Interview Iveco: "Natural gas from Russia is not used for LNG in Germany"

Mr. Sulser, what advice does Iveco give to entrepreneurs currently affected by high natural gas prices? In what way can the manufacturer provide support here?

Christian Sulser: Many companies have long-term supply contracts with gas station operators, providing a certain degree of supply and price security. This means they do not have to pay the current price at the pump. Through IVECO Capital, we offer our LNG customers in Germany the option, in hardship cases, to reduce their rental-purchase, leasing, or loan installments.

Additionally, we are in constant contact with politicians, associations, and gas station operators to clarify that today's fossil LNG, which already has sustainability effects, and future green Bio-LNG make a decisive contribution to the decarbonization of road freight transport and thus must receive the appropriate attention from politicians.

Why are there such enormous jumps in the price of fossil LNG at the pump?

The price models for fossil LNG generally refer to an evaluation period of three to four weeks. They are based on average spot market prices (TTF – Title Transfer Facility). The LNG price per kilogram at the pump consists of components such as TTF (spot market price), Gamma price (service fee for gas station operators), energy tax, and CO2 tax. The spot market price is thus the main price driver here.

With increasing availability of biomethane, a product independent of the spot market price will be available in the future. The Bio-LNG price per kilogram at the pump will consist of local production costs, Gamma price (service fee for gas station operators), and energy tax. Minus a quota share for the marketing of the clean gas. The CO2 tax will be completely eliminated.

How is the security of LNG supply maintained in case of absent Russian natural gas?

Fossil LNG is an imported product delivered by sea to various LNG terminals in Europe. This LNG can be transported to the gas station in liquid form using appropriate tank trailers, or it is regasified and fed into the natural gas network. Pipeline natural gas, as it comes from Russia to us, is not used in Germany for the production of LNG.

What is the current situation regarding the demand for natural gas models? Does the production of corresponding trucks proceed unimpeded? Have orders already been canceled or converted to diesel trucks?

This is a unique, unprecedented situation. We strongly believe that the level of gas prices will realign below diesel prices in the coming months. As mentioned earlier, with increasing availability of biomethane, a product independent of fossil gas and its associated pricing structure will be available in the future. This will not only save costs but also drastically reduce CO2 consumption.

We continue to see a high share of gas vehicles in total sales of heavy commercial vehicles. There is some uncertainty regarding current delivery times due to raw material shortages and the semiconductor situation. Customers are questioning how long they can benefit from toll exemptions when the vehicle is delivered. The LNG price may be quite different by then.

Currently, LNG vehicles are unlikely to be economically viable – what is your medium- and long-term forecast for the competitiveness of this type of drive?

Gas propulsion with its potential for biomethane is not just a bridge. Bio-LNG is currently the only scalable regenerative fuel. Our customers can already drive almost CO2-neutral with it today and achieve ranges of up to 1,600 kilometers and more with the IVECO S-WAY LNG. From an ecological point of view, we cannot afford to wait until BEV and FCEV are available in sufficient quantities and, above all, until the necessary infrastructure is available.

In the future, we see the market share of heavy commercial vehicles with gas propulsion at ten to fifteen percent by 2030. A large part of the remaining market can be covered by BEV and FCEV, although diesel will remain with us to some extent. However, in this transition phase, it will certainly become increasingly difficult for it in the future, especially with appropriate CO2 taxation and the possible gradual withdrawal of the diesel privilege.

In the future, will there be enough Bio-LNG and what is it made from?

According to the European Commission, there is sufficient so-called biomethane feedstock available. In a press release dated March 8, 2022, it states that 350 TWh by 2030, which is approximately 35 billion m³, will be available. As part of the 35 billion m³ goal, the Commission aims to double the amount of biomethane in the EU already in 2022. Raw materials available for biomethane production include raw and residual materials such as manure, food waste, industrial wastewater, and agricultural residues such as straw.

The production of Bio-LNG is far less complex than the production of green alternatives for diesel fuels. Bio-LNG is produced by liquefying biomethane and can be fully obtained as a so-called "advanced biofuel" from the aforementioned residues.

A second method is the production of synthetic gas using Power-to-Gas (electricity-to-gas) technology. Excess green electricity is used to split water into oxygen and hydrogen via electrolysis. The hydrogen can be converted into synthetic methane through methanation and then into green, electricity-based LNG via a liquefaction plant.

In Germany, several gas station operators have already announced plans to build Bio-LNG liquefaction plants in the near future to supply their and our customers nationwide with Bio-LNG. This will ensure that there is enough Bio-LNG available to not only meet the demand in the short term but also to explore additional potentials.