Interview: High Diesel Costs Put Alternative Fuels in Focus

Elevated diesel costs are bringing renewed attention to alternative fuels in commercial transportation, from biofuels and natural gas to battery-electric trucks.

John Eichberger, executive director of the Transportation Energy Institute, spoke with Dow Jones Energy at the NACS Show last week about the outlook for alternative fuels and the economic factors shaping fleet adoption.

Dow Jones Energy: How are high diesel prices affecting the outlook for alternative fuels like renewable diesel and biodiesel?

John Eichberger: Biodiesel has made gains. When the Biodiesel Blenders’ Tax Credit expired, biodiesel volumes dropped 50%. Most renewable diesel is going to California because of the Low Carbon Fuel Standard. But elevated D6 RIN prices help a ton, and with the latest renewable volume obligations, second-quarter biodiesel volumes have tripled year over year, while renewable diesel is up 30% to 40%. Guidance is starting to turn around.

DJE: Which fuel alternative stands to benefit most in the near term?

Eichberger: Biomass fuels are the biggest short-term winner. I thought they’d be the winner even when EVs were the darling because we have 300 million combustion vehicles in the United States, and we’re not getting rid of them. To reduce emissions without replacing the powertrain, you have to reduce the carbon intensity of the fuel, and biofuels like ethanol, biodiesel and renewable diesel allow you to do that.

Today, we’re not as focused on carbon emissions. We’re worried about economics. If biofuels are available at the street or on contract for less than diesel, why would you not lock in that supply?

Pilot Travel Centers has partnered with Pepsi and ADM to sell B99 — 99% biodiesel — out of three stations. You have to heat the container to maintain B99 in cold weather, but overall, it’s a huge cost reduction. You get the full RIN value on almost the entire gallon rather than just a 2% or 20% blend, alongside an LCFS credit in certain states. Plus, the blending economics of lower-priced biodiesel. The biofuels market is poised for huge success in the next three to five years.

What happens in November with domestic policy will determine how long that advantage remains. If the pendulum swings back, EVs could become the darling again.

DJE: Is natural gas gaining ground as diesel costs remain elevated?

Eichberger: Natural gas is a lot cheaper than diesel right now. Converting a truck is $60,000, but that’s cheaper than buying a new $150,000 tractor. If diesel operators can lock in a natural gas supply, they can save a ton of money.

The Cummins X15N natural gas engine is driving huge advances and drawing attention because the economics of diesel are so upside down. However, the engine isn’t cheap, and you still have to buy a purpose-built truck. There are conversion kits that allow you to run on natural gas, but they’re not as efficient or powerful as the Cummins engine.

A dual-fuel tractor makes sense because compressed natural gas isn’t ubiquitous. If CNG runs out, the engine seamlessly switches back to diesel, and you don’t even notice.

DJE: Are battery-electric vehicles practical for Class 8 heavy-duty trucks?

Eichberger: Not yet for long-haul operations. For a return-to-home fleet running 300 miles a day, electric vehicles work because you can plug in overnight and don’t need a DC fast charger.

Long-haul truckers get at most 500 miles per charge, compared with 1,200 miles on diesel. And about every 500 miles, you hit your hours-of-service limit. A 350-kW charger works for recharging over an eight-hour rest break, but if you want a quick charge to swap drivers and keep the truck operating, you need megawatt power.

A megawatt or two of charging capacity is essentially a substation just for a truckstop. And a truckstop isn’t installing just one of these megawatt chargers — they’re putting in six. That requires years of permitting and millions of dollars in infrastructure.

DJE: Where does electrification make more sense for commercial vehicles today?

Eichberger: The biggest growth in commercial EVs is in delivery vehicles, like Class 2B vans used by Amazon, UPS and FedEx. They drive 150 miles a day in residential areas with frequent stops and starts. They use regenerative braking and are constantly recharging. They’re quiet and produce no emissions. It’s a no-brainer.

–Reporting by Allegra Fradkin, allegra.fradkin@dowjones.com and Donna Harris, donna.harris@dowjones.com; Editing by Michael Kelly, michael.kelly@dowjones.com