Staying the Course on Alternative Fuel

Despite a renaissance in petroleum use, sustainable energy is still an important long term investment.
May 5, 2015 9:45 AM ET

Mike Whitlatch | UPS

UPS has been in the alternative fuels business for a long time. In fact, we’ve been plugging in electric vehicles before it was cool — as far back as the early 1930s.

The larger our company grew over time, the more we, like others, became dependent on cheap, reliable petroleum fuels.

Today, our worldwide transportation fleet includes about 100,000 package cars, trucks, and motorcycles. We also operate more than 500 aircraft that fly 1,900 daily flight segments.

To offset this carbon footprint, we have been committed to using more alternative fuels that reduce our dependence on oil.

UPS recently announced that it will soon become the nation’s largest user of renewable natural gas (RNG) in the shipping industry. This is just one example of our alternative fuel strategy.

When it comes to alternative fuel, we’re in it for the long haul.

Some may ask why we would invest in this space when North America is in the midst of a “petroleum renaissance,” where the recent surge in crude oil production has led to significantly lower gas and diesel prices.

The answer is simple: Not only is it the right thing to do, it also makes good business sense for our company, our customers and our communities.

Weathering the storm

While the oil price drop is great for our national security and our economy, it is having a significant impact on investment and innovation in the alternative fuel space. In fact, investments in alternative fuels in 2014 slumped to the lowest points since 2004.

When it comes to investing, UPS, like any company, weighs the potential return against the cost and risk. With renewable energy, determining whether renewables make financial sense is complex.

Throughout the years, we’ve seen the ebbs and flows of economic cycles, innovation, investment and supplies. Part of this ebb and flow is due to state and federal government incentives that may have put alternative fuels on the map, but do not meet the long-term challenge of true alternative fuel reform.

Reasonably, individuals and companies question whether federal incentives will continue, and what happens when those short-term incentives expire? Companies need predictable and stable regulatory environments in order to plan for the future.

UPS has been using alternative fuels like LNG, CNG and propane vehicles since the late 1990’s, including in those times where the economics were not so attractive.

Since 2000, our alternative fuel and advanced technology vehicles have logged more than 350 million miles in the U.S., Germany, Canada, Netherlands, Chile, Thailand, Hong Kong, South Korea, Brazil and the United Kingdom.

We’ve also taken steps to optimize our routing technology, which is expected to reduce our distance driven by 100 million miles by 2016. This will result in a 100,000 metric ton reduction in CO2 emissions, equivalent to taking 21,000 passenger cars off the road for a year.

The near-term cost benefits of lower cost petroleum are appealing, but we know that natural disasters and the geo-political climate can change things overnight, impacting the oil supply/demand and price dramatically.

We also know that investing in alternative fuels diversifies our energy portfolio, which reduces our risk during those volatile price swings. And, most importantly, we know our use of alternative fuels reduces our impact on the environment, helping us preserve our planet for generations to come.

Choosing the right path

We continue to learn about alternative fuels through the UPS “rolling laboratory,” which allows us to evaluate existing and emerging technologies in the real world of heavy-duty transportation.

Our exposure to a wide range of alternative fuel platforms has allowed us to expand our thinking and evaluate new solutions that we may not have considered previously. This continued learning provides us with tremendous flexibility—we can quickly deploy a technology at any location on a wide variety of scale when the time is right.

We’re continuing that progress. In fact, we’re evaluating exciting fuel cell technologies and testing synthetic fuels that can be used in existing diesel equipment without modification.

We’re excited about our results with synthetic diesel, an advanced renewable fuel –chemically engineered as a superior replacement to petroleum diesel.

This advanced fuel has no blending limitations and is fully interchangeable in the supply chain. We will be sharing more about the exciting fuel in the near future.

As noted above, one fuel we feel particularly optimistic about is renewable natural gas (RNG).

RNG, also known as biomethane, can be derived from many abundant and renewable sources, including decomposing organic waste in landfills, wastewater treatment and agriculture.

Historically, bio-methane from these sources in the U.S. is primarily used in local electricity generation, flared or harmfully vented to the atmosphere. By putting this fuel to work in transportation, we can displace petroleum based fuels and ultimately reduce carbon emissions.

UPS’s commitment to expand our use of RNG is part of our goal to drive one billion miles with the alternative fuel and advanced technology fleet by the end of 2017. This initiative will make UPS the largest user of RNG in the shipping business.

We will achieve this title by pumping renewable natural gas into Class 8 heavy-duty trucks and delivery vehicles that are part of our alternative fuel and advanced technology fleet.

Although RNG has been available for several years, there’s been little demand for it in heavy duty Class 8 trucking in the U.S. We believe we can change that by leveraging our existing natural gas infrastructure and using our 2,300 natural gas vehicles to stimulate the production of transportation-quality RNG.

This is a great opportunity for the transportation industry to adopt a cleaner burning fuel, thus lowering its carbon footprint.

At UPS, sustainability starts with a top-down commitment. Our management is convinced that we can have it both ways—that we can do the right thing for the planet while also returning value to our business.

For us, it’s not a question of “should we make it work?” It’s a conversation about “how to make it work.” And we recognize suppliers who partner with UPS to invest in technology development to make it work.

Our 5,088 LNG, CNG, propane, hybrid electric, hybrid hydraulic, biomethane and full electric vehicles are what steer us toward a greener future—and we aren’t afraid of hitting some speed bumps on the way.

The stakes are high, but we are prepared to stay the course toward a more sustainable, less oil-dependent future. goldbrown2

Mike Whitlatch is VP of Global Energy and Procurement at UPS