Fleet News

LPG: the green road forward or just another dead end?

AT the turn of the century, the fleet industry was buzzing with news of alternative fuels. Van fleet operators were being urged by the Government to buy vehicles powered by liquefied petroleum gas (LPG) and natural gas (CNG).

Grants were made available to cover the extra cost of such vehicles and duty on LPG and CNG was set at an artificially low level in a bid to persuade the unbelievers that this was the way ahead for making Britain a greener and more environmentally-aware nation.

But as 2004 dawned, it became obvious that all was not rosy in the green fleet garden. First setback came in November 2003 when the Energy Savings Trust announced that it had run out of money for grants for fleets to buy alternatively-fuelled vehicles for the financial year up to April 2004. The PowerShift scheme which gives out the cash had £10 million to spend in that financial year but used it all after grant applications rose by 350%. The scheme, it appeared, had become a victim of its own success.

For the 2004-05 financial year, PowerShift has announced that grants will be cut by 30%.

Then, in his pre-Budget speech in December 2003, Chancellor of the Exchequer Gordon Brown announced that duty on LPG would rise because the discount that makes the fuel about half the price of petrol was no longer justified by its environmental benefits.

Brown said in his speech: ‘We will gradually increase the duty rate for LPG over the next three years, setting duty differentials on a path towards a level commensurate with the fuel’s environmental benefits.’ Thus, within the space of two months, the two pillars on which the success of LPG was built – grants to buy the vehicles and duty benefits to keep the fuel cheap – were suddenly removed.

There are others problems too.

Here at Fleet Van, we have heard many stories about reliability problems with LPG vehicles, especially ones adapted by aftermarket ‘specialists’ – and remarketing experts are warning that alternatively-fuelled vehicles are making less money than their diesel counterparts at selling time.

So exactly where does this leave the average UK van fleet operator today? Most would agree that we all need to do our bit to help the environment, but all have limited funds too, so if doing that ‘bit’ comes at an unreasonably high cost, few finance bosses are likely to allow it. An added problem is that the holy grail of motor manufacturers – an engine with zero emissions – is already within sight.

In about 15 to 20 years, time, cars and vans will be powered by hydrogen fuel-cells which run on liquefied hydrogen and pump out nothing more harmful than water. Vehicles using this technology are already being tested and manufacturers are investing billions of pounds in test programmes.

On that basis, any investment in alternative fuels is likely to be a short-term one. Add to this the fact that diesel engines are becoming ever cleaner and greener and you have a complicated situation indeed.

Here we give a platform to various interested parties in the great alternative fuel debate. Read their views and decide for yourself...

The manufacturers’ view

Why Peugeot will stick with diesel power

By Robert Browett, Head of public affairs and Governmental issue, Peugeot

Motor vehicles operating on the roads today emit 10 times fewer pollutants than similar vehicles 10 years ago. The main pollutants generated are CO, HC, particulates and NOx, all a by-product of the internal combustion engine’s combustion process.

To reduce these pollutants and also to reduce operating costs of vehicles, alternative fuels have been developed, such as liquefied petroleum gas or LPG. Peugeot’s policy in the UK and generally across Europe, however, has been to provide limited production of LPG vehicles. It is felt that the short to medium-term solution to greener vehicles will be found in highly-efficient high-pressure direct-injection (HDi) diesel engine vehicles.

Converted petrol vehicles operating on LPG produce, on average, 15% less CO than the original vehicle operating on petrol alone.

A modern diesel engine, however, produces on average 5% less CO than the converted petrol vehicle operating on LPG. An LPG-equipped vehicle produces fewer particulates. Modern Peugeot diesel engines over 2.0-litres are now available with particulate filters, which trap the particulates between 0.01 – 0.05 micron. A diesel engine fitted with a particulate filter also provides 99% filtering of particulates and automatically compensates for engine wear and poor engine tuning. LPG vehicles do produce lower emissions of oxides of nitrogen (NOx) but NOx emissions are currently only 18% of the level of CO2. Therefore, the reduction of CO2 and the greenhouse effect must be the number one priority.

Diesel engines with their lower CO2 emissions, therefore, provide the best answer to the CO2 challenge in the short to medium term.

Further CO2 reductions can be achieved using the latest diesel technology and fossil fuels blended with bio-products. Peugeot warrants all its diesel engines to operate in fleet conditions up to a 30% mix of biofuel (FAME – Fatty Acid Methyl Ester) for fleets with their own fuel supply.

So a diesel engine operating on biofuels provides an immediate reduction in CO2, as the plants used to produce the fuel absorb CO2 at source through photosynthesis, giving a reduction in CO2 produced of 2.5t /CO2 per 1,000 litres of diesel replaced.

With the fuel tax advantages of LPG likely to be eroded by the Government, the key advantage of this fuel will disappear. The only effective and efficient short to medium-term power solution is the diesel engine. This supports Peugeot’s long- standing strategy of developing class-leading diesel engines with the development of the particulate filter a world first when fitted to the 607 and only now being taken by other manufacturers.

Plenty of reasons to go for alternative fuels

By Phil Hobbs, national dualfuel sales manager, Vauxhall

VAUXHALL Motors, Britain’s leading producer of dualfuel LPG/petrol models, and maker of some of the best Euro IV-compliant diesel engines, is remarkably well placed to give fleet van users the choice.

No-one in the industry would deny that the lengthy gap over the winter, between the first hint that the Government might be having second thoughts on its support for LPG and the final Budget announcement that, after all the hullabaloo, there was still a place for LPG, damaged interest in the product – and slowed sales substantially.

Consequently, we at Vauxhall do not expect registrations of dualfuel vans to reach anything like the 1,600-plus we recorded in 2003. That figure was three times higher than the 2002 level, which does indicate graphically just how the market was taking off before the Treasury’s question mark last autumn.

But we do know that interest is back and the order book is beginning to grow again. A number of companies who had put dualfuel vans on hold during the period of uncertainty have returned. And more are set to join the ranks.

Since the Budget, we have made it clear that we will continue to back LPG as a green, cheaper fuel into the foreseeable future – probably well towards the time when fuel cells will provide the means of propulsion.

So, in short – yes, Vauxhall is keen to see more van fleets go down the dualfuel road. We’ve even just added the Corsavan to the range, fitted with an amazingly perky yet frugal 1.2-litre engine. Corsavan has joined the Combo and Astravan.

Dualfuel fleet operators well know that, particularly with their own bunkering facilities, they can make substantial savings over the lifetime of their vehicles.

The slight increase in duty is unlikely to have a particularly significant effect (not least because duty on other fuels will also rise at the same time) and while the PowerShift grant, while regretted, has been reduced, it is still a substantial element in the ‘why choose gas power’ equation.

And of course, in Scotland the grant was not reduced.

Meanwhile, Vauxhall never forgets that operators have a choice, which is why the diesel engine range has been through a complete revamp.

The Corsavan is available with the 1.3 CDTi common-rail diesel engine and the Astravan with the highly-acclaimed 1.7 CDTi engine. Both, of course, comply with the Euro IV emissions standards.

Combo will also be available with the 1.3 CDTi engine later in the year. The fleet managers’ view

Operators angry as Government ‘pulls the rug out’

MARY Blackwell, contracts/costs manager at the Yorkshire Building Society, is feeling let down at present and she believes she is typical of Britain’s van fleet operators.

Having listened to the Government and invested in alternatively-fuelled vehicles, she now feels that the Government has pulled the rug out from under her feet. On her fleet of cars and vans are four LCVs and two of these – a Vauxhall Astravan and a Ford Transit – are petrol/LPG bi-fuel models.

She said: ‘We took these vans on because we wanted to be seen to be doing our bit to help the environment and also because we wanted to save money on fuel. So far, we reckon we are savings a third in fuel costs.

‘Our drivers like them and we have had no problems with them at all.

‘The Government urged fleets to buy bi-fuel vehicles and, following the reduction by 30% in Powershift grant and the extra duty on the fuel, we feel as through we have the rug pulled out from under us.

‘I think I am typical of the way other fleet operators are feeling at present.

‘The PowerShift grants and the cost of fuel were big factors in the decision to buy bi-fuel vans and now one has been reduced and one raised and we will have to look carefully in the future about buying more, although no decision has been made yet.

‘Our car drivers get an allowance to lease a vehicle and they get 15% extra allowance if they choose an lpg car and, as a result, at present there are 16 LPG cars on the fleet.

‘On vans, we will be guided by future leasing rates because if the leasing company does not see a future for LPG and residual values suffer, the rates will go up and drivers won’t be able to afford them. If this happens, we will not buy any more vans.

‘We only have a few vehicles but some local authorities in particular have invested heavily in LPG and they could be badly affected.’
  • Right: Operators like Mary Blackwell have embraced alternative fuels but now feel let down by the Government

    The residual value expert’s view

    The future is by no means assured

    By David Hill, senior editor, CAP Red Book

    LPG was promoted as an economical way of reducing emissions, with encouragement from the Government by way of tax breaks on the fuel and other concessions such as conversion grants and exemption from congestion charges in London and elsewhere.

    But how do LPG vans fare in the used market? What is now emerging is a two-tier LPG market, roughly divided between the 3.5-tonne sector and car-derived vans (CDVs), with demand for LPG much stronger in the latter area. This reflects the enduring difference between the car and van market, with trends in the CDV sector much more closely mirroring the car sector.

    But interesting business users who need a workhorse to reliably and cheaply haul a tonne or more of load around the country is more challenging than turning the small van driver on to the economic benefits of a cheap fuel.

    I have personal experience of this kind of inertia. In the late 80s it was very difficult to interest the retail customer in a diesel engine. Happy with petrol, the diesel variant was seen as an unknown quantity.

    Converting someone away from the fuel type which gave them the performance and economy they wanted proved difficult until enough people had bought into the diesel market to give it what you might call critical mass. Exactly the same problems now exist for LPG in the 3.5-tonne sector and it is notable that the new Volkswagen Transporter range has led off with four diesel models ranging from 85 to 174 bhp, but no petrol or LPG option so far.

    Personal experience of this van – which delivered me 357 miles on half a tank of fuel, albeit unladen – suggests that persuading the vast majority of buyers that there was a better alternative would be challenging indeed.

    Researching dealer experience and retail buyer attitudes reveals a perception of LPG which is split by sector. For larger vehicles, the common belief is that LPG will not give the same performance and, with diesel technology offering power and economy undreamed of not so long ago, this is unsurprising.

    There are still relatively few large LPG vans in the used marketplace and therefore obtaining truly realistic data on their price performance remains difficult.

    However, research does indicate an approximate £1,200-£1,500 difference in diesel’s favour. And the main factor restraining the large van buyers’ choice of LPG is the continuing uncertainty in their minds over the durability of the engine.

    These vans do the highest miles – 150,000 a year is common – and understandably the owner prefers not to be the guinea pig for testing LPG engine reliability.

    Although probably less of a factor in influencing demand, the issue of where to re-fuel is also more significant to these users.

    The picture changes dramatically in the CDV market. Looking at Astravan, LPG variants fare very well in comparison with diesel, generally remaining within £100-200 of the latter and sitting comfortably above petrol versions.

    However, this kind of parity is always likely to be fragile, given the ongoing erosion of tax advantages for LPG, and this area of the market should be watched carefully.

    The Energy Savings Trust view

    Why van fleets should have faith in LPG

    By Alex Veitch, senior policy analyst, EST TransportEnergy

    Liquid Petroleum Gas (LPG) is a transport fuel with a strong future and is the most widely available of the alternative fuels. Its environmental credentials are also sound: when used in comparable vehicles, LPG produces less CO2 than petrol and compared to diesel vehicles LPG delivers significant reductions in NOx and particulate emissions.

    As such, the environmental benefits of LPG remain strong, although the gap in environmental performance between LPG and diesel vehicles has reduced in recent years.

    Vehicles powered by LPG are also increasingly available direct from manufacturers such as Ford and Vauxhall. Converting an existing petrol vehicle is also a relatively simple process and grants are available towards the purchase and conversion costs of the cleanest LPG vehicles from the Energy Saving Trust. These factors combined make LPG a realistic alternative to traditional fuels for fleet owners.

    Grants from the Energy Saving Trust continue to be provided to support the development of the LPG market in line with its environmental benefits. The new grant levels for this year have been set lower than in previous years to ensure the grant fund delivers maximum environmental benefit and the greatest possible number of vehicles funded across the UK.

    The revised TransportEnergy grants are based upon fixed grant levels for all vehicle categories. This is in response to stakeholder suggestions that such a system would be clearer to understand and more easily and effectively administered for customers.

    Fleet operators should remain confident in the current and future viability of LPG vehicles. Many UK companies are making the switch to cleaner fuels and those that do often find that cleaner fuels also provide financial savings. The key is to choose the right fuel for the right vehicle and to ensure the right application of the vehicle.

    There are also alternatives for fleet operators in maximising profit and reducing environmental impact beyond the simple choice of fuel. In order to effectively and significantly reduce fleet emissions and costs, organisations should develop and sign up to a BestPractice travel plan, which is a package of measures designed to help develop and implement plans that can reduce single-occupancy car travel for schools, businesses and commuters.

    Most importantly, organisations should introduce a cleaner fleet strategy which sets out clear targets such as minimum emissions standards for all vehicles and encourages the supply of cleaner fuel vehicles, fuel efficient vehicles and vehicles fitted with emission control technologies.
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