|Issue Number: 111||August 2014|
Driving Growth in Natural Gas Vehicles in Europe
Figure 1: Mercedes-Benz E200, a car that runs off natural gas. 
Oil dominates the road transportation sector in Europe, constituting 93% of all vehicle fuels in 2011. Despite the current overwhelming dominance of oil in Europe, there are growing signs that natural gas could take off as a vehicle fuel. This article will briefly explore the technical aspects of natural gas as a road fuel before exploring the different kinds of commercial and environmental drivers for its greater adoption. Whilst the drivers suggest that the future looks positive for natural gas-fuelled vehicles, there are also high hurdles that will have to be cleared first.
What type of gas? CNG or LNG
There are two main technical applications of natural gas as a transportation fuel: compressed natural gas (CNG) and liquefied natural gas (LNG). CNG is natural gas that has been compressed to between 200 and 275 bar and has been stored as a pressurized gas in a high-pressure storage tank. LNG is natural gas cooled to -161°C and stored as a liquid in highly-insulated tanks. Typically, CNG occupies 1/200th to 1/275th of the volume of gas at standard temperature and pressure, and LNG 1/600th.
What natural gas vehicles are available?
There are three main vehicle technologies that can use natural gas as a fuel:
The case for natural gas-fuelled vehicles in North America is based largely on the significant price differential between natural gas and crude oil. But the situation in Europe is less clear-cut, and along with the cheaper cost of natural gas over oil-based fuels, there are various other factors that are driving the growth of NGVs, including the role of taxation, regulation and access to infrastructure.
Europe offers attractive incentives for on-road gas use in tax regimes. The table below compares the tax levels on diesel with those on natural gas for four European countries. The most supportive tax regimes are found in Belgium, the UK, Italy, France, the Netherlands and Sweden, where excise taxes for natural gas as a vehicle fuel average about €0.58 per litre equivalent lower than those levied on diesel in the same country.
Table 1: Comparison of vehicle fuel tax rates for selected European countries 
The other driving force for the adoption of natural gas as a transportation fuel is the cost advantage over diesel. Although the price advantage in Europe is not as great as in the US, it is still significant. The graph below shows some price differences between wholesale gas, diesel and three sets of gas prices: the cost of Japanese LNG, which is strongly correlated to gas oil and fuel oil prices, the cost of German gas imports as assessed by BAFA, and the cost of gas in the UK at the NBP hub market. The graph highlights the economic advantages in using gas over oil-based vehicle fuels in most markets, but particularly in markets such as the UK, and to a lesser extent Germany, where gas prices are significantly lower than diesel prices. The prices shown in the graph are all wholesale prices and do not include retail costs and taxation. A key factor is the extent to which gas prices are decoupled from oil prices. Historically both Japanese LNG and German gas prices have been strongly correlated with gasoil and fuel oil prices. However, following the recession of 2009 German gas prices have started to decouple from oil prices due to the growth of gas trading markets and renegotiation of long-term contracts, bringing German gas prices lower towards the UK level. This significantly increases the cost advantage of gas over diesel.
Figure 2: Selected oil and gas prices. 
Another important driver in the adoption of natural gas vehicles is the role of the European Commission and national governments in:
Natural gas refueling stations are a prerequisite for any future growth of natural gas vehicles. The growth of the NGV sector in Europe is marred by significant technical barriers, including infrastructure constraints and hesitance about the availability of infrastructure from potential adopters. This has led to the so-called the chicken-and-egg problem. However, total spend on NGV refueling infrastructure to date has been estimated by the European Commission to amount to €322 million for road transport and geographic coverage is improving.
Within the EU, there are currently about 3,000 CNG refueling stations (2,500 public and 500 private) as well as about 220 planned stations. NGVA has developed the first European interactive map of CNG and LNG filling stations, including information of the stations' GPS coordinates, opening hours, payment method, a trip planning function and a 'search nearby/by country option'. The map below shows the current numbers of CNG (including L-CNG) stations in Europe. Blue indicates good coverage, yellow medium and red poor or no coverage.
Figure 3: Map of CNG filling stations in Europe 
This article suggests that natural gas as a transportation fuel is increasingly making headway in the European vehicle market, although there are also significant challenges that will have to be managed or overcome.
Commercial factors may drive the NGV market because of the cost advantage over diesel and the differences between taxes. As tax regimes are subject to change, however, it is possible that national governments might increase tax on natural gas vehicles if gas becomes a more popular option in the future.
The policies adopted by the European Commission, national governments and supranational bodies will have a strong impact on the future of natural gas in vehicles. There is a thrust towards reducing the dependence on oil used in transportation and decarbonising the vehicle sector. Whilst these policies might drive the NGV market, there are also tensions and uncertainties. The European Commission's vision of a reduction of oil in transport can sometimes jar with national and local initiatives. For instance, the current subsidies for buses in some countries will act as disincentives for this sector to switch to gas.
The chicken and the egg dilemma is on its way to be cracked because of the various projects to build a network of filling stations. However, more investment in infrastructure is needed and the length of time to build it will create further delays in the NGV market. 'Range anxiety' is likely to remain as a deterrent to switching to an unconventional form of transportation fuel.
In summary, therefore, there are plenty of reasons why NGVs in Europe are likely to become more populous in the future. Challenges, however, remain.
Written and researched by Nico Cottrell
 Chris Le Fevre http://www.oxfordenergy.org/wpcms/wp-content/uploads/2014/03/NG-84.pdf p. 25.
 Chris Le Fevre http://www.oxfordenergy.org/wpcms/wp-content/uploads/2014/03/NG-84.pdf p. 23.
 Chris Le Fevre http://www.oxfordenergy.org/wpcms/wp-content/uploads/2014/03/NG-84.pdf p. 89.