Propane Vehicles Fuel the Growth of the Propane Market

Key Takeaways

• Propane autogas vehicles are helping drive significant growth in the global propane market.
• Government incentives and emissions regulations are accelerating adoption of alternative fuels.
• Fleet operators and school districts are increasingly turning to propane as a practical alternative to electric vehicles.
• As the propane market expands, dealers and distributors face new operational and liability risks.
• Specialized propane dealer insurance programs help address the unique exposures of this growing sector.

As society grapples with climate change, people are recognizing the need for clean energy. Propane is emerging as a viable clean-burning alternative fuel. As the propane market grows, so will the propane sector’s insurance needs. This is creating a fantastic opportunity for insurance brokers who are looking for a new niche with long-term potential. This rapid propane market growth is creating new opportunities for propane dealers, distributors, and the insurance brokers who serve them.

Understanding Propane

Propane is also known as liquefied petroleum gas or propane autogas. According to the U.S. Department of Energy, it is used in propane vehicles, home and water heating, cooking, refrigeration, clothes drying, and powering farm and industrial equipment. It is also used as a raw material to make plastic and other compounds. It burns cleanly and, because propane vaporizes when released, it presents a lower environmental contamination risk than many liquid fuels.

What Are Propane Autogas Vehicles?

Propane autogas vehicles run on liquefied petroleum gas (LPG) instead of gasoline or diesel. The fuel burns cleaner than traditional fuels, producing fewer greenhouse gas emissions and particulates. Because propane is widely available and relatively affordable, it has become one of the most practical alternative fuels for fleet operators, school districts, and commercial vehicles.

The Growth of the Propane Market

According to Fortune Business Insights, the global propane market was valued at $88.77 billion in 2020 and is expected to grow to $98.50 billion by 2023 and $225.10 billion by 2030. That’s an impressive CAGR of 12.5%.

This growth is being fueled by interest in propane vehicles. Although currently only about 3% of U.S. propane fuels vehicles, the U.S. Department of Energy says interest in propane as an alternative fuel source is growing because it is available domestically, has a high-energy density, burns clean, and has a relatively low cost. Fortune Business Insights says propane autogas vehicles produce 90% fewer particulates and 20% less carbon dioxide than petrol vehicles.

Government Funding for Propane Vehicles

Switching from petrol vehicles to propane vehicles can be expensive, but government funding could make this an affordable option.

The EPA’s Clean School Bus Program will provide $5 billion between 2022 and 2026 to replace existing school buses with zero-emission and low-emission models. During the first funding opportunity, the EPA awarded up to $965 million to around 400 schools.

School Transportation News says propane autogas is the most common alternative fuel for school buses because (unlike with electric vehicles) there are no concerns about recharging or range restrictions. In addition to the EPA Clean School Bus fund, schools may be able to draw on state incentives to fund the switch.

A Viable Option for Fleets

Schools aren’t the only ones adopting propane autogas.

According to Fleet Owner, fleet operators are looking for alternative fuels, but electric vehicles aren’t currently a practical option for many applications due to range issues and the lack of charging infrastructure. However, fleets are finding success with propane autogas. Passing newer emissions standards for vehicles is becoming increasingly difficult, but since propane is a clean-burning fuel, the emissions associated maintenance is easier.

According to Yahoo Finance, Superior Energy Systems recently hit a milestone by pumping more than 100 million gallons of fuel through its PRO-Vent 2000 propane Autogas dispensers.

Propane Risks

Although propane offers many benefits as an alternative fuel source, it is not without risks. Propane is highly flammable – and when propane fires occur, there can be explosions. According to the CDC, a type of explosion known as a Boiling Liquid Expanding Vapor Explosion (BLEVE) can occur when propane tanks are exposed to extreme heat, and is always possible during a propane fire.

• A propane-fueled fire that started at a nearby propane business destroyed more than 30 cars, according to Arizona’s Family.
• A woman had to be treated for burns after a spark from a cigarette combined with vapors from a propane tank inside her car and caused an explosion, according to WSOC-TV.
• A car in Washington hit a 500-gallon propane tank and caused a fire, according to KOMO News.

For propane distributors and fueling infrastructure operators, incidents involving vehicle fueling, storage tanks, or transportation can also trigger significant liability and property damage claims.

Serving the Needs of the Growing Propane Market

The propane market is growing, and the need for practical alternative fuels means it’s likely to keep growing in the foreseeable future. This means there will be more propane dealers and distributors who need insurance coverage designed for their unique exposures.

Tangram offers a specialized propane dealer and distributor insurance program designed for the unique exposures of the propane sector. Our insurance solutions include property, general liability, inland marine, commercial auto, workers’ compensation, and excess limits. We also offer risk management solutions to help propane dealers and distributors take control of their exposures.

The growing propane market is a great opportunity for brokers looking for a new niche. Tangram can help you serve this sector. Learn more.