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DiGas Dual fuel Report Summary

Project ID: 745142

Periodic Reporting for period 1 - DiGas Dual fuel (A novel dual fuel system for diesel locomotive modernisation to CNG or LNG operation)

Reporting period: 2016-12-01 to 2017-03-31

Summary of the context and overall objectives of the project

DiGas has developed and is deploying dual-fuel system (DFS) that enable locomotive operator companies to run their locomotives in dual fuel mode substituting majority of diesel fuel consumption with natural gas or biomethane which results in 30-40% cut in fuel costs, diesel-like operation, compliance with new emission standards and enhancement of environmental commitments.

The unique proposition of our system is the highest on the market (80%) diesel fuel substitution rate with natural gas even on the smallest engine loads. Contrary to any other competitor solutions DiGas technology allows for meaningful natural gas injection from the 1st notch of locomotive engine operation compared to 3rd notch natural gas injection start for other competing technologies. It provides an economically viable solution for shunter locomotives that majority of their time are operating in low engine loads however represents 40% of all locomotive fleet worldwide. More than that, we have designed our DFS in the way that on 95% it consists from reliable, proven and currently available mass produced components. Therefore, by utilizing our proprietary DFS elements and tailoring DFS to vast majority of shunter diesel locomotives we are able to retrofit the locomotives in the most cost effective, time-effective, reliable, service free and scalable manner. This allows for massive shift for European locomotive industry, enabling rail operators to capitalize on cheap, clean and abundant natural gas fuel and provide much more competitive service saving funds that be used for other investment objectives such as acquisition of new environmentally more friendly diesel locomotives that comply with most recent stricter emission standards. In addition to economical savings for operators we expect that annual social impact of conversion to DFS in CO2 and NOx decreased savings will amount to EUR 17.6 thousand per converted locomotive and based on our projections with an aggregated impact of EUR 21.5 million (20`219 tons less emissions) by 2024.

Developed over more than 5 years and tested on numerous engines, the core proprietary technology is based on self-adaptive algorithms, pre-calculated models and real-time comparative analysis to dynamically changeable current state operation model. Adopted to locomotive engine and successfully tested on engine test cell the technology and accumulated experience provides the unique advantages for us and our customers. With an objective to roll out finished and scalable, certified, applied to numerous types of locomotives and ready to be mass produced DFS by 2019 DiGas is now is in the process of setting up a demonstration project with Latvian Railway company which will prove the system in its actual operational environment by Q3 of 2017.

The objective of Feasibility Study was to verify the market size, assess technical feasibility of DiGas DFS, identify and contact all locomotive operators that will be interested in our product in European region with an objective to initiate pilot conversion of their locomotives as well as locomotive maintenance and repair plants within geographical reach of those operators that will take part in locomotive modernization installing DFS. These contacts will be very beneficial during our commercialisation stage and will provide us with credibility of actual application of DFS in daily operations. Other objectives include: gain understanding of project risks and potentials of product commercialization; evaluate in detail potential technical, commercial, certification, legislative and economic issues.

Work performed from the beginning of the project to the end of the period covered by the report and main results achieved so far

During the reporting period our system was successfully tested on a ChME3 locomotive engine (K6S310DR) in cooperation with locomotive maintenance plant JSC “DLRR”, LDZ and BE in a controlled test cell environment. It showed astonishing results substituting on average 69% of diesel with natural gas without any changes in power, torque or temperature parameters of an engine. And it was proven that DiGas dual fuel system is able to inject natural gas at any of engine operating notches. We have initiated a local ChME3 dual fuel locomotive certification and a ChME3 conversion to DFS in cooperation with the largest Latvian rail operator AS “Latvijas Dzelzceļš” with a planned delivery date by the end of Q2 2017 and testing phase lasting till Q1 2018.
During reporting period we have identified that our initial targeted available market consists of more than 110 operators in 14 countries in Central and Eastern Europe operating 7`646 of diesel locomotives. After we carried out our in-depth research of these countries the serviceable obtainable market shrunk down to 45 operators from 11 countries with a total number of 2`263 of shunter locomotives of age more than 30 years available for conversion. These locomotives consist of 5 shunter locomotive types that are old enough and still are operated that we plan to certify in these countries within 2 year time. All these countries have a developed natural gas piping infrastructure therefore CNG can be delivered to refuelling points without any significant investments. From the legislative stand of point key bottleneck is certification of new locomotive type and due to the fact that most of these countries are EU members and if locomotive type will be certified in one EU member state no or less complex certification will be required in other EU countries.
Our financial projections based on our market research show that further commercialisation of the project is feasible, and will generate substantial profits, ROI and SROI.

Progress beyond the state of the art and expected potential impact (including the socio-economic impact and the wider societal implications of the project so far)

DiGas dual fuel systems offers Diesel-like operations for all locomotive segments and allow natural gas to be supplied at every engine operating notches, that provides a significant benefits beyond current state of the art available products in form of higher average natural gas offset rates.
The widespread introduction of LNG as a clean and competitive fuel alternative to Diesel requires the build-up of critical filling station coverage of the main railway routes across Europe.
Our project as part of socio-economic impact will be able to decrease environmental greenhouse gas emissions that in the long-run will have positive impact on both European and Worldwide environment.

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