New Natural Gas Opportunities

Recent headlines showed Electro-Motive Diesel (EMD) losing the race for cleaner diesel locomotive engines to GE(1). (See note 1 for disclaimer.)

Caterpillar had purchased the Electro-Motive Diesel (EMD) business in 2010 that had previously been owned by General Motors, as the Electro-Motive Division.

New regulations, coming into effect January 1, 2015, will see GE with a diesel engine meeting the new regulations, while EMD locomotives may not be able to.

This raises an interesting situation for EMD, saying it will focus on foreign sales while still developing its Tier 4 offering.

But does EMD have another option, that, while not immediately available, could leap-frog GE?

While locomotives only use 7% of the diesel fuel consumed in the United States, they still represent an opportunity for using liquefied natural gas (LNG).

The first thought that comes to mind, is to replace diesel fuel with LNG while still using diesel engines.

But why not use gas turbines?

The use of gas turbines in locomotives has a long history, which was well documented in a series of articles in Turbomachinery International(2).

Several railroads are currently exploring the use of LNG for existing diesel locomotives. By one estimate, it would cost between $600,000 and $1 million to convert a diesel locomotive to using natural gas, though this may include the LNG tanker as shown in the accompanying picture.

Picture from Canadian National Railway Company
Picture from Canadian National Railway Company

A new diesel-electric locomotive costs around $2.5 million.

So, why not build new gas turbine-electric locomotives that use LNG?

Current diesel-electric locomotives use a 4,400 HP generator. The electricity produced by the generator is routed to traction motors that actually drive the train.

GE has more or less ceded the lower HP gas turbine market to others, including Solar Turbines Incorporated, a Caterpillar company. Looking at published GE spec sheets, it seems as though GE is focused on the power generation market, and larger pipeline and related markets, with 15,000 HP being among the lowest ratings published. However, GE’s LM500 marine gas turbine, rated 6,000 HP, might be suitable.

Solar Turbines, on the other hand, has a number of gas turbines rated around 4,000 HP.

GE would probably oppose switching from diesel-electric to gas turbines, as GE’s highly successful locomotives are built around diesel-generators, that are said to be able to meet the new exhaust standards.

It would be an interesting strategic move by Caterpillar to promote Solar Turbine’s gas turbines for powering locomotives.

Marrying Solar Turbine’s, gas turbines to locomotives that use LNG, would be a strategic end run around GE.

There are around 24,000 Class 1 locomotives in the United States. By focusing on one major railroad, such as Union Pacific, EMD could develop a market for around 8,000 gas turbine powered locomotives.

Most companies involved with transportation, including Caterpillar, are developing diesel engines that can run on LNG, so it’s not entirely clear which route — gas turbines or diesel — EMD will take.

While it’s very possible that railroads will eventually adopt LNG because of its lower cost, with diesel fuel representing as much as 25% of overall expenses, adopting gas turbines is more problematic.

To me, the more important thought is how fracking has created new opportunities.

While the idea of using gas turbines in locomotives is speculative, it’s clear that low-cost natural gas, as the result of fracking, is creating new opportunities and changing the industrial landscape.

 

  1. Notes:
    All of the information contained in this article is from published sources, and does not draw upon unpublished sources from either General Electric or Caterpillar. It should be noted, that while an employee of General Electric, I had a close relationship with the locomotive and turbine businesses.
  2. Articles by Ivan Rice in Turbomachinery International at http://www.turbomachinerymag.com/blog/content/how-rising-fuel-costs-forced-retirement-frame-3-and-5-units-us-locomotives

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