Making the pitch for propane: Company focuses on fleets to build volume in effort to get the price of a system down

Via the Houston Chronicle (click for full article)
By Ryan Holeywell

Curtis Donaldson founded Georgetown-based CleanFUEL USA in 1993 after more than a decade working at Conoco (which became ConocoPhillips in a later merger). His company develops vehicle engines that run on propane - a component of natural gas - as well as propane fueling stations, primarily for fleets. It made news earlier this year when it entered a deal with UPS to supply the delivery company with 1,000 trucks and more than 50 fuel stations. He spoke with the Chronicle about the promise he sees in propane. Excerpts, condensed and edited for clarity.

Q: What prompted you to get into the propane business?

A: Conoco was looking at alternative fuels and putting them in our stations in the early 1990s. That was my project. I kind of got exposed to alternative fuels while working for a major oil company and fell in love with it. When Conoco decided not to progress beyond Denver, where the pilot project was, I left and started my own business to build dispensers.
The one thing I figured out for sure was customers aren't going to want to fill up with a device if it looks like something out of the ordinary. We build dispensers that look just like gasoline dispensers. Initially we were just making station equipment, then we migrated into making engines. Now, most of our business is on the engine side.
Q: What made you fall in love with propane?
A: I think two things. The idea of clean air quality drew me to it, and it's the utilization of a domestic resource.
Think about propane. It's in every town in America. There's no infrastructure cost to America to utilize propane. During the oil embargo (in the 1970s), propane grew from 1974 to 1981. We had 1.1 billion gallons sold by 1981, and 750,000 vehicles. I know we can do it. We've already done it once. Let's just do it again.
Q: The bulk of your customers are on the fleet side. What will it take for propane to catch on with private consumers?
A: In Europe, it's a consumer fuel. You can go to any dealership and order a propane vehicle. To get to that in the United States, we're starting with the fleets so we can build up the infrastructure of public fueling stations. It's the chicken and egg problem.
The other key is getting the volume up to get the price of the system down. Right now, based on a $10,000 propane system, who can economically justify the cost of converting? It's the fleets.
We start with fleets to build volume and infrastructure, and hopefully through building that volume, costs comes down. If we can get a system installed for $5,000, I think the consumer will start saying, "Wait a minute, I want some of that action."
Q: Why has the U.S. lagged behind the rest of the world in terms of using propane as a vehicle fuel?
A: If you look abroad, fuels in most countries are heavily taxed. In countries where propane has become prolific, the tax was waived for propane, or it's a minimal tax. In Poland about 30 percent of vehicles run on propane. Turkey's about 30 percent. Korea's about 25 percent. Australia's about 20 percent. In the U.S. we're about three-quarters of one percent.
 If we could just get to 10 percent there's enough supply that we wouldn't upset supply and demand economics.
Q: Are there any downsides to using propane in a vehicle?

Curtis Donaldson, managing director of CleanFUEL USA, shown with a company vehicle in a Houston parking lot in 2014, founded the company in 1993 to make propane-fueled vehicles and pumps to fuel them.

A: For fleets fueled in central locations, it's a no-brainer. The truck goes out and it comes back. But some trucks aren't centrally fueled. The drivers are wondering '"Where can I find propane?" I can show you where it is on a map, but how comfortable is the driver thinking he has to go out of his way?
Also, there's capital required. If they didn't put it into their budget this year, they have to put it in their budget next year. They have to spend $10,000 per vehicle to convert them. For fleets, it takes between a year and two years to pay off. But it doesn't change the fact that they need to have $10,000 per vehicle.
Q: How do you make your pitch to fleet managers?
A: If we can catch a guy who's already educated on alternative fuels, the cycle of sales is much shorter. You're just differentiating between other fuels at that point. But last week we were meeting with two fleets and it was raw education - Propane 101. We try to get them comfortable they're not jumping off a cliff with propane.
Q: If I'm a fleet manager considering alternative fuels, why should I use propane instead of compressed natural gas?
A: I'm for all energies being used.
I think the best use for CNG is in tractor-trailers and larger vehicles and mass transit. You can put a bunch of tanks on there, where the frame will support multiple tanks to get enough fuel on board.
I believe propane owns medium-duty down through light-duty. We're a liquid fuel. My pitch is we can range better, and range more closely to gasoline because we're a liquid. We're abundant. We're in every town. And the cost of infrastructure is less - about a tenth of what a CNG station costs.