"You can't get blood out of a stone," the saying goes. But if liquid fuels are the lifeblood of the transportation sector, then technology and economics have combined to disprove that old saw. You can get blood out of a stone - specifically, diesel and other transportation fuels out of coal, at a price competitive with oil-derived fuels.
That's good news for the U.S.
The chemical-industrial process for extracting ultra-clean diesel fuel, jet fuel and other products from coal has been around for decades, but only in recent years have advances in technology and the steep increase in the price of oil combined to make "coal-to-liquids" an attractive part of the solution to our pressing energy security and environmental concerns.
Energy security means having reliable, affordable and environmentally sound sources of energy available largely from domestic sources. Coal fits the bill. The United States has more coal resources than any other country - a quarter of the world's total. Coal provides half our electricity. The National Coal Council, an advisory group for the secretary of energy, estimates that our coal supply could support an additional 100 gigawattts of electricity production by 2025, as well as 2.6 million barrels per day of coal-derived fuels, 4 trillion cubic feet annually of synthetic natural gas and other products. The Air Force has successfully tested blends of coal-derived jet fuel in its planes.
Environmental objections to using coal are always raised, but technology is making the objections obsolete. Coal plants are getting cleaner every year, and in a few years, the U.S. will have a near-zero-emissions, coal-based demonstration plant called FutureGen up and running. Carbon sequestration and other emissions-reduction technologies can be applied to coal-to-liquids plants, and the primary product, ultra-clean diesel fuel, is far cleaner than any diesel fuel or gasoline in use today.
These advantages are obvious and appealing. But building the first few coal-to-liquids plants, as with any new industrial endeavor, will present challenges. The technologies have never been combined before in a major project, and no one wants to step out onto the high wire and build a first-of-its-kind plant without some sort of safety net. That's why several bills designed to encourage coal-to-liquids development through loan guarantees and various tax incentive plans are circulating in Congress.
While the legislative wheels grind, developers are working on coal-to-liquids plans with the governors and governments of Alaska, Montana, Indiana, Pennsylvania, Ohio, West Virginia and Louisiana.
Things are moving more quickly overseas, where three of the most populous countries are preparing to exploit their coal resources and reduce oil dependency. China, using technology developed by the Department of Energy and a private partner, expects to be producing 20,000 barrels of fuel daily from its first coal-to-liquids plant before the year is out. When planned expansion is complete, the plant will produce 200,000 barrels of fuel a day. This is only the first shot in a massive, $127 billion coal liquefaction campaign by the Chinese.
Indonesia and a private partner have agreed to build a $6 billion coal-to-liquids plant that will produce 29 million barrels of diesel fuel a year, and India's government is studying ways to implement a coal-to-liquids strategy.
Australia and New Zealand are also well along in planning for their first coal-to-liquids facilities.
Here in the United States, the market, as always, determines whether a technology and product can be competitive with other fuels - in this case, oil-derived transportation fuels. The Department of Energy estimates that the first three or four coal-derived diesel fuel plants can be built and operate competitively with oil-derived fuel plants at a price of $50 to $55 per barrel of oil. The products from additional plants built with the benefit of the knowledge and experience of the pioneers should be competitive at an oil price of $40 to $45 per barrel.
Coal-derived fuels were considered uncompetitive until recently because oil was comparatively cheap, averaging $17 to $18 per barrel in the 1980s, around $20 per barrel in the 1990s and in the low-$30 range in the early years of this decade. Those prices, it seems, are a thing of the past. According to the Energy Information Administration, crude oil prices are likely to be $50 to $60 out to 2030.
At those prices, coal-derived fuels can provide a highly competitive and clean supplement to oil-derived fuels, substantially reducing the need for imported oil and thereby increasing energy security.
Lowell Miller is director of the Office of Sequestration, Hydrogen and Clean Coal Fuels in the U.S. Department of Energy. His e-mail is lowell.miller@hq.doe.gov.