Forecourt Innovations Profile: Catalysing Automotive LPG Use: Lessons to be learnt from the world's leading autogas markets

Forecourt Innovations Profile: Catalysing Automotive LPG Use: Lessons to be learnt from the world's leading autogas markets

Introduction
 
Collectively seven markets account for 68% of global automotive LPG use. This report examines the fiscal, economic and market based factors that have catalyzed and encouraged autogas use in these markets. It also highlights what governments and energy companies can learn from these markets in order to encourage the wider spread use of automotive LPG in Europe.
 

 
Scope
 
insight into the key factors that have driven the development of the world's largest autogas markets
 
the ability to assess the potential for increased autogas use in individual European markets
 
Highlights
 
The world's seven leading autogas markets account for 68% of demand yet just 15% of the world's car parc, 7.4% of population and 22% of GDP
 

 
Tax incentives are the key driver encouraging use, though factors such as LPG availability, use in other markets and conversion incentives also play an important role to varying degrees
 

 
The potential for increased autogas use in Europe varies considerably according to the identified issues
 

 
Reasons to Purchase
 
an overview of the fiscal incentives in the main autogas markets that have encouraged use
 
analysis of how supply availability and import dependence impact on autogas use

TABLE OF CONTENTS
 
CHAPTER 1 EXECUTIVE SUMMARY 3
 
The world’s 7 largest autogas markets account for a disproportionately high level of consumption given their size 3
 
The importance of these factors varies between markets, though tax incentives and non-autogas LPG use are common themes 3
 
When scored on a sliding scale, tax incentives and LPG use in other sectors are the key factors driving autogas use in the 7 markets 5
 
The majority of Europe’s markets have potential to increase autogas use if appropriate fiscal incentives are provided 5
 
CHAPTER 2 INTRODUCTION 18
 
This report highlights how the world’s 7 largest autogas markets account for a disproportionately high level of consumption and what lessons European markets can learn from them 18
 
The potential for European markets to replicate these key factors for success is assessed via a scoring mechanism 19
 
The Existence of Tax incentives metric assesses the degree to which governments have levied favourable taxes on autogas 20
 
The Government Assistance in Conversion Costs metric highlights financial incentives to convert 21
 
The Emissions Cognisance metric is a proxy measure of pro- environmental attitudes 22
 
The Use of LPG in Other Sectors metric highlights existing LPG penetration in the non-automotive market 23
 
The Level of LPG Self Sufficiency metric shows how reliant on external sources of LPG a given market is 24
 
The Proportion of Outlets Offering autogas metric highlights how easy it currently is for autogas users to obtain supplies 25
 
This report is aimed at European governments and fuel retailers seeking to understand how autogas use can be increased 26
 
CHAPTER 3 MARKET CONTEXT 27
 
At 8% of the total, autogas is a comparatively small part of global LPG use, though proportions vary widely between markets 27
 
The world’s 7 largest autogas markets account for 68% of demand but much lower proportions of GDP, population and car parcs 28
 
Environmental issues and switching to natural gas has lead to global autogas demand growth significantly outpacing that of LPG 29
 
Autogas demand growth patterns and factors are autonomous of the wider LPG market 30
 
Demand growth in the LPG 7 has slightly exceeded global growth, though growth rates differ widely between markets 31
 
Growth in LPG 7 autogas fleets and outlets has been faster than the world average, though rates differ according to market maturity 33
 
CHAPTER 4 MARKET TRENDS 35
 
Excise tax is not currently levied on autogas, though this will soon be phased in to supplement the current General Sales Tax 35
 
Government grants to cover around half the cost of retro conversion are widely available 37
 
Only 7% of Australia’s primary energy comes from non-fossil fuel sources indicating a low propensity for green energy options 37
 
Autogas is by the largest LPG end use sector and accounts for two thirds of LPG demand 39
 
Significant reserves and a long history as a producer mean that Australia is both self sufficient in and a significant exporter of LPG 40
 
Nearly half of Australia’s forecourts retail autogas 42
 
Australia's weighted average score of 5.55 reflects its very favourable tax incentives and LPG production capacity 43
 
Tax incentives are sufficiently strong in Italy to ensure that autogas retails for around half the price of petrol 44
 
Recent changes have enhanced the conversion incentives available to Italian motorists 44
 
Non-fossil fuels play only a minor role in the Italian Primary Energy mix resulting in a low Emissions Cognisance score 45
 
LPG has a strong penetration into the Italian market with the domestic sector the main end user 47
 
Italy has a strong reliance on imported LPG, though this reliance has decreased in magnitude over the past decade 48
 
Only 10% of Italian forecourts retail autogas, a function of Italy’s disproportionately large number of forecourts 49
 
Widespread use of LPG in other sectors and indigenous production levels result in Italy’s weighted average score of 4.50 51
 
Japan does not currently have any conversion cost incentives 52
 
A significant movement towards nuclear power over the past 30 years has reduced reliance on fossil fuels 52
 
LPG is widely used in all end use sectors in Japan owing to a lack of indigenous resources 53
 
Japanese self sufficiency in LPG has consistently remained at less than 25% over the past decade 55
 
The relatively low proportion of sites retailing autogas is a result of the high number of sites that exist in the market 56
 
The cost differential between autogas and conventional road fuels has narrowed recently 58
 
The Mexican government does not provide conversion grants, though costs to convert are low compared to other markets 60
 
The use of non fossil fuels in the Mexican Primary Energy Mix has remained low in both proportional and absolute terms 60
 
LPG is widely used outside of the autogas market in Mexico 62
 
Mexico currently produces around three quarters of LPG demand, though this proportion is rapidly decreasing 63
 
Around half of Mexico’s rapidly increasing number of forecourts sell autogas 64
 
Widespread use of LPG in various sectors and indigenous production result in Mexico’s weighted average score of 4.45 66
 
Poland’s particularly favorable tax regime on autogas has been the key driver of significant and growing use 66
 
The lack of conversion cost incentives is more than outweighed by the particularly favourable excise tax rates on autogas in Poland 68
 
With less than 5% of Primary Energy sourced from non fossil fuels, Poland does not score on the Emissions Cognisance metric 68
 
Despite a strong penetration into the residential and industrial sectors, autogas remains the main form of LPG use in Poland 70
 
Poland has a small, but growing, ability to meets LPG demand via indigenous production 71
 
Poland has the highest proportion of autogas equipped sites in all of the LPG 7 markets 72
 
Poland’s weighted average score of 4.28 results from very favourable tax incentives and widespread autogas availability 74
 
Fiscal incentives ensure that autogas remains highly competitive in relation to other fuels 74
 
The South Korean government does not offer any conversion incentives to potential autogas users 75
 
South Korea’s use of nuclear power gives it the highest Emissions Cognisance score of all of the LPG 7 75
 
Stagnating residential and declining industrial demand have been more than offset by rapid growth in the autogas sector 77
 
South Korea’s ability to meet LPG demand through indigenous production has grown significantly over the past decade 78
 
The low proportion of autogas outlets is a function of a crowded market place rather than a lack of widespread autogas availability 80
 
A lack of conversion cost assistance and a low proportion of autogas outlets constrains South Korea’s weighted average score to 3.65 81
 
Favourable taxation rates means that autogas currently retails at around 40% less than petrol 81
 
Conversion rates in Turkey have been high, though conversion quality remains an issue 83
 
Turkey scores a low mark for Emissions Cognisance given the strong role of fossil fuels in the primary energy mix 83
 
The growth of natural gas has significantly curtailed LPG use in the residential sector, though autogas use is growing rapidly 85
 
Turkey has only a limited ability to meet LPG demand through indigenous production 86
 
Around a third of outlets sell autogas and the number of sites continues to increase strongly 87
 
Tax incentives and use of LPG outside of the automotive sectors result in Turkey’s weighted average score of 3.58 89
 
CHAPTER 5 RECOMMENDATIONS 90
 
Use of LPG in other sectors and self sufficiency are the key non-government influenced drivers of autogas use 90
 
Apart from tax incentives, use of LPG in other sectors and self sufficiency are the main drivers of autogas use in the LPG 7 markets 90
 
Use of LPG and sectoral consumption vary widely across Europe 91
 
All LPG markets in Europe other than Denmark and the UK are heavily import dependent 92
 
The numbers and proportions of autogas equipped sites varies widely within the European markets 93
 
The majority of Europe’s markets have significant potential for increased autogas use 94
 
The European markets can be segmented into four distinct groups relating to the potential for wider-spread autogas use 94
 
Two segments have significant potential for increased autogas use if supply barriers can be overcome 95
 
The onus must now be on governments to encourage autogas use until other alternative fuels reach a viable stage of development 96
 
CHAPTER 6 METHODOLOGY AND CONTACT DETAILS 97
 
Research methodology 97
 
Report writing team 97
 

 

 

 

 
LIST OF FIGURES
 

 
Figure 1: Key factors Driving Autogas Use in the LPG 7 Error! Bookmark not defined.
 
Figure 2: Key Factors Scoring Mechanism 19
 
Figure 3: Existence of Tax Incentives Scoring Metrics 20
 
Figure 4: Government Assistance in Conversion Costs Scoring Metrics 21
 
Figure 5: Emissions Cognisance Scoring Metrics 22
 
Figure 6: Use of LPG in Other Sectors Scoring Metrics 23
 
Figure 7: Level of LPG Self Sfficiency Scoring Metrics 24
 
Figure 8: Proportion of Outlets Offering Autogas Scoring Metrics 25
 
Figure 9: Potential Users of this Report 26
 
Figure 10: World LPG Demand by Sector (2003) 27
 
Figure 11: Regional LPG Demand by Sector (2003) 28
 
Figure 12: Autogas, Car Parc, GDP and Population Comparisons 28
 
Figure 13: Autogas and Total LPG Demand 29
 
Figure 14: Annualised LPG and autogas growth 1994 to 2003 by region 31
 
Figure 15: Autogas Demand Growth in LPG 72 32
 
Figure 16: Growth in Autogas Parc 1994 to 2003 33
 
Figure 17: Growth in Autogas Filling Sites 2000 to 2003 34
 
Figure 18: Average Pump Prices (Australia) 36
 
Figure 19: Cost Elements of Forecourt Prices (Australia) 36
 
Figure 20: Primary Energy Composition 2003 (Australia) 38
 
Figure 21: Primary Energy Composition (Australia) 38
 
Figure 22: End Use LPG Demand 2003 (Australia) 39
 
Figure 23: Annualized Sectoral LPG Demand Growth 1994 to 2003 (Australia) 40
 
Figure 24: Supply / Demand Balance (Australia) 41
 
Figure 25: LPG Production / Imports Balance (Australia) 41
 
Figure 26: Number of Sites Selling Autogas (Australia) 42
 
Figure 27: Proportion of Sites Selling Autogas 2003 (Australia) 43
 
Figure 28: Weighted Average Scores (Australia) 43
 
Figure 29: Average Pump Prices (Italy) 44
 
Figure 30: Primary Energy Composition 2003 (Italy) 46
 
Figure 31: Primary Energy Composition (Italy) 46
 
Figure 32: End Use LPG Demand 2003 (Italy) 47
 
Figure 33: Annualized Sectoral LPG Demand Growth 1994 to 2003 (Italy) 48
 
Figure 34: Supply / Demand Balance (Italy) 48
 
Figure 35: LPG Production / Imports Balance (Italy) 49
 
Figure 36: Number of Sites Selling Autogas (Italy) 50
 
Figure 37: Proportion of Sites Selling Autogas 2003 (Italy) 50
 
Figure 38: Weighted Average Scores (Italy) 51
 
Figure 39: Primary Energy Composition 2003 (Japan) 52
 
Figure 40: Primary Energy Composition (Japan) 53
 
Figure 41: End Use LPG Demand 2003 (Japan) 54
 
Figure 42: Annualized Sectoral LPG Demand Growth 1994 to 2003 (Japan) 54
 
Figure 43: LPG Balance Thousand Tonnes (Japan) 55
 
Figure 44: Supply / Demand Balance (Japan) 56
 
Figure 45: Number of Sites Selling Autogas (Japan) 57
 
Figure 46: Proportion of Sites Selling Autogas 2003 (Japan) 57
 
Figure 47: Weighted Average Scores (Japan) 58
 
Figure 48: Average Pump Prices (Mexico) 59
 
Figure 49: Cost Elements of Forecourt Prices (Mexico) 59
 
Figure 50: Primary Energy Composition 2003 (Mexico) 61
 
Figure 51: Primary Energy Composition (Mexico) 61
 
Figure 52: End Use LPG Demand 2003 (Mexico) 62
 
Figure 53: Annualized Sectoral LPG Demand Growth 1994 to 2003 (Mexico) 63
 
Figure 54: Supply / Demand Balance (Mexico) 64
 
Figure 55: Number of Sites Selling Autogas (Mexico) 65
 
Figure 56: Proportion of Sites Selling Autogas 2003 (Mexico) 65
 
Figure 57: Weighted Average Scores (Mexico) 66
 
Figure 58: Cost Elements of Forecourt Prices (Poland) 67
 
Figure 59: Current Cost Elements of Autogas (Poland) 67
 
Figure 60: Primary Energy Composition 2003 (Poland) 69
 
Figure 61: Primary Energy Composition (Poland) 69
 
Figure 62: End Use LPG Demand 2003 (Poland) 70
 
Figure 63: Annualized Sectoral LPG Demand Growth 1994 to 2003 (Poland) 71
 
Figure 64: LPG Balance Thousand Tonnes (Poland) 72
 
Figure 65: LPG Production / Imports Balance (Poland) 72
 
Figure 66: Number of Sites Selling Autogas (Poland) 73
 
Figure 67: Proportion of Sites Selling Autogas 2003 (Poland) 73
 
Figure 68: Weighted Average Scores (Poland) 74
 
Figure 69: Primary Energy Composition 2003 (South Korea) 76
 
Figure 70: Primary Energy Composition (South Korea) 76
 
Figure 71: End Use LPG Demand 2003 (South Korea) 77
 
Figure 72: Annualized Sectoral LPG Demand Growth 1994 to 2003 (South Korea) 78
 
Figure 73: LPG Balance Thousand Tonnes (South Korea) 79
 
Figure 74: LPG Production / Imports Balance (South Korea) 79
 
Figure 75: Number of Sites Selling Autogas (South Korea) 80
 
Figure 76: Proportion of Sites Selling Autogas 2003 (South Korea) 80
 
Figure 77: Weighted Average Scores (South Korea) 81
 
Figure 78: Average Pump Prices (Turkey) 82
 
Figure 79: Current Cost Elements of Autogas (Turkey) 82
 
Figure 80: Primary Energy Composition 2003 (Turkey) 84
 
Figure 81: Primary Energy Composition (Turkey) 84
 
Figure 82: End Use LPG Demand 2003 (Turkey) 85
 
Figure 83: Annualized Sectoral LPG Demand Growth 1997 to 2003 (Turkey) 86
 
Figure 84: LPG Balance Thousand Tonnes (Turkey) 87
 
Figure 85: LPG Production / Imports Balance (Turkey) 87
 
Figure 86: Number of Sites Selling Autogas (Turkey) 88
 
Figure 87: Proportion of Sites Selling Autogas 2003 (Turkey) 88
 
Figure 88: Weighted Average Scores (Turkey) 89
 
Figure 89: Average Scores across LPG 7 markets 90
 
Figure 90: Sectoral LPG Consumption by Selected European Market 91
 
Figure 91: LPG Balance by Selected European Market 92
 
Figure 92: Proportions of Autogas Sites in Selected European Markets 93
 
Figure 93: LPG Use and Self Sufficiency Scores (Selected Europe Markets) 94