Saving money while being green is the dream for any fleet business. It bolsters your reputation, has a positive impact on the earth, and improves your bottom line all at the same time. A solution that can achieve these goals is something any fleet would pursue, right? This is why there is such a growing interest in alternative fuels among fleet businesses. When fleets use alternative fuels, they not only reduce emissions and harmful oil industry practices, but they can also save money! How is this possible, and how can your fleet start saving? Read on to find out.
Alternative Fuel Tax Credit
The IRS offers an incentive called the alternative fuel excise tax credit to encourage drivers to use alternative fuels. It applies to various alternative fuels, including compressed or liquefied gas derived from biomass, liquefied hydrogen, propane, P-Series fuel, Fischer-Tropsch gas and diesel, and natural gas. The amount fleets can obtain is $0.50 per gallon, which is the gasoline gallon equivalent (GGE) or diesel gallon equivalent (DGE), depending on the fuel. For example, one GGE is the same as 5.75 lbs of propane. One DGE, on the other hand, equals 6.06 lbs of liquefied natural gas.
Fleets can take advantage of these alternative fuel tax credits as long as they are registered with the IRS and pay the federal excise tax on the sale or use of the vehicle’s fuel. The tax credit first applies against the fleet’s alternative fuel tax liability, and then the fleet can take any remainder as a direct payment from the IRS.
You can find out more about this tax incentive through the US Department of Energy.
Most Common Types of Alternative Fuel
Biodiesel is what fleets with large trucks most commonly use. It comes from various sources, including soybean oil, recycled cooking oil, and animal fats. Biodiesel is a clean, renewable alternative to diesel and can be used in diesel engines without modification. The use of biodiesel has grown significantly in the past two decades. Between 2001 and 2016, biodiesel use increased from 0.3 billion gallons to 9.3 billion gallons worldwide.
Natural gas is often available either as compressed natural gas (CNG) or liquefied natural gas (LNG). CNG vehicles operate very similarly to gasoline-powered vehicles regarding the engine, fuel tank, cylinder, and overall operation. LNG vehicles also work the same way, but they cost a bit more than CNG. LNG is more common in heavy-duty vehicles than CNG. Natural gas is a fossil fuel comprised mainly of methane but has lower emissions than gasoline and is non-toxic and non-corrosive.
Propane is another fossil fuel, but unlike natural gas, it comes from liquified petroleum gas (LPG). It is non-toxic, colorless, and odorless unless an odor is added for detection. When used for vehicles, propane is called propane autogas. US propane supplies are growing, so propane is expected to become more abundant in the coming decades, which is perfect for fleets looking for tax incentives.
Liquid hydrogen is another alternative fuel that works with the alternative fuel tax incentive. It works by combining with oxygen to create electricity. Hydrogen is compressed into a liquid that is then used as fuel. Hydrogen can replace processes with fossil fuels and lower emissions. It’s an excellent green alternative.
P-Series fuels are a variety of different fuels that are renewable, non-petroleum, liquid options to replace gasoline. They are 45% ethanol, 35% natural gas liquid, and 20% methyltetrahydrofuran (MeTHF). The natural gas liquid comes from what is left over after processing natural gas, making the entire process efficient and non-wasteful.
There are a lot of reasons to consider switching to alternative fuel options for your fleet. Saving money is only one of them. The environment is a serious concern not only to your business but to its partners and clients. Create a positive reputation for yourself in the community by going green on alternative fuels, and enjoy the tax credits as a bonus! To get updates on the latest in alternative fuel and fleet technology, follow Azuga’s blog.