CNG COMPRESSORS MARKET ANALYSIS

Market Challenges And Opportunities

• Increasing demand for natural gas as a clean fuel: Natural gas is being increasingly adopted as a cleaner alternative to diesel and gasoline around the world. As natural gas emits significantly lower levels of greenhouse gases and pollutants as compared to other fossil fuels, many countries are encouraging its use in transportation. This is evident from India’s initiative of building the world’s largest pipeline network for city gas distribution. Till 2021, India has over 30,000 kilometers of pipelines laid to supply CNG to vehicles and piped natural gas to household kitchens in over 406 districts nationwide. This expanding network is driving significant demand for CNG compressors that are used at gas stations to refuel vehicles.

The push for cleaner fuels is expected to continue in the near future. The European Union has proposed policies to expand natural gas refueling infrastructure across major roads and ports by 2025. According to the EU’s (European Union) 2021 annual work program, this move aims to reduce transport emissions by at least 55% from 1990 levels by 2030. Similarly, China introduced tax incentives and subsidies in 2020 to promote the use of natural gas-powered trucks and buses in several of its major cities and economic zones. With more regions around the world adopting policies promoting natural gas for transport, the need for reliable and efficient CNG compressors is likely to grow substantially.

This consistent and growing demand for natural gas in the transportation sector is anticipated to create sustained momentum for the global CNG compressor market in the next forecast years. The key players are innovating compressor designs to optimize performance for refueling heavy vehicles as well. For example, manufacturers are developing compact multi-stage units that are capable of high-pressure refueling of buses and trucks. Such technological advancements are expected to further increase the adoption of CNG technology among fleet operators.

• Stringent emission norms: Stringent emission norms implemented by various governments across the globe are expected to drive significant growth in the CNG compressor market. Countries are gradually shifting towards cleaner fuels and technologies to reduce emissions and curb environmental pollution. Natural gas emits less carbon and particulate matter as compared to gasoline and diesel, thus making CNG a viable alternative for automobiles.

Several nations have introduced BS-VI and Euro-VI emission standards policies for vehicles in the recent past. This mandates deeper cuts in emissions from new vehicles. As a result, many automakers are focusing on CNG variants of their vehicles to comply with these stringent norms. For instance, the Government of India implemented BS-VI standards from April 2020 across the country. This has led to increased demand for factory-fitted CNG kits as well as retrofit kits.

According to data published on the Hindu business line, prime minister Mr. Narendra Modi unveiled plans to significantly increase the proportion of natural gas in India’s mix of energy sources. He emphasized the need to diversify the country’s energy supply and integrate the national infrastructure through a comprehensive gas pipeline network. The development of 16,000 kilometers of fresh gas pipeline infrastructure is underway and is expected to reach completion within the next 5 to 6 years. This expansion is set to offer access to cost-effective fuel to numerous citizens and key industrial sectors, alongside paving the way for the establishment of approximately 700 new CNG stations.

• Preference over gasoline and diesel: Natural gas is increasingly being preferred as a greener and more economical alternative to traditional gasoline and diesel fuels. With volatile crude oil prices, natural gas provides relative price stability for running automotive engines. The global abundance of shale gas and expanding production capacities has also helped natural gas cement its position as a viable alternative fuel. CNG offers comparable power, torque, and cruising range to gasoline engines at a lower running cost. The pricing dynamics tilt favorably towards natural gas as governments also promote NGVs by way of tax incentives. The lower total cost of ownership is thus driving adoption of CNG vehicles. For instance, in the U.S. around 40% of new garbage trucks run on CNG. Transit and school buses are also transitioning to natural gas as fuel. This transition will drive the need for more CNG fueling infrastructure and compressors. Service providers are also targeting fleet owners to convert their fleets to NGVs or dual fuel systems. The economics and abundance of natural gas make it an attractive automotive fuel globally. This will continue to provide growth opportunities to CNG compressors market over the forecast decade.
• Supportive government initiatives: Many governments especially across Asia, North America, Latin America, and Europe are undertaking initiatives to develop natural gas infrastructure and promote use of natural gas vehicles. Under India’s City Gas Distribution (CGD) initiative, the government aims to expand CNG infrastructure to cover 70% of the population. The impetus on NGVs is also visible in target setting for automakers whereby a certain fraction of their portfolio must be NGVs. The alternative fuel vehicle credit in the U.S. provides tax incentives for purchasing NGVs and setting up refueling equipment. 25C tax credit per gasoline gallon equivalent (GGE)  of CNG is extended as incentive. There are also preferential policies on parking and tolls in cities like London and Berlin for NGVs.