Natural Gas at CMU

1. Natural Gas at CMU Mike Chester Joan Gariano November 25, 2002 12-706: Benefit-Cost Analysis Final Project Presentation

2. Presentation Summary • Background • Model • Preliminary Analysis • Preliminary Conclusions • Next Steps

3. Background • Natural Gas vs. Gasoline • Emissions reduction from Conventional Gasoline Vehicles to NGV (source: “CNG Vehicles for CMU” Graduate Research Project by Esin Ergen) • VOCs – 89% • NOX – 87% • CO – 70% • CO2 – 20% Background | Model|Preliminary Analysis|Preliminary Conclusions|Next Steps

4. Background • Pittsburgh exists on large source of NG, cheap source of fuel Background | Model|Preliminary Analysis|Preliminary Conclusions|Next Steps

5. Background • History of Natural Gas at CMU • FMS fleet • 21 gasoline vehicles • Astrovans • Pickups • Majority cargovans • 2 NG vehicles • NG vehicles refuel on Southside • Gas vehicles refuel at Forbes Exxon Background | Model|Preliminary Analysis|Preliminary Conclusions|Next Steps

6. Background • Brad Hochberg—FMS “Energy Manager” • Possibility of Southside NG station closing down • Suggesting installation of NG station on campus • Possibility of “free station” from Equitable Gas • What would be the costs and benefits of installing NG station on campus and converting all current vehicles to NG? Background | Model|Preliminary Analysis|Preliminary Conclusions|Next Steps

7. Model • Objective: evaluate benefits and costs of installing NG station on campus and replacing all gas vehicles with NG vehicles over time • Structure: benefit-cost analysis • 2 Situations for comparison in BCA • Status quo • Conversion of all NG vehicles Background| Model|Preliminary Analysis|Preliminary Conclusions|Next Steps

8. Model • Status Quo Costs • Maintenance • Refueling—both gas and 2 NG vehicles • Purchase of one new gas vehicle every year • Opportunity cost of refueling time • NG Station and Vehicles Costs • Maintenance—<status quo • Refueling—<status quo • Purchase one new NG vehicle/yr—>status quo • Install NG station—large initial cost • Opportunity cost of refueling time—<status quo • Note: For preliminary analysis, $ values of environmental benefits were not evaluated Background| Model|Preliminary Analysis|Preliminary Conclusions|Next Steps

9. Model • Method: • Generate cash flow of costs in both situations • Create NPV’s for both cash flows and compare • Find variance between status quo and alternatives NPV of Status Quo Currently refueling at Exxon Station (21 vehicles) and NG station on South Side (2 vehicles) NPV of NG Options Background| Model|Preliminary Analysis|Preliminary Conclusions|Next Steps

10. Preliminary Analysis • Status Quo Scenario  NPV = ($475,000) Background| Model|Preliminary Analysis|Preliminary Conclusions|Next Steps

11. Preliminary Analysis • NG Station Scenario  NPV = ($475,000) Background| Model|Preliminary Analysis|Preliminary Conclusions|Next Steps

12. Preliminary Conclusions • Options: • Already looked at • Status Quo • Full transition to a NGV fleet • Must also consider • Possibility that South Side station closes • Leaving fleet at partial NGV and partial gasoline Background| Model|Preliminary Analysis|Preliminary Conclusions|Next Steps

13. Preliminary Conclusions • From results with initial assumptions: • NPVstatus quo = NPVNG station = ($475,000) • Would be much greater with environmental benefits • Also, tax exemptions may make (2) more desirable • However, so far, (2) is attractive, but not beneficial enough to implement Background| Model|Preliminary Analysis|Preliminary Conclusions|Next Steps

14. Next Steps • Add tax exemptions • Sensitivity analyses • Cost of NG station • NG fuel economy • Cost of NG vehicles • Free parts vs. no free parts for natural gas station Background| Model|Preliminary Analysis|Preliminary Conclusions|Next Steps