Canadian businesses race to bring alternative auto fuel to the market

Canada's quest for alternative automotive fuel is on. Now that the federal government has finally given in to much higher domestic energy costs - the last industrialized country to do so - Canadians will see their fuel bills, including gasoline, more than double in the next five years.

There have already been some stiff wellhead and pump price escalations, taking the cost of filling up the family car from about 19 cents (Can.) a liter (60 US cents per American gallon) to about 33 cents ($1.04 a gallon) at present.

Under the provisions of the Sept. 1 pricing agreement between Ottawa and Calgary - versions of which will be signed soon with all the other energy-producing provinces - domestic oil prices will rise from $21.25 (Can.) a barrel now to close to the world price for ''old'' oil found before 1981.

The so-called ''new'' oil to be found in the future will command even stiffer prices, which will inevitably be reflected in the rolled-in price the Canadian consumer will pay for mobility and to heat the nation's homes and factories.

Bearing out the truth of the old saw that necessity is the mother of invention, Canada's private entrepreneurs have been quick to respond to the challenge posed by costlier conventional fuels.

Condensed natural gas (CNG) appears to be the first off the starting blocks, where entries also include ammonia, alcohol derived from grain, and propane.

Virtually identical claims made by the sponsors of rival alternative fuels focus on:

* The relative ease of conversion to what essentially would be dual fuel systems in the same automobiles.

* The savings to be effected.

CNG and propane promoters point to their own calculation suggesting that motorists would recoup the cost of conversion in about one year, given the projected 1985 costs of motoring. They both offer alternative fuels at about half what the price of gasoline is expected to be five years hence.

Ammonia as automotive fuel, pioneered by the CAE (Canadian Alternative Energy Corporation) of Unity, Saskatchewan, is perhaps the least promising contender for the alternative fuel market. The process involves producing a fuel by electrolytic means.

CNG recently became available to motorists in Calgary at a solitary outlet that doubles as a conversion center.

The conversion kits cost $1,600 (Can). The driving range of a vehicle packing the two thick-walled CNG cylinders is about 180 miles. They are sold by CNG Fuel Systems Ltd., a subsidiary of Canadian Hunter Exploration Ltd., which is in turn controlled by the giant Noranda mining group.

Soon there will be CNG outlets tagged to Husky Oil Company service stations in western Canada, in Edmonton and Vancouver. By next spring, they will be in Toronto and Montreal in cooperation with other retailers.

Judged by the first few weeks of operation, business is brisk, according to Judd Buchanan, a former federal Cabinet minister-turned-salesman.

As president of CNG Fuel Systems, Mr. Buchanan is obviously enthusiastic about the commercial prospects of his company. He points to the 80 trillion cubic feet of proved natural gas reserves as an almost inexhaustible source of supply for CNG-powered vehicles. Most of the gas is in Alberta and British Columbia.

In fact, both the federal and B.C. governments recently announced generous industry grants and research funds to simplify and further develop the use and application of natural gas in internal combustion engines.

Meanwhile, propane is likely to give CNG a good run for its money, proponents of the natural gas derivative suggest.

Several large fleet users, including gas utilities here, have converted trucks and other service vehicles to ''clean burning'' propane. This claim, naturally, applies to gas consumed in the form of CNG, too.

Taxis and other modes of public transportation have been using propane on a small scale. And where the fuel is available, all of them are planning to increase its use.

Both CNG and propane promoters estimate there will be about 100,000 conversions initially. This pace is likely to quicken as the cost advantages of alternatives vs. gasoline or diesel become still more pronounced.

At the same time, Greg Vezina, chairman of the Canadian Alternative Energy Corporation, is emphasizing that his feedstock - electricity and water - may be the most widely available of all options.

When burned, CAE's ''hydrofuel'' produces only harmless steam and nitrogen. Also, anhydrous ammonia, unlike propane or natural gas, is nonflammable. Conversion to burn hydrofuel is quite similar to that required by propane.