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    CNG Fuels banks on UK biogas prospects: CEO interview


The UK market for compressed biomethane as a vehicle fuel is seeing "exponential growth," Philip Fjeld, CEO and co-founder of CNG Fuels, says.

by: Joe Murphy

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CNG Fuels banks on UK biogas prospects: CEO interview

UK fuel retailer CNG Fuels is anticipating a rapid expansion in the use of bio-compressed natural gas (CNG) in heavy vehicle transport in the UK, viewing it as the best option for fleet operators to decarbonise while remaining competitive.

CNG Fuels was established in 2014 and since then its bio-CNG retail business has been "building momentum," CEO and co-founder Philip Fjeld tells NGW in an interview. The company currently operates six filling stations across the UK and plans to add 14 more over the next two years with £80mn ($110mn) of funding from a new partnership with investment manager Foresight Group. It began construction on the first of these new stations near Glasgow in Scotland in late March.

"It takes a long time to create and build an industry," Fjeld says. "But we're in a very good position now. The industry is taking off and our customer base is ever increasing."

The use of biomethane in long-haul transport is still an early stage in the UK. Of the 130,000 heavy articulated trucks on the road that are registered in the UK, less than 1% run on CNG and LNG. Some 90-95% of the gas used is biomethane, while the rest is fossil fuel-based.

However, Fjeld projects that the market penetration of gas-fuelled trucks should reach 2-3% by the end of 2022 and 5% by the end of 2023. 

"The growth trajectory is huge because we're seeing operators with fleets of 3,000 or 4,000 trucks essentially having decided not to order diesel trucks anymore," the CEO said. "They keep trucks for five, six or seven years, and so as their current diesel truck stock comes up for replacement, they're going to be ordering hundreds and hundreds of gas-fired trucks."

The Covid-19 pandemic did not put a stop to CNG Fuels' growth trajectory, given that many of its customers are involved in food retail or in internet shopping, which saw significant growth during the pandemic. In fact, the company's sales almost doubled in 2020, Fjeld says, and are likely to double again this year.

"We haven't really been affected by Covid necessarily. The majority of our customers are busier now than they were a year ago," he says. "We're off to a great start this year. We've had more incoming interest from new and existing customers in the first three months of this year than all of 2020. It's a kind of an exponential growth."

There is limited space for CNG in lighter passenger vehicles in the UK given the lack of right-hand drive vehicles built to run on the fuel, Fjeld explains. Battery and hydrogen fuel cell electric cars are therefore the best option for decarbonising this class of transport, he believes, but the same is not the case for heavier vehicles.

"Even if money was no object, or you had a government that was willing to subsidise things to an extreme extent, a battery electric 44-ton truck that could take you 500 miles in one charge doesn't really exist," he notes.

Hydrotreated vegetable oil (HVO) biodiesel is another decarbonisation option available to fleet operators. But there is limited supply of the fuel globally and it is more expensive than conventional diesel, Fjeld says.

"Most haulage companies operate in a 3-5% profit margin. And fuel is 30-40% of the cost of running a truck. So if your fuel is 20% more expensive which HVO typically is, you're essentially eating up your entire profit and you're going to end up bankrupting your company," he said.

Bio-CNG, on the other hand, is cheaper than conventional diesel, and supply is more greatly available and locally, according to Fjeld. It can also be obtained under much longer-term contracts than is the case with HVO.

In some countries, bio-LNG is more popular than bio-CNG in long-haul trucking. But this is not the case in the UK, given the country's very well-developed pipeline network and the shorter transport distances, Fjeld says.

The UK has a "very well-functioning biofuels policy" in the form of the 2007 Renewable Transport Fuel Obligations Order, according to the CEO. The policy does not discriminate between different types of biofuel such as biomethane, biodiesel and bioethanol, instead simply favouring all biofuels from waste over biofuels from crops.

"The policy doesn't really pick a winner," says Fjeld. "They've designed this policy that lets the industry decide which biofuel is the most cost effective."