This article of alphaDIRECT Management Series focuses on Westport Fuel Systems and its role as a global leader in gaseous fuels for transportation, including LPG and its comprehensive set of products and systems. The European LPG market, along with regulatory issues and key economic drivers for LPG fuel versus gasoline, is also included. Liquified petroleum gas (LPG) fuel is the most common unblended alternative vehicle fuel, with an estimated 27 million LPG vehicles in use globally, according to Management. LPG is used in passenger vehicles since it is relatively easy to store in cylinder tanks or toroidal tanks under the vehicle or in the spare wheel compartment. When compared to other fuels such as compressed natural gas (CNG) and liquified natural gas (LNG), LPG has a lower cost structure and conversion costs. Key LPG market drivers includes fuel cost savings, wide availability, relatively low investment for infrastructure, low installation costs and reduced GHG emissions. Markets with government support such as Turkey, Poland and Italy have a long-term deployment strategy and taxation benefits, which have encouraged growth and high penetration rates. Prins Autogassystemen B.V. is part of Westport Fuel Systems.
First, I’d like to thank you, Bart, for taking the time to speak with us today. The last time that we spoke with Westport Fuel Systems we discussed the European heavy-duty carbon dioxide emissions standards and regulatory environment with CEO, David M. Johnson. Today, our focus will be on the global LPG market. I understand you’ve been working in the alternative fuel systems industry since 1998. Can you share a bit about your background and your insights on how the global markets of alternative fuels have evolved over time?
Bart van Aerle:
I started working in the alternative fuel industry directly out of school and I completed my thesis with a small company in the Netherlands who was importing propane/liquified petroleum gas (LPG) systems. In 1999 I started working for Prins Autogas Systems in Eindhoven, the Netherlands. And in 2014 Prins was bought by Westport Innovations and became Westport Fuel Systems in 2016. In North America, we use the term propane but in Europe people refer to LPG or GPL or even Autogas when talking about the transportation fuel. Technology has changed a lot over time. When I started, there were still cars with carburetor engines and then we moved on to cars with single-point injection fuel systems and then to multi-point injection (MPI) systems. Now, we are using direct injection engine technology as well as direct injection with MPI technology. Actually, the new direct injection engines are better suited for LPG than for gasoline because LPG has a higher-octane number than gasoline which enables us to create better efficiency in the engine. We are reducing both emissions and fuel costs, which is a unique investment proposal. When you are investing money in a propane system, you’re not only saving money, but you’re also contributing positively to the environment. I cannot think of anything else that works like that and this is what has kept me in the business for approximately 22 years.
Great, thank you, Bart. Westport Fuel Systems is a global leader in gaseous fuels for transport and that includes LPG. Tell us a bit about the state of the global LPG vehicle market and outlook for growth. What are the market drivers for LPG and how is that different from CNG and LNG? What market segments are compelling for LPG and why?
Bart van Aerle:
Absolutely, Shawn. We do indeed have the technology, systems, and components for a wide range of fuels. LPG is the most common unblended alternative vehicle fuel in use in the world today. The LPG fleet continues to grow unabated; there are almost 27 million LPG vehicles in use around the world. LPG is a waste product as about 60% of the LPG in the world comes from the extraction of natural gas and 40% from the refinery of crude oil. In the old days, you saw refineries flaring off LPG. Perhaps they captured a small amount for heating etc., but the rest was just flared off because it was more expensive to capture than to burn it. At this time, LPG started to be used for transportation but also for heating and cooking. The major differences between LPG versus compressed natural gas (CNG) or liquified natural gas (LNG) are the lower cost of the LPG-infrastructure, the lower conversion costs, and easy storage of LPG in a cylinder tank or toroidal tank in the place of the spare wheel or under the car. LPG is stored under 7 bar, CNG under 200/240 bar, and LNG needs to be stored at -162 degrees Celsius in a special coated tank. LNG is a commercial solution for heavy-duty trucks due to their driving range while LPG and CNG are commercial solutions for passenger cars and trucks. The main drivers for LPG are fuel cost savings, wide availability of the fuel, relatively low investments for infrastructure, comparable performance as driving on gasoline, low installation costs of the LPG system, and reduced GHG emissions. The markets vary greatly for LPG, CNG and LNG and depend on the natural resources of a country and regulations for both natural gas and LPG. Markets can grow rapidly when the government has a long-term vision. We have seen this in countries like Turkey, Poland, and Italy as they now have a large market penetration rate for LPG because the government has realized that this is a good fuel option and provides cost savings. The government made the right long-term strategy on taxation to encourage growth.