Propane at a crossroads: Forecasting the industry through 2035

▶ Commercial sector (2 billion gallons / 23 percent of the industry in 2024)

Much of the commercial sector propane demand, including space and water heating markets in the multi-family and commercial building markets, will face the same challenges as the residential sector. Rather than duplicating the residential discussion, we focus our commentary on the commercial sector on two potential high-gallon commercial applications.

1. Towable power generation – Industry forecasts suggest significant growth in the towable power generation market over the next 10 years to address the resiliency and reliability challenges facing the power industry and to address existing off-grid power requirements. Almost all the mid-to-large size (20 kW to 1,500 kW) towable generator market is diesel powered. Given the changes in diesel emissions standards and improving propane cost advantages relative to diesel, this market represents a potential opportunity for significant gallon growth.

While there are no definitive assessments of the size of this market, a review of rental company activity suggests potential demand totaling 300 million to 700 million gallons. A 100-kW diesel generator burns about 7.4 gallons per hour at full load; the propane equivalent uses around 10.9 gallons. A unit of this size would be expected to consume between 3,000 to 10,000 gallons per year depending on the application. Use of these units is widespread, and the number of units required is expected to grow rapidly over the next 10 years.

Roughly 80 percent of the towable generator demand is met by the rental market. Because rental fleets standardize and turn over slowly, it will take most of the next decade to influence future equipment cycles to feature propane and to achieve significant penetration in this market. To take advantage of this opportunity, towable power generation would need to be a long-term strategic priority.

2. Lawn care markets – Propane has been a participant in the landscape and lawn care markets for at least 15 years. However, propane sells only 2.5 million gallons annually in this market, a 50 percent decline since 2015. This sector consumes annually about 550 million gallons of gasoline and diesel. Because propane offers significant consumer advantages, capturing a 25 percent market share by 2035 – adding 200 million of much-needed offseason gallons – is a viable goal.

▶ Agriculture markets (800 million gallons / 6 percent of the industry in 2024)

We do not expect significant change in agricultural markets. Gallons for poultry house use, which is 40 percent of the ag sales volume, should see normal market growth. Corn drying, which averages about 35 percent of the gallons sold, likely won’t change much. In most of the ag markets, continuing improvements in efficiency will reduce propane gallon sales in existing operations, offsetting modest market growth, although some of these losses could be offset by increased utilization due to lower operating costs.

▶ Autogas markets (121 million gallons / 1.4 percent of the propane industry in 2024)

After two decades of focus and investment, autogas accounts for only 1.4 percent of the propane industry gallons sold, and a very small fraction of the overall transportation market.

Major setbacks – most notably the discontinuance of the S2G bobtail and the Cummins engine development project – hurt propane’s credibility as an engine fuel and slowed momentum when cleaner fuel alternatives were gaining national attention. Most of this market opportunity has been captured by electric vehicles or has remained diesel.

In the school bus market, propane’s market share has held flat at only 5 percent despite propane’s cost and emissions advantages, the growing demand for diesel alternatives and the solid reputation of the Roush CleanTech/Blue Bird solution.

Compounding the challenge in the vehicle market: We lack the equipment pipeline needed for widespread penetration. Without a committed, nationally recognized engine manufacturer or OEM partner – beyond Roush – the industry is not currently positioned for market growth. The market potential is real, but the propane industry has been unable to capture a significant share.

Despite the lack of recent market growth, the school bus and transit bus markets still represent significant potential. Growth in these markets is reflected in our more optimistic forecast.

▶ Forklift markets (584 million gallons or 6 percent of the industry in 2024)

Advancements in battery technologies in electric forklifts and the shift toward automation in warehouses will continue to hold down propane market share in the forklift market. While part of the expected decline will be offset by overall market growth, we expect that, at best, this part of the market will remain flat.

Challenges meeting new emissions standards with diesel equipment and expected improvements in comparative fuel costs provide an opportunity to grow propane use in the heavy-duty forklift market, although propane equipment capable of serving these markets is not readily available.

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