Authors: Joe Palmer Martin Delaney Harp Powar Josh Hannaberry
The transportation industry is seeing an increase in demand for commercialized alternative fuel solutions. As these fuel solutions are sourced, tested and ultimately used, new and unique risks need to be identified and mitigated.
Alternative fuels and commercial transportation in Canada and beyond
Many popular alternative fuels are being tested across Canada, including hydrogen, compressed natural gas (CNG), liquid natural gas and bio diesel.
Several organizations are doing an excellent job in leading the research of potential solutions for commercial carriers to use alternative fuels.
For example, the Alberta Zero Emission Truck Electrification Collaboration (AZETEC) project involves the design, manufacturing and testing of two long-range heavy-duty hydrogen fuel cell tractors that will operate year-round on Alberta's major highway between Calgary and Edmonton.
One of the highlights of this project is the opportunity it presents for commercial carriers in Alberta to try using the AZETEC project tractor in their own operation. It allows real-life testing with the commodities a commercial carrier would normally haul on common routes to regular customers.
In British Columbia, the Canadian Infrastructure Bank (CIB) announced earlier this year that they will be investing in a project by HTEC, which will pioneer expanding hydrogen production and establishing a province-wide refueling network.1 The H2 Gateway project aims to cut emissions in the transportation sector, while constructing up to 20 hydrogen fueling stations, 18 of which will be in BC to facilitate the use of fuel-cell vehicles and promote greener transportation solutions.
Further east, in Ontario, Nikola Corporation, under the HYLA brand, together with ITD Industries, has successfully opened the first commercial hydrogen refueling station for heavy-duty transportation sector.2
While the testing of alternative fuels in some subsectors of transportation is new, a couple of early adopters have integrated CNG into their commercial fleets. In Alberta, for example, the city of Calgary has buses operating on CNG fuel, while one of Canada's largest fleets has integrated tractors that operate on CNG fuel.
CNG has been a fuel of choice in Quebec with one of the major environmental waste removal companies, which established a relationship several years ago.3 The opportunity to use CNG became apparent, as a landfill was exploring ways to mitigate their methane gas emissions.
One major Canadian bus-for-hire operation has integrated a dual fuel solution into a motorcoach.4 This specific motorcoach runs on a blend of hydrogen and diesel fuel, which significantly reduces harmful emissions while enhancing fuel efficiency.
Considerations to obtain adequate insurance coverage
While insurance companies differ in their risk appetite, there's a collective interest to provide coverage for alternative fuel commercial vehicles.
Carriers should be thorough in their research to identify possible risks and consider the downstream impacts to their business. To assist with this research, carriers are encouraged to speak with their insurance broker, which can help identify potential risks.
In addition to the normal details required, for insurance companies to consider these types of risks, commercial carriers are asked to provide details of the proposed use of the alternative-fuels commercial vehicles.
Carriers will also be required to provide information on their current safety and maintenance programs with additional precautions in place to mitigate risks associated with the integration of alternative fuel commercial vehicles. It's also critical for the carrier to provide their insurance broker with evidence of the drivers' experience and training with handling the proposed alternative fuel. Key stakeholders are working towards developing industry training and educational materials.
Additional risks to consider and mitigate
Currently, only a small number of fueling stations provide hydrogen fuel for commercial vehicles. While the hydrogen fuel supply and pricing volatility are difficult to predict or plan for, many provinces are investing heavily in developing infrastructure and increasing production, which over time should bring stability.
In the event of a collision, be prepared for an extended period of downtime, due to a limited supply of less-than-common parts and mechanics trained and certified to complete the required repairs. If you have questions regarding the commercial claims process, speak with your insurance broker.
Clean fuel standard
What impact will the implementation of the Clean Fuel Standards (CFS) have on your business's profitability and our industry in general? The CFS, introduced by the Government of Canada, aims to reduce greenhouse gas emissions and contribute to the national target of reducing emissions by 30% below 2005 levels by 2030. The CFS will work alongside carbon pollution pricing to reduce emissions throughout the lifecycle of fuels and promote investments in cleaner fuels and clean technology.
The key design elements of the CFS include:
- Requirement for the liquid stream: The carbon intensity of liquid fuels must be reduced by 10 grams of carbon dioxide equivalent per megajoule below their current carbon intensity by 2030. This reduction will result in an approximate 11% reduction in carbon intensity and up to 23 megatonnes of emissions reductions in 2030.
- Actions that generate credits: Fuel users can earn credits when they switch from higher carbon intensity fuels to lower carbon intensity fuels, such as transitioning from liquid transportation fuels to natural gas, propane or non-carbon energy carriers such as electricity or hydrogen. They can also earn credits when they switch fuels along the production chain of a fossil fuel.
- Trading of credits between fuel streams: Companies will have the option to meet a portion of their carbon intensity compliance obligation for any stream by using credits from other streams.
The implementation of the CFS will have a significant impact on the transportation industry across the country. The standards will focus on reducing greenhouse gas emissions from liquid fuels used in the transportation sector. Fuel suppliers will need to incorporate more renewable fuels, such as biofuels, which must have at least 25% fewer greenhouse gas emissions than petroleum fuels. While there are concerns about the economic implications of the CFS, experts argue that the regional costs may not be as severe as some anticipate.
To meet the new standards and benefit from the introduction of credits, the transportation industry will need to invest in cleaner technologies and infrastructure, such as electric vehicles and hydrogen fuel cells. It's important that your broker partner understand the significance of these credits to your bottom line and how to protect them against invalidation, ensuring that you can fully benefit from these CFS credits. Make sure that you and your insurance broker understand the implications of this program and the value of these CFS credits to your company and, importantly, how to protect and maximize their benefit to you.
How Gallagher can help
As the demand and environmental pressures increase for commercial carriers and key stakeholders to incorporate alternative fuel solutions into their operations, it's critical to work with a knowledgeable insurance broker to help navigate potential risks.
With offices and transportation experts strategically located across the country, Gallagher is well positioned to help any organization that operates within the transportation industry as they explore these innovative fuel solutions.
For nearly 100 years, Gallagher has worked closely with organizations around the world and across all industries to navigate risk. At Gallagher, we provide tailored and comprehensive solutions designed for all your business needs. Our team of experts develop effective risk management strategies to help protect both your business and your people, while reducing your total cost of risk.
We'd like to thank Intact Insurance, Northbridge Insurance and other contributing insurers for their insights regarding insurance and risk mitigation for commercial carriers interested in using alternative fuels.
