Alternative transportation fuels: Financing issues

A multitude of alternative fuels could reduce air pollution and the impact of oil price shocks. Only a few of these fuels are readily available and inexpensive enough to merit serious consideration over the coming five years. In New York City, safety regulations narrow the field still further by eliminating propane. As a result, this study focuses on the three alternative fuels readily available in New York City: compressed natural gas, methanol, and electricity. Each has significant environmental benefits and each has different cost characteristics. With the Clean Air Act and the National Energy Strategy highlighting the country's need to improve urban air quality and move away from dependence on imported fuels, fleets may soon have little choice but to convert to altemative fuels. Given the potential for large infrastructure and vehicle costs, these fleets may have difficulty finding the capital to make that conversion. Ultimately, then, it will be the involvement of the private sector that will determine the success of alternative fuels. Whether it be utilities, fuel distributors or suppliers, private financing partners or others, it is critical that altemative fuels programs be structured and planned to attract their involvement. This report examines financing methods that do not involve government subsidies. It also explores financing methods that are specific to alternative fuels. Bond issues and other mechanisms that are used for conventional vehicles are not touched upon in this report. This report explores ways to spread the high cost of alternative fuels among a number of parties within the private sector. The emphasis is on structuring partnerships that suit methanol, electric, or natural gas vehicle fleets. Through these partnerships, alternative fuels may ultimately compete effectively against conventional vehicle fuels