develop indicative life-cycle cost estimates for a school-bus fleet using selected alternative fuels. School Bus Fuel Cost Comparison To enable credible comparison of the economies of alternative fuels, an indicative school bus fleet was developed. Using transit fleet investment data, relative fuel and life-cycle costs were examined. The hypothetical fleet consisted of 325 buses with a relatively large daily range of 190 miles. Assuming a 185 day school year, the diesel requirements (at the national average of 8.1 mpg) would be 7,62 3 gallons per day, 1.41 million gallons annually. At $0.65 per gallon, the annual cost of diesel fuel is $917,000. Fuel Requirement. Although the mileage traveled is the same for each scenario, differences in fuel efficiency imply different fuel use. Efficiency estimates along with prices for each fuel enable calculating costs for each alternative fuel and for a range of blends and prices. The estimated fuel costs range from a low of $917,000 per year for diesel to a high of $1.930 million for B30 (with biodiesel cost at $3.00 per gallon). Each of the alternative fuels considered is more costly than diesel. CNG is the least expensive alternative fuel considered, with an annual cost 21% above diesel. LNG costs are 64% and LPG 98% above diesel. Biodiesel blend costs also are much higher than diesel, and are affected heavily by both biodiesel prices and the amount of biodiesel used in each fuel blend. A B30 blend at a $3.OO biodiesel price implies system costs 110% more than diesel. B20, with $1.75 per gallon biodiesel costs less, but still is 35% more expensive than diesel, and somewhat (14 points) more costly than CNG. Fleet Capital Requirements. Almost the inverse relationship exists with regard to system capital costs (buses, modifications, and special equipment and training) for alternative fuels. Based primarily on the assumption that the system would be required to pay for one-sixth the cost of a regional liquefier, LNG capital costs (infrastructure, handling facilities plus cost of buses) are estimated to be $23.2 million, well above those for CNG in spite of the assumption that a direct line compressor system would be required in order to reduce refill time. LPG and CNG capital costs are relatively similar, 13% and 14% higher than for diesel. Biodiesel capital requirements, by contrast, are quite small (limited to the cost of the buses and a relatively inexpensive diesel storage and fueling station). In a scenario where the system already owns its diesel buses and facilities, the marginal cost of biodiesel would be nearly zero.

8 vi Indicative School Bus Fleet Comparison of Capital Costs Annual Capital Fuel Type Total Payment I/ mil $ Diesel LNG CNG LPG Biodiesel I/ Total cost. amortized over 12 years at 9% interest. Index Total System Costs. Biodiesel fuel costs tend to exceed those of both diesel and other alternative fuels. But, when the capital requirements of using the alternative fuels are considered, biodiesel is lowest. Thus, comparisons of total annual costs (with capital costs amortized over a 12 year period at 9% interest) show a much more competitive picture. The total costs for all fuels are above those for diesel, with LPG the most costly. CNG appears to be the least costly petroleum fuel. Costs of biodiesel blends are substantially above those for diesel fuel, as well. Total Capital and Operating Costs Compared Indicative School Bus Fleet Difference Difference Fuel Type Total w/diesel Total w/diesel Index mil $ $/mile % Diesel LNG CNG LPG B30 ($3.00) B30 ($1.75) B20 ($3.00) B20 ($1.75) Comparisons among fuels indicate that the high capital cost of the gas-based fuels several biodiesel blends highly competitive. makes With biodiesel prices at $1.75 per gallon, life-cycle system costs for both B30 and B20 are less than for CNG;

9 vii Even with biodiesel prices as high as $3.00 per gallon, B20 costs are below those for CNG: On a system cost per mile basis, CNG costs exceed those for diesel by $0.06, about the same as B20 when biodiesel cost is high ($3.00 per gallon); For B20 and B30 with biodiesel at $1.75 per gallon, per mile costs exceed those for diesel by $0.042 and $0.028 per mile, respectively. Under those scenarios, biodiesel blends have life-cycle costs that are cheaper than any of the other alternative fuels, including CNG. Conclusions The study concludes that biodiesel blends can compete effectively with other alternative fuels when life-cycle, total fleet costs are considered. While biodiesel blends have higher fuel costs, they require very little equipment modification or other capital investment. By contrast, the use of the petroleum gases requires extensive equipment modification and major up-front investment. 0 CNG, the most competitive gas-based fuel in this comparison, is about 15% more expensive than diesel fuel on a life-cycle, total cost basis. 0 At biodiesel prices of $1.75 per gallon, B20 and B30 both have lower indicative costs than does CNG. 0 Even at $3.00 per gallon, B20 has life-cycle costs about the same as CNG. In spite of biodiesel s low capital investment requirements, it likely will compete advantageously in the minds of fleet managers only at reasonably low unit prices and low blends. For blends as high as B30, or with biodiesel costs as high as $3.00 per gallon, biodiesel will be difficult to sell to fleet managers, especially those who benefit from development grants or other special assistance in spite of the fact that initial investment costs for biodiesel are low. Biodiesel competes at a relative disadvantage today, in part because of its lack of infrastructure for production and distribution. Other fuels overcome their similar disadvantage through promotional programs that cover a significant part of the cost of conversion (at least for test vehicles). Also, grant funds from federal agencies also are available to reduce the investment cost for natural gas and other fuels. These policies directly reduce the competitive position of biodiesel. To the extent that future budget concerns reduce the availability of such support for competing fuels, the competitive position of biodiesel will be enhanced.

10 viii 0 The observations above apply specifically to a large school bus fleet with high daily mileage. However, up-front capital requirements may be even more difficult for smaller fleets, a factor that could enhance the competitive position of biodiesel fuels. In addition, schools located in areas where natural gas either is unavailable or more expensive would be expected to be attracted to biodiesel fuels. Fleet managers tend to be unfamiliar with biodiesel. While not necessarily skeptical of its potential to reduce pollution, they point out that gas-based fuels bum clean because they lack pollutants, while biodiesel contains diesel pollutants but depends on better combustion. Until the legal status of biodiesel blends as alternative fuels is cleared up, and until fleet managers are better informed about competitive prices and costs, biodiesel likely will continue to compete at a psychological disadvantage. Potential School Bus Fuel Market. While the SC1 economic evaluation of the competitive position of biodiesel indicates it can compete favorably for a major share of the fuels in the future, the strength of that competitiveness depends heavily on several factors. These include: CMAs not meeting CAA requirements. The CAA clean fleets requirements will affect 22 consolidated metropolitan areas containing more than 81.2 million people. The first requirement to come into compliance is 1998, if the provisions of the Act are strictly enforced. These areas represent a total market based on more than 125,000 buses expected to require more than 180 million gallons of fuel annually. School buses subject to CAA rules. The CAA focuses on bus purchases. In 1994, just over 35,000 new school buses were sold. Again, assuming the CAA CMA share to be the same as its share of total population, the market for clean buses would be 11,140 annually. Assuming the clean bus market to be 50% of the total, increasing to 70% in 2000, the market would be 5,600 buses in 1998 and 7,800 by A growing clean fuels market for school buses. At national average school bus usage, the additional clean buses would require an additional 7.5 million gallons of clean fuel in 1998, increasing to 10.4 million gallons annually by Thus, after 2000, not only would the school bus market for clean fuels in the CAA areas alone be growing by more than 10 million gallons annually, but increasing pressure would be expected to convert the balance of the fleet in those areas. Such a trend would bring that particular clean fuels market to more than 100 million gallons annually, a penetration of over 50% at that time. How well will biodiesel compete for this market? market depends on several factors: As noted above, the competition for this Will EPA either conclude that biodiesel blends are substantially similar diesel fuels, or waive the requirement for such a determination? The longer this determination is delayed, the greater uncertainty it creates in the minds of fleet administrators and the more it erodes biodiesel s competitive position in this market. Only after it is clear that

11 ix there is no barrier to using B20 or B30 fuel blends to meet CAA requirements can consideration of them as an alternative fuel become both widespread and active. What will be the commercial price for substantial amounts of biodiesel? How reliable will those supplies prove to be.? Fleet administrators are highly familiar with diesel distribution systems, and many are being approached with various proposals for gasbased fuels from systems they know, as well, such as their local natural gas distributor (who has a proven track record). At this time, fleet administrators are concerned about the investment required to use those fuels (and the fact that these markets are essentially unregulated). They also are equally concerned about the potential fuel cost for biodiesel. If concerns about meeting CAA requirements using biodiesel and its cost can be met, fleet administrators could be expected to carefully evaluate its use to avoid the capital investment required to use natural gas or LPG fuels. In the current environment of reduced government spending at all levels, there is substantial skepticism that the current level of grants and other assistance can be sustained in the future. The availability of a legally acceptable alternative fuel that could be used with lower upfront investment is appealing to many administrators and could mean a strong share of the clean fleet school bus market during the next several years. Recommendations Accelerate efforts to achieve a substantially similar rating for biodiesel blends, or to achieve a waiver for biodiesel blends for use as an alternative fuel under clean fleet rules. Until fleet managers can be reasonably specific regarding biodiesel fuel options, they will continue to be skeptical about its ability to compete for the school bus market in CAA CMAs. Fleet managers are greatly concerned about the costs of complying with future CAA rules, especially as tighter federal budgets reduce grant funds available to support alternative fuel programs. NBB should consider developing a national program, with emphasis on school bus fleets in the 22 CAA CMAs. The program could include specific information for school bus fleet managers highlighting the potential life-cycle savings from the use of biodiesel to meet CAA rules. In response to fleet managers comments that current biodiesel tests are too short in duration to convince their managers of the efficiency of biodiesel operations, that the equipment available to test emissions is not standard (or not available), and that they lack credible ways to convince decisionmakers that biodiesel will be available commercially at competitive prices, the NBB should consider developing more extensive fuel test projects specifically focused on school bus fleets.

12 X Such a program could demonstrate the effectiveness of biodiesel blends in normal school bus operations with significant reductions of harmful emissions, high fuel efficiency and competitive costs. Based on fleet managers comments, they should be at least six-months in duration and focus on all aspects of efficiency and competitiveness. In addition to concerns regarding the future legal position of biodiesel blends under CAA rules, fleet managers most acute concerns regarding biodiesel relate to its local availability and supply, and its price (and price variability). NBB should consider a specific campaign for school bus fleets designed to highlight the enormous supplies of vegetable oils available in the United States and the capacity of the U.S. agricultural and agribusiness system to produce biodiesel reliably and competitively.

13 Potential Biodiesel Use in the Nation s School Bus Fleet I. Introduction This report concerns potential biodiesel fuel use by school bus fleets. Its purpose is to review available information on the size of the bus fuel market, the factors affecting selection of fuels and the competitive position of biodiesel in that market. Fuel cost and engine performance are expected to be the primary factors affecting fuel selection, for both private and public fleet operators. In addition, two very important national policies have been developed in the last two decades that are increasingly important in fleet manager decisions. The first is based on concerns about the nation s reliance on imported fossil fuels. Transportation accounts for more than one-fourth of U.S. energy use, and 97% of the transportation fuel is from petroleum products. Conversion from petroleum to other fuel sources has been effective in Europe (where the transportation industry is less dependent on oil), and is a key objective of the Energy Policy Act-(EPACT) of 1992 which places increasing federal emphasis on the availability and use of alternative fuels. 1 For specified fleets and locations, specific new vehicle purchase requirements are required beginning in A second national concern is air quality (as reflected in the Clean Air Act [CAA] of 1990, Appendix B). Six major types of air pollutants are the target of that legislation and emissions from gasoline and diesel powered engines are important sources of five of the six. Engine pollution accounts for an average of 90% of the carbon monoxide; 30% of the lead; 50% of the volatile organic compounds; and 50% of the nitrogen oxides (which, in turn, combine to form about 50% of the photochemical oxidants, including harmful ozone). 1 The Energy Policy Act of 1992, Section 405 has led the U.S. Department of Energy to articulate goals of both promoting the use of alternative fuels and of alternative-fue1 vehicles. Taking An Alternative Route, Alternative Fuels Fueling the Future, Argonne National Laboratory, U.S. Department of Energy, See Appendix A for further details.

14 2 0 Diesel powered vehicles contribute about 16% (or more) of the particulate matter in metropolitan areas.2 Both the EPACT and CAA apply to Consolidated Metropolitan Statistical Areas (CMSAs) with populations of 250,000 or more, while the CAA narrows its focus to CMSAs with the most difficult ozone and carbon monoxide pollution problems. And, there are specific legal requirements for clean fuel use for some school bus fleets in these areas. This report considers the legal and economic reasons why many school bus fleets are beginning to consider the use of alternative fuels, including those produced from non-petroleum sources which reduce harmful emissions, and the competitive position of selected fuels. Following this introduction, Chapter II considers the technical properties of selected fuels, the legal requirements for converting fleets from diesel to other fuels and the nations school bus fleet. Chapter III discusses fuel characteristics and factors affecting fuel use, and the economics of alternative fuel use. Chapter IV focuses on the competitive position of biodiesel fuels, tests now underway and the potential school bus market for biodiesel. 2 Major pollutants include carbon monoxide, volatile organic compounds (reactive hydrocarbons), nitrogen oxides, sulfur oxides, lead and particulate matter. Carbon monoxide is a product of incomplete fuel combustion. It is odorless and colorless, and an asphyxiant that displaces oxygen in the respiratory system. Reactive hydrocarbon and nitrogen oxides are corrosive gases which react in the atmosphere to form photochemical oxidants (including ozone), a major component of smog. Lead is a cumulative toxin that affects the nervous system, especially in children. Particulate matter is suspended particles which float or drift in the atmosphere similar to dust or pollen, with some types poisonous to human health. Source: Nicolas B.C. Ahouissoussi, A Comparative Cost Analysis for Biodiesel, Compressed Natural Gas, Methanol and Diesel Fuels for Transit Bus Systems, PhD dissertation, University of Georgia, 1995.

15 3 II. Alternative Fuels In general usage, the term alternative fuels include any fuel product not made from crude oil. More specifically, current laws include electricity, ethanol and methanol, natural gas, propane and others. Because the EPACT and CAA have different purposes, their alternative fuel requirements differ (Appendix C). Under the CAA, the Environmental Protection Agency (EPA) is charged with defining motor fuels that are substantially similar to fuels certified for use in particular engines designed to operate on those fuels and, the Act prohibits use of fuels or additives unless they are found to be substantially similar (or are granted an EPA waiver). With regard to fuels that are substantially similar to diesel fuel, biodiesel fuels have oxygen levels higher than those in diesel fuel, a difference that has caused biodiesel to be scrutinized. And, since biodiesel is not in widespread use (and lacks extensive data about its performance characteristics), its certification as substantially similar is still under consideration by EPA. A final EPA Notice of Proposed Rulemaking (NPRM) on the diesel sub sim regulation is expected in late This NPRM could include biodiesel at various blends (EPA has already classified 100% biodiesel as an alternative fuel), but it also could require an EPA waiver for blended biodiesel to be classified as an alternative fuel for the purpose of meeting CAA requirements.3 Several fuels are considered especially promising for bus fleet use, including:4 CNG, compressed natural gas (a naturally occurring mixture of hydrocarbons, primarily methane) compressed to improve ease of handling and storage. 0 LNG, liquefied natural gas, cooled to minus 160 C for storage and shipment in high pressure cryogenic containers at l/600 volume of its vapor state. In liquid state, LNG is nearly pure methane. LPG, liquefied petroleum gas, kept liquid for ease of handling and storage. LPG is primarily propane or butane, or a mixture of the two. a Biodiesel, methyl soyate, a light fuel oil made from refined, degummed soyoil (or other animal or vegetable oils). Raw soybean oil, when reacted with methanol (transesterification) in the presence of a catalyst, produces both methyl soyate (soydiesel) and glycerol.5 3 The National Biodiesel Board is helping to develop a performance based specification for biodiesel that is not based on feedstocks. Biodiesel could be defined as mono-alkyl esters derived from material lipid sources. Triglycerides are reacted with an alcohol (or an ethyl) in the presence of a catalyst, producing both biodiesel and glycerol. 4 Glossary, The Energy Fact Book, Congressional Research Service, Library of Congress, November Interchem Methyl-Ester Biodiesel Being Tested in Bus Fleets All Over U.S., Mobile Source Report, July 30, 1993.

16 4 In general, diesel engines (because of their much higher compression systems) have much more complete combustion and smaller amounts of many of the more dangerous emissions (such as carbon monoxide, but others, as well) than do gasoline engines. Nevertheless, diesel engines using conventional fuels emit very substantial amounts of particulates and other problem pollutants. As a result, there is significant pressure for the development of more efficient, less polluting fuels. It is expected that the choice of approved fuel alternatives will eventually be made by individual fleet administrators on economic grounds. Each alternative considered provides significant reductions in air pollution relative to diesel fuels in widely cited engineering tests using a variety of fuels and engine types (Table 1). Each of the alternative fuels tends to significantly reduce harmful emissions relative to base diesel engines using #2 diesel fuel. 6 And, although reductions of PM and NOx from 20% biodiesel use are smaller than those using certified alternative fuel engines with CNG or LNG, it is expected that biodiesel in advanced diesel engines will result in incremental emission reduction. As a result, the primary focus of this study is on legal reasons for fuel use and the competitive position of selected fuels. Fuel/engine 4-Stroke Diesel 20% Biodiesel Change (%) Table 1. Bus Engine Emissions, Alternative Fuels l/ EPA Transient Cycle (g/bhp-hr) HC CO NOx PM Stroke CNG or LNG w/catalyst Change relative to diesel na l/ Technical and Economic Assessment of Biodiesel for Vehicular Fuel Use, Booz-Allen & Hamilton, HP na Legal Requirements Concerning Alternative Fuels The two primary federal laws stimulating interest in alternative fuels (the 1990 CAA and the 1992 EPACT) require certain fleet vehicles to operate on alternative fuels. In addition, numerous state 6 In particular, ORTEC/Fosseen Manufacturing found a 1991 DDC 6V-92TA engine had reduced emissions when using biodiesel including HC, -73.2%, CO -72.8%, NOx -3.1% and PM -26.8%. 7 The CAA requires individual states to implement clean-fuel fleet programs, and the EPACT requires the DOE to implement an alternative-fuel fleet program. Taking An Alternative Route,

17 5 and local agencies have implemented regulations of their own to promote use of alternatives to gasoline and diesel fuel. In some cases, either the EPACT or CAA regulations apply to an individual fleet, while others must comply with both (or are exempt from both). With regard to federal regulations, criteria for coverage include: Type of Fleet. Numerous fleets are exempt, including those for lease or rental, those held by dealers (or for demonstrations), those used by original equipment managers for tests, those held by law enforcement purposes, emergency purposes, non-road use (farming, construction) and military fleets. Also, vehicles garaged at personal residences are exempt, as well as those for which the feasibility of alternative fuel use is low. The laws apply to centrally fueled fleets (or those capable of being centrally fueled). Fleet Location. Fleets located outside CAA/EPACT areas are not presently regulated under these laws. Those in EPACT areas but outside CAA areas are covered by EPACT regulations. The rules that apply to fleets in areas covered by both acts are determined by characteristics of the fleet. Fleet Size. Three fleet-size categories are used, smaller than 10 vehicles, fleets with more than 10 but fewer than 20 vehicles, and fleets with more than 20 vehicles. 0 Vehicle Size. Vehicles are characterized by weight (smaller than 8,500 lbs, between 8,500 lbs and 26,000 lbs and larger than 26,000 lbs). Larger vehicles (those larger than 26,000 pounds) are not now regulated. Those between 8,500 lbs and 26,000 lbs are generally subject to CAA rules, while those smaller than 8,500 lbs are subject to EPACT and CAA regulations or only EPACT regulations, depending on the fleet location. Thus, school bus fleets located in either CAA or EPACT areas (or both) with ten or more vehicles weighing between 8,500 lbs and 26,000 lbs are subject to CAA regulations (Table 2). These restrict alternative fuel choices to: 8 0 Electricity; Ethanol or methanol; 0 Natural gas; 0 Propane; and Reformulated gasoline and clean diesel (only to meet CAA requirements). Alternative Fuels Fueling the Future, Argonne National Laboratory, U.S. Department of Energy, Ibid.

18 6 Table 2. Regulations and Laws Criteria for CAA and EPACT Coverage Source: Taking An Alternative Route, Alternative Fuels Fueling the Future, Argonne National Laboratory, U.S. Department of Energy, Biodiesel blends are not yet designated as alternative fuels, although it is expected that at least some blends will be designated before the CAA requirements take full effect in While many of the U.S. school bus fleet s vehicles operate outside metropolitan areas (and, outside those covered by the CAA), those in CAA areas appear to be subject to CAA regulations rather than under EPACT, primarily on the basis of the fleet and vehicle size (more than 10 vehicles, between 8,500 lbs and 26,000 pounds gross vehicle weight). In particular, CAA regulations require that after 1998, 50% of new vehicle purchases (smaller than 26,000 pounds) must be clean fuel vehicles (CFV) (Table 3).

19 7 Table 3. New Fleet Vehicle Purchases Required by EPACT/CAA Clean Air Act Energy Policy Act GW Less Than GVW Less Than Federal l/ State Fuel Municipal/ Year 8,500 Ibs 26,000 Ibs Provider Private 2/ (% of CFVS) (% or # of AFVs) (% of AFVs) ,500 3/ ,250 3/ ,000 3/ % 10% 30% % 15% 50% % 50% 50% 25% 70% % 50% 75% 50% 90% 20% % 50% 75% 75% 90% 2 0 % % 50% 75% 75% 90% 20% % 50% 75% 75% 90% 30% % 50% 75% 75% 90% 40% % 50% 75% 75% 90% 50% % 50% 75% 75% 90% 60% % 50% 75% 75% 90% 70% 1/ Fiscal year for federal fleet acquisitions requirements; model year for all others. 2/ May be required by regulations if DOE finds these voluntary acquisitions unlikely to be met. 3/ As required by Executive Order No Source: Taking An Alternative Route, Alternate Fuels Fueling the Future, Argonne National Laboratory, U.S. Department of Energy, The Clean-Fleet cities where CAA rules would be expected to apply to school buses include 22 major Consolidated Metropolitan Areas (CMA) with 81.2 million people in 1992, just under one third of the U.S. population (Table 4).

20 Table 4. Population, Clean-Fleet Cities, 1992 Metro Area (OOO) 1 Atlanta, GA Baltimore, MD Baton Rouge, LA Beaumont-Port Arthur, TX Boston MA, NH Chicago, IL, IN Denver, CO El Paso, TX Greater Connecticut, CT Houston-Galveston, TX Los Angeles, CA Milwaukee, WT New York, CT, NJ, NY Philadelphia, DE, MD, NJ, PA Providence, RI Sacramento, CA San Diego, CA San Joaquin Valley, CA Southeast Desert, CA Springfield, MA Ventura County, CA Washington, D. C, MD, VA 4293 Total U.S. Total Percent of Total 31.8 State Alternative Fuels Programs A large number of states have alternative fuel laws and regulations, as well as alternative fuel incentives programs and many others have programs under consideration by commissions and other state bodies. The following is a selection of programs focused directly toward school buses which were in effect November 1, Alaska. Contingent on Anchorage air quality, municipal and state government fleets must acquire CNG vehicles beginning in State Alternative Fuel Laws and Incentives, National Alternative Fuels Hotline, U.S. Department of Energy, November 1, See Appendix D for additional information.

21 9 Arizona. School districts with more than 3,000 pupils (in counties with more than 1.2 million residents) must plan to phase in AFVs, increasing AFV share from 18% in 1995 to 75% by The requirement for school bus fleets may be waived if cost increases exceed 20%. California. Districts in nonattainment areas may regulate public and private vehicle fleets requiring clean fuel use. Colorado. The city and county of Denver requires fleets of more than 30 vehicles (registered in the city) to convert 10% of the vehicles to clean fuels by The Green Fleets plan requires emissions reductions, which may be met by purchasing AFVS. District of Columbia. Fleets must increase their share of AFVs from 5% in 1995 to 40% by Iowa. All school district vehicles must use ethanol-blended fuels. New York. A centrally-fueled fleet program will require specific shares of new vehicles to be clean fuel vehicles beginning in Oklahoma. Established a loan fund to reimburse governments and school districts for the voluntary conversion to alternative fuels. 0 Pennsylvania. Alternative fuel fleet plan that supports grants for public and private projects. Texas. For fleets of 50 or more vehicles, a specific share of new vehicles must be capable of using alternative fuels, increasing from 50% in 1997 to 90% by In addition, the Texas Alternative Fuel Fleet program for CMAs with serious pollution problems established independent standards with coverage extending to fleets of 15 or more vehicles. Virginia. Beginning in 1998, specified shares of fleets in Northern Virginia, Richmond and Hampton Roads must be AFVs. West Virginia. Specific shares of state and local agency s new vehicles must be AFVs, increasing from 20% in 1995 to 50% by 1997.

22 10 School Bus Fuel Market School related transportation of children is a massive enterprise in the United States. More than 50 million children are enrolled in primary and secondary schools, 45.1 million in public schools and 5.6 million in private schools. 10 And, while many of these children are able to walk to school, nearly one-half are transported in buses owned or contracted by public schools, or by public transportation in cooperation with the school systems. This report concentrates on bus fleets owned or contracted by public school districts, an estimated 393,768 buses, with just over onehalf of the total owned by various school districts and 23% contractor owned. 11 In school year 1992/1993, public school transportation: Served 23.4 million public school students in 50 states, and more than 589,000 private school students; Traveled 4.25 billion miles; Required capital expenditures of $9.8 billion; and 10 Statistical Abstract of the United States. 11 The U.S. Department of Transportation categorizes buses into four types: Type A. A conversion or body constructed upon a van-type compact truck or a front section vehicle, with a gross vehicle rating of 10,000 pounds or less designed to carry more than 10 persons. Type B. A conversion or body constructed and installed upon a van or front-section vehicle chassis, or striped chassis, with a gross vehicle weight rating of more than 10,000 pounds designed to carry more than 10 persons. Part of the engine is beneath and or behind the windshield and beside the driver s seat. The entry door is behind the front wheels. Type C. A body installed upon a flat chassis with a gross vehicle weight rating of more than 10,000 pounds designed to carry more than 10 persons. All of the engine is in front of the windshield and the entrance door is behind the front wheels. Type D. A body installed upon a chassis with the engine mounted in the front, midship or rear, with a vehicle weight rating of more than 10,000 pounds designed to carry more than 10 persons. The engine may be behind the windshield, beside the driver s seat, located at the rear of the bus, behind the wheels or midship between the front and rear axles. The entrance is ahead of the front wheels. Source: National School Transportation Association.

23 11 Consumed an estimated 543 million gallons of fuel. 12 The average bus travels about 10,000 miles per year and provides daily transportation for 61 pupils. About 33,500 new buses are added to the fleet annually, but purchases vary widely (from more than 40,000 units in 1988 to less than 29,000 units in 1992). Total public school capital transportation expenditures exceeded $9.8 billion for the United States, with New York ($1.3 billion), California ($827.4 million), Pennsylvania ($534.4 million), Texas ($498 million) and Illinois ($449.2 million) the five largest investors accounting for 36.8% of total capital outlay. The average capital investment per pupil transported was $420 in 1992 (Appendix E). 13 The 4.25 billion miles public school buses travel annually make public school transportation a very attractive market for U.S. fuel producers. At the current time, the vast bulk of the nation s school buses are powered by heavy duty diesel engines and consume conventional #2 diesel fuel. (although a small share of school bus engines now in use are designed for gasoline). 12 Likely understates fuel consumption, since it is based on Department of Transportation estimates of average fuel consumption for school buses and other non-revenue buses (8.1 miles per gallon in 1992 for 4.4 billion miles). Source: National Transportation Statistics, 1995, U.S. Department of Transportation. 13 In six states, school districts purchase buses from a state procurement bid (compared to all other states, where schools procure buses from manufacturers and are then reimbursed by the state). State officials develop specifications, determine the number of buses school districts receive, then solicit bids from body and chassis manufacturers (beginning in 1988, Texas allowed schools to lease-purchase buses, so state totals since then represent one-half of buses purchased by districts). The six states include (along with 1994/95 sales figures and percent change from previous year in parenthesis): Florida (1,166, a 12% decrease); Kentucky (603, an almost 6% increase); North Carolina (960, a 4% decrease); South Carolina (2,000, an increase of over 4,000%); Texas (1,150, an 8% decrease); and West Virginia (250, an almost 3% increase).

24 12 III. Fuel Characteristics and Factors Affecting Use Alternative fuels for use in the nation s school bus fleet have very different characteristics, and, as a result, significant advantages and disadvantages. Number 2 diesel fuel is the current standard, with perhaps 95% of the nation s school buses designed to operate efficiently on this fuel. Diesel fuel has attained its preeminent position because it has many advantages. It is relatively inexpensive, its energy content is high and it is proven safe to use and easy to store. Except for the fact that it is made from petroleum (approximately one-half of which is imported) and produces significant levels of pollutants, it likely would continue to be the standard fuel in the future as it has been in the past. Today s diesel engines were largely designed to maximize efficiency when used with diesel fuel, so differences in fuel energy content, volatility, lubricity, flash point and other characteristics affect performance. While it is beyond the scope of this study to evaluate the technical characteristics of alternative fuels, several major characteristics of each have very important impacts on their competitive position. Natural Gas Natural gas is produced in many domestic oil production areas, and is one of our most abundant fuels. Its primary advantage is that it bums very cleanly, with among the lowest levels of pollutants of fuel choices available (Table 5). Unlike home heating plants, vehicles must be fueled from an on-board reservoir, so an important aspect of efficiency is the energy density of each fuel. Liquid fuels have a strong advantage in this regard because they can be gasified for combustion, but are relatively dense in their natural state so that a sufficient amount for a reasonable trip length can be readily transported. Gases have a significant disadvantage in energy density, and two methods of increasing it are commonly used: Compression. Natural gas is compressed to about 3,600 pounds per square inch in order to reduce the volume required for a reasonable trip length. Relative to diesel, this compressed fuel has: 0 12% more energy per pound (but less per unit of volume), and requires less fuel per mile than other, less energy dense fuels. CI High-pressure handling and storage requirements that necessitate large capital investments in engines, compression equipment, storage facilities, safety equipment, etc.

25 13 Table 5. Advantages and Disadvantages of Compressed Natural Gas (CNG) Advantages Disadvantages (1) Relatively low cost compared with other (1) Must be stored in tank at high pressure or fuels. under cryogenic conditions. When stored as high pressure gas, the tank takes space in the vehicle and has low energy density of storage relative to diesel. (2) CNG vehicles do not require the fuel/air (2) Relatively high volumetric fuel-air ratio ratio to be enriched during warming because as reduces engine air consumption by about l0%, a gas it mixes very well with air at low thereby reducing peak power unless there are temperatures. compensating changes in compression ratio or boost. (3) Evaporative emissions are no problem with (3) Relatively high cost of converting existing CNG because as a high pressure gas, all vehicles. connections are very tight. (4) Unburned fuel emissions have very low photochemical reactivity. (4) Added weight of tankage reduces vehicle carrying capacity. (5) Very high octane number and high lean flame ignition limit. Source: Nicolas B.C. Ahouissoussi, A Comparative Cost Analysis for Biodiesel, Compressed Natural Gas, Methanol and Diesel Fuels for Transit Bus Systems, PhD dissertation, University of Georgia, o Lower engine efficiency relative to diesel, with the reduction depending on engine design. Relative to diesel fuel, CNG efficiency is as much as 20% lower, a deficit that may be overcome in the future as better engine designs are developed. 14 Requirements for on-board fuel tanks that are both very heavy and bulky. Tanks that hold adequate amounts of gas for normal trip length may be five times or more the weight of conventional diesel storage tanks (for transit buses with a 330 mile range, the weight of the fuel tank for a CNG bus is 1,540 pounds, compared with 196 pounds for a diesel bus). 15 The weight of the fuel tank affects the performance l4 A Comparison of LNG, CNG and Diesel Transit Bus Economics, Acurex Environmental Corporation, Gas Research Institute, Market Evaluation Group, I5 Technical and Economic Assessment of Biodiesel For Vehicular Fuel Use, Booz-Allen & Hamilton, Inc., 1994.