Talk about opportunity. By 2015, the market for diesel exhaust fluid, now at zero, more or less, could amount to 500 million gallons, according to one widely accepted forecast.
That projection, by the Engine Manufacturers Association and a research firm, has set off a race among suppliers who are already vying for share of the jug and container market at petroleum-convenience locations and truck stops.
“When do you see an industry getting created like this?” Frank Cook, senior vice president of Old World Industries, said to an audience at the annual meeting of the Pennsylvania Petroleum Marketers & Convenience Store Association, before answering his own question. “It’s pretty rare.”
As previously reported in NPN Magazine, a jumpstart for the diesel exhaust fluid (DEF) market is due in January, when 2010 emissions standards set by the U.S. Environmental Protection Agency come into effect. To comply, most heavy-duty engine makers are adding selective catalytic reduction (SCR), a technology that injects DEF into the exhaust stream to reduce nitrogen oxide emissions. Vehicles with the technology will be equipped with small tanks to carry up to 25 gallons or so of the diesel exhaust fluid. (It’s estimated that the reduction technology requires two gallons of the fluid for every 100 gallons of diesel fuel burned.)
For “topping-up” purposes, manufacturers are aiming to market their branded DEF in containers, including one-gallon and 2.5-gallon sizes, through retailers such as truck stops and petroleum-convenience marketers. This represents a low impact initial offer for industry retailers that do some diesel business, but are not at the high volume level.
Old World Industries, Northbrook, Ill., is manufacturing and distributing its product, BlueDEF, in one- and 2.5-gallon jugs for retail sale, said Chad Wenzel, brand manager. “Obviously with the limited number of trucks [with SCR technology] on the road right now there is not going to be any demand for bulk deliveries,” Wenzel observed. One reason the jugs are typically sized at one gallon and at 2.5 gallons is that diesel exhaust fluid weighs nine pounds per gallon, and to package it in containers any larger would make package weight a handling issue at the retail level.
Diesel exhaust fluid sold in containers or jugs at retail will also carry a higher per-gallon price compared to bulk because of the costs of handling and packaging. During his presentation at the Pennsylvania Petroleum Marketers’ gathering in Gettysburg in September, Old World’s Cook said he was uncertain just what the price per gallon would be. “Maybe about the same as diesel fuel itself,” he said. That is, in packaged form it might be approximately $3 per gallon, Cook said, and would drop once bulk distribution became common, possibly to about $1.75 per gallon. He emphasized those figures were estimates.
Diesel exhaust fluid consists of 32.5 percent urea and 67.5 percent de-ionized water. The urea must be very high-quality for use in SCR technology, Cook noted; he warned that “shoddy product” is likely to be marketed by some. There is an ISO standard for diesel exhaust fluid, and the American Petroleum Institute certifies suppliers that meet the standard. Cook said in cases where sub-par product is marketed, it is likely to be fertilizer grade.
To safeguard the quality of the urea, and the fluid, the product must be handled and stored properly to prevent it being compromised – handling and storage are also covered in the ISO standard. Containers and dispensing equipment made of unapproved materials will contaminate the fluid. Containers, for example, must be made of stainless steel or plastic. “Your mindset has to be: ‘dedicated equipment,’” Cook told Pennsylvania marketers attending his presentation.
Chad Johnson, product manager of Gilbarco Veeder-Root’s Encore dispensers, said, “DEF freezes below 12 degrees Fahrenheit and is corrosive to some of the metals traditionally used in dispensers.” Gilbarco’s dispenser for DEF features a heated cabinet designed to keep the fluid above the freezing point, Johnson said, and internal surfaces and components are made of corrosion-resistant materials.
The Petroleum Equipment Institute (PEI) recently finished collecting public comments and proposals to change its recommended practice for storage and dispensing of DEF. The new document, representing a synthesis of industry procedures, manufacturers’ recommendations and regulatory standards, is expected to be published this year, PEI said.
While some truck stop operators are committed to installing bulk dispensers on fuel islands, their immediate efforts are focused on programs to retail the fluid in jugs or containers.
For example, Pilot Travel Centers has announced installation plans for the rollout of 100 DEF “at-the-pump” locations by mid 2010. But the company said that its first step will be to carry pre-packaged supplies of DEF at all Pilot stores. There are more than 350 Pilot-owned or licensed retail interstate locations in 41 states.
Another truck stop operator, TravelCenters of America, Westlake, Ohio, announced last summer that all 234 of its TravelCenters of America (TA) and Petro Stopping Centers had begun stocking 2.5 gallon containers of DEF for retail sale. The fluid is packaged in bottles that include an extended nozzle designed to ease dispensing. TravelCenters of America also said it was making the DEF available to 400 RoadSquad emergency roadside assistance vehicles at TA and Petro locations for trucks that run out of DEF while on the highway. (The truck stop operator also announced last May that it had opened a retail DEF bulk dispensing operation at its facility in Ann Arbor, Mich.)
As more vehicles with SCR technology are put into service in coming years and demand for DEF increases, the fluid will be sold in 55-gallon drums, and in 275- and 330-gallon intermediate bulk containers, also called “totes.” Totes are outfitted with dispensing equipment. Bulk delivery of the fluid, in truck tanks, will become common once the market is fully developed, suppliers said.
“Mid-sized and larger fleets will have drums or totes,” said Wenzel, the product manager for BlueDEF, the Old World Industries brand, “dispensing product at their sites or home base, and then ultimately you’ll see a lot of volume at the truck stops.” Large distributors will be carrying in bulk and refilling mini-bulk or tote systems, he said.
Old World plans to distribute BlueDEF to the North American commercial diesel vehicle industry beginning in 2010 at over 4,500 distribution points. “The challenge for the industry will be to maintain ample and uninterrupted supply as demand for DEF grows,” said Old World’s Kal Mahmood, senior vice president of commercial sales, when announcing the launch of BlueDEF. “Our extensive supply chain offers an established distribution infrastructure.”
All about SCR and DEF
Additional information about selective catalytic reduction (SCR) and diesel exhaust fluid (DEF) can be found at FactsAboutSCR.com, a Web site sponsored by the North American SCR Stakeholders Group. Members of the group include equipment manufacturers such as Detroit Diesel Corporation, Daimler Trucks North America, Volvo Trucks North America and PACCAR trucks.
Articles, white papers and links to presentations that have been made at various forums and panels, including a recent DEF Forum sponsored by Integer Research in Las Vegas, can be found at the Web site. The site also features a link to a diesel exhaust fluid usage calculator.
An online study in May 2009 found that more than half (51.2%) of truck buyers are likely or very likely to consider SCR for their EPA 2010 engine purchase, the Web site reported. That compared to only 31.2% that are likely or very likely to consider increased EGR (exhaust gas recirculation, an alternative to SCR).