A Service Station Location Model to Explore Prospects and Policies for Alternative Transport Fuels: A Case of CNG Distribution in Italy

CNG is an example of alternative gaseous fuel whose market development requires supply infrastructure (pipelines), refuelling stations and alternative vehicles to exist at the same time, which is known as the ‘‘chicken and egg dilemma’’. In this chapter, a case study of limited or locally nonexistent market development for CNG in an Italian frontier region is analyzed and a mixed integer non linear programming model is introduced to evaluate the effect of incentive measures envisaged by the regional government to foster refuelling station development. It is found that, taking an entrepreneurs’ perspective of maximizing profits, even with substantial capital grants investors are more likely to choose higher demand areas, in spite of fiercer competition, rather than areas without stations. Subsidies should be more specifically targeted to critical areas to be efficient.