Clean Energy Fuels Profile
Clean Energy Fuels Corp. operates as a renewable energy company that focuses on the procurement and distribution of renewable natural gas (RNG) and conventional natural gas, in the form of compressed natural gas (CNG) and liquefied natural gas (LNG), for the United States and Canadian transportation markets.
The company focuses on developing, owning, and operating dairy and other livestock waste RNG projects and supplying RNG (procured only from third party sources but once its RNG projects go online it expects to supply RNG from its own sources) to its customers in the heavy and medium-duty commercial transportation sector.
The company is North America’s provider of fuel for the commercial transportation market, based on both the number of stations it operates and the amount of gasoline gallon equivalents (GGEs) serviced and GGEs sold of RNG and conventional natural gas, in the form of CNG and LNG, which amounted to a total of 428.4 million GGEs in 2022.
As a comprehensive clean energy solutions provider, the company also designs and builds, as well as operates and maintains (O&M), public and private vehicle fueling stations in the United States and Canada; sells and services compressors and other equipment used in RNG production and at fueling stations; transports and sells RNG and conventional natural gas via virtual natural gas pipelines and interconnects; sells the U.S. federal, state and local government credits (collectively, Environmental Credits) it generates by selling RNG as a vehicle fuel, including Renewable Identification Numbers (RIN Credits or RINs) under the federal Renewable Fuel Standard Phase 2 and credits under the California and the Oregon Low Carbon Fuel Standards (collectively, LCFS Credits); and obtains federal, state and local tax credits, grants and incentives. The company serves fleet vehicle operators in a variety of markets, including heavy-duty trucking, airports, refuse, public transit, industrial and institutional energy users, and government fleets.
Commercial transportation, including heavy-duty trucking, generates a significant portion of the emissions of overall carbon dioxide and other climate-harming GHGs, and transitioning this sector to low and negative carbon fuels is a critical step towards reducing overall global GHG emissions. According to the Global Carbon Project’s Global Carbon Budget published in November 2022 and International Energy Agency’s topic analysis on transport, 37.1 billion metric tons of carbon dioxide were emitted globally in 2021, of which 7.7 billion metric tons, or 21%, came from the transportation sector. There is a global demand for reducing GHG emissions, as evidenced by 96% of the world’s countries having committed to the Paris Agreement according to The United Nations Framework Convention in Climate Change, and 96% of S&P 500 companies focusing on sustainability metrics, including GHG emissions, according to the Governance & Accountability Institute’s Flash Report published in 2022.
The company’s sources of commercial scale biogas are anaerobic digester gas (ADG), which is produced inside an airtight tank used to breakdown organic matter, such as dairy and other livestock waste, and landfill gas (LFG), which is produced by the decomposition of organic waste at landfills.
The company is pursuing development and ownership of dairy and other livestock waste ADG projects on its own and with partners including TotalEnergies S.E. (TotalEnergies) and BP Products North America (bp). Further, the company enters long-term RNG supply offtake agreements with well-known third parties that own RNG production facilities. Because the company’s business transforms waste methane into a renewable source of energy, its RNG generates valuable Environmental Credits under federal and state initiatives. As of December 31, 2022, the company served over 1,000 fleet customers.
Principal Products, Services and Other Business Activities
Fuel Sales
The company sells RNG and conventional natural gas, in the form of CNG and LNG, as fuel for medium and heavy-duty vehicles.
RNG is injected into natural gas pipelines, which allows RNG to be transported to vehicle fueling stations where it can be compressed and dispensed as CNG, and to liquefaction facilities where it is liquified and made into LNG. The company purchases RNG from bp and other third-party producers, comprising over 100 supply sources, typically under long-term RNG supply offtake agreements. In exchange for the agreement to offtake RNG supply, the company and the supplier negotiate to determine what percentage share of the value of the Environmental Credit each party will retain. The value of the Environmental Credit is based on the realized value after the credit is sold to (purchased by) an obligated party or as agreed by the supplier and the company as part of the negotiation.
The company purchases conventional natural gas under North American Energy Standards Board base contracts on a spot market or short-term forward index basis or forward purchase contracts under take-or-pay arrangements that require it to purchase minimum volumes of conventional natural gas. Conventional natural gas is purchased on a normal purchase normal sale basis, as the conventional natural gas the company purchases is for physical delivery of the commodity to its fueling stations for sale to customers.
CNG is RNG or conventional natural gas that is compressed and dispensed in gaseous form. CNG is typically sold by obtaining RNG from RNG suppliers or third-party RNG marketers or conventional natural gas from local utilities or third-party conventional natural gas marketers, compressing and storing it at a fueling station, and dispensing it directly into a vehicle. The company’s CNG vehicle fuel sales are primarily made through contracts with its customers or on a per fill-up basis at prices it sets at public access fueling stations based on prevailing market conditions. Through its subsidiary NG Advantage, LLC (NG Advantage), the company also transports and sells CNG for non-vehicle purposes via virtual natural gas pipelines and interconnects to industrial and institutional energy users. NG Advantage also has the capability to transport CNG from production facilities to pipeline injection sites using its fleet of 99 high-capacity trailers.
LNG is RNG or conventional natural gas that is cooled at a liquefaction facility to approximately negative 260 degrees fahrenheit until it condenses into a liquid. The company obtains LNG from its own liquefaction plants and from third-party suppliers. For LNG obtained from the company’s own liquefaction plants, it supplies the RNG, sourced from RNG suppliers or third-party RNG marketers, or conventional natural gas, sourced from local utilities or third-party conventional natural gas marketers, to its liquefaction plants. The company owns and operates LNG liquefaction plants near Boron, California and Houston, Texas, which it refers to as the Boron Plant and the Pickens Plant, respectively. In 2022, the company produced 94.8% of its LNG at its plants and purchased the remainder of its LNG from third-party suppliers. The company sells LNG for use as a vehicle fuel on a bulk basis to fleet customers and through its network of public access fueling stations. The company delivers LNG with its fleet of 74 tanker trailers to fueling stations, where it is stored and then dispensed in liquid form into vehicles. The company sells LNG through supply contracts and on a per fill-up basis at prices it sets at public access fueling stations based on prevailing market conditions. Additionally, the company sells LNG for non-vehicle purposes, including to customers who use LNG in rocket propulsion and oil fields, and for utility, industrial, marine and rail applications.
Sales of Environmental Credits: The company generates Environmental Credits consisting of RINs and LCFS Credits when it sells RNG for use as a vehicle fuel in the United States. The company sells these Environmental Credits to third parties who must comply with federal and state emissions requirements. Generally, the number of Environmental Credits the company generates increases as it sells higher volumes of RNG as a vehicle fuel. The number of Environmental Credits the company sells and its revenue from these sales can vary depending on a number of factors, including the market for these credits, which has been volatile and subject to significant price fluctuations in recent periods, any changes to the federal and state programs under which the credits are generated and sold, and its ability to strictly comply with these programs.
O&M Services: The company performs maintenance service on Clean Energy-owned and customer-owned fueling stations. The company’s maintenance program is backed by over 200 company employed service technicians and support personnel, an in-house 24/7 remote monitoring center, technician training center, computerized maintenance management system and inventory warehouses throughout the United States and Canada. For maintenance services, it generally charges a fixed fee or per gallon fee based on volume of fuel dispensed at the station.
Station Construction and Engineering: The company designs and constructs fueling stations and sell or lease some of these stations to its customers. Since 2008, the company has served as the general contractor or supervised qualified third-party contractors to build over 450 natural gas fueling stations.
Grant Programs: The company applies for and helps its fleet customers apply for federal, state and local grant programs in areas in which it operates. These programs can provide funding for vehicle purchases, fueling station construction and vehicle fuel sales.
Strategy
The key elements of the company’s strategy include promoting the reduction of GHG emissions and expanding the use of renewable fuels to displace fossil-based fuels; increasing supply of RNG through the development of new project investment opportunities, expanding its existing supplier portfolio, and leveraging its existing fuel network and customer relationships; empowering its customers to achieve their sustainability and carbon reduction objectives; leveraging its management expertise; and utilizing its environmental, health and safety and compliance leadership.
Key Customer Markets
The company serves customers in a variety of markets, including trucking, airports, refuse and public transit. These customer markets are well-suited for the adoption of RNG and other alternative vehicle fuels because they consume relatively high volumes of fuel, refuel at centralized locations or along well-defined routes and/or are facing increasingly stringent emissions or other environmental requirements.
Trucking
The company estimates there are approximately 4.1 million Class 8 heavy-duty trucks operating in the U.S. using over 40 billion gallons of fuel each year. Because these high-mileage vehicles consume substantial amounts of fuel, operators can derive significant benefits from the carbon and GHG reductions associated with the company’s vehicle fuels. The company focuses on fueling more heavy-duty trucks, and many well-known shippers, manufacturers, retailers and other truck fleet operators have started to use RNG fueled trucks to move their freight, including among others, Amazon, Pepsi Frito-Lay, FedEx, Anheuser-Busch, USPS, UPS, Kroger, KeHe Distributors, Kenan Advantage Group, and Estes Express.
Zero Now
The company has launched the Zero Now truck financing program, which is intended to increase the deployment of the commercially available RNG heavy-duty trucks in the U.S. The Zero Now program generally involves the following:
One or more truck leasing or finance companies lease or sell RNG heavy-duty trucks to vehicle fleets pursuant to lease or sale agreements with the fleet operators and with the company, providing for periodic payments by the fleet operators of amounts equal to the payments that will be made for the lease or purchase of an equivalent truck that operates on diesel fuel, and providing for payment by it of the incremental cost of the RNG truck over and above the diesel-equivalent truck; and
The fleet operators participating in the program enter into fueling agreements with the company, under which the operators agree to purchase from it, and it agrees to supply, minimum monthly volumes of RNG at prices (which are lower than diesel prices per GGE) to operate the trucks leased or purchased in the program and allow it to recoup its payment of the incremental cost of the RNG trucks.
Chevron Adopt-A-Port Program
In 2020, the company partnered with Chevron Products Company, a division of Chevron U.S.A. Inc (Chevron) on Adopt-A-Port, an initiative that provides truck operators serving the ports of Los Angeles and Long Beach with RNG to reduce emissions. For its part, Chevron provides funding for Adopt-A-Port and supplies RNG to Clean Energy stations near the ports. The company manages the program, including offering fueling services for qualified truck operators. Truck operators participating in the program, which supports the ports’ Clean Trucks Program and Clean Air Action Plan, fuel at its stations supplied with Chevron RNG.
Airports
The company estimates that vehicles serving airports in the United States, including airport delivery fleets, rental car and parking passenger shuttles and taxis, consume an aggregate of approximately two billion gallons of fuel per year. Additionally, many U.S. airports face emissions challenges and are under regulatory directives and political pressure to reduce pollution, particularly as part of any expansion plans. As a result, many of these airports have adopted various strategies to address tailpipe emissions, including rental car and hotel shuttle consolidation and requiring or encouraging service vehicle operators to switch their fleets to the company’s vehicle fuels.
Refuse
The company estimates that approximately 60% of new refuse trucks are capable of operating on RNG, up from approximately 3% of new refuse trucks in 2008. Refuse haulers are increasingly adopting trucks that run on the company’s vehicle fuels to realize operational savings and to address demands for reduced emissions from the public, investors, and governmental agencies. As of December 31, 2022, the company fuel approximately 15,000 refuse vehicles for customers including Waste Management, Republic Services, Waste Connections, GFL Environmental, Atlas Disposal, Burrtec, CR&R, Recology and Waste Pro, among others. The company also provides vehicle fueling services to municipal refuse fleets.
Public Transit
The company estimates that transit agencies in the United States consume approximately one billion gallons of fuel per year. Many transit agencies have been early adopters of vehicles using the company’s fuels, and over 25% of existing transit buses and approximately 35% of new transit buses operate on RNG. As of December 31, 2022, public transit customers for which the company serves include the Los Angeles County Metropolitan Transit Authority, New York MTA, Foothill Transit (Los Angeles County, California), Orange County Transit Authority, Santa Monica Big Blue Bus, Dallas Area Rapid Transit, Phoenix Transit, New Jersey Transit, Jacksonville Transportation Authority, NICE Bus (Nassau County, New York) and Washington Metro Area Transportation Authority.
Seasonality
To some extent, the company experiences seasonality in its results of operations. Some of the company’s customers tend to consume more of its vehicle fuels in the summer months, when buses and other fleet vehicles use more fuel to power their air conditioning systems, which typically translate to an increased volume of fuel sold in the summer months.
Sales and Marketing
The company markets its brands, products and services primarily through its direct sales force, which includes sales representatives covering all of its major geographic and customer markets, as well as attendance at trade shows and participation in industry conferences and events. The company’s sales and marketing team also work closely with federal, state and local government agencies to provide education about the value of its vehicle fuels and to keep abreast of proposed and newly adopted regulations that affect its industry.
Regulation
The company is required to register each RNG project with the Environmental Protection Agency (EPA) and relevant state regulatory agencies. In addition to registering each RNG project, the company is subject to quarterly audits under the Quality Assurance Plan of its projects to validate its qualification.
The company is subject to a qualification process, such as that for RINs, including the verification of carbon intensity (CI) levels and other requirements, existing for California’s Low Carbon Fuel Standard (LCFS) credits.
History
Clean Energy Fuels Corp., a Delaware corporation, was incorporated in 2001.
