AAAS Policy Brief: Coal-to-Liquid Technology

Issue Summary | Resources

High oil prices and the desire to reduce energy dependence in the United States have brought coal-to-liquid (CTL) technology to the forefront of the discussion about alternative fuel sources. Nearly 100 years old, CTL processes have long been used by countries lacking access to oil, most notably Germany, where production peaked during the 1940s; South Africa, which has been using CTL technology for fuel since the 1950s; and, more recently, China, where the Shenhua Group LLC began trial operation of the worlds first direct CTL facility in December 2008, and intends to eventually produce 1 million tons of coal-based liquid fuel a year. The U.S. Government promoted the development of CTL technologies following the oil shocks of the 1970s, but shelved the projects after the price of oil fell during the 1980s. In the current economic and political environment of the United States, with oil prices surpassing $100 per barrel in summer 2008 and generally projected to rise in the long term, synthetic fuel derived from coal may once again become economically viable, and several projects are in the initial design phase around the country. From an environmental standpoint, however, the carbon dioxide (CO2) emissions produced throughout the lifecycle of coal-based liquid fuel make it a less desirable option.

Turning Coal into Liquid FuelCosts Advantages of Coal-Based Liquid FuelDisadvantages of Coal-Based Liquid FuelResearch Needs Turning Coal into Liquid Fuel

Coal can be converted into liquid fuel using several liquefaction processes; these processes can be divided into two general categories. The first category, indirect liquefaction, is a multi-step procedure that first requires the gasification of coal to produce a "syngas." This syngas is then converted to liquid fuel via two methods: the Fischer-Tropsch process or the Mobil process. In the Fischer-Tropsch process, which is much more common, the syngas is then cleansed of impurities and subjected to further chemical refinement to produce a sulfur-free diesel or gasolinei. The initial syngas can be derived from coal alone, or from a coal / biomass mixture. The process is the same when biomass is included, but the amount of CO2 emitted during the process decreases as the proportion of biomass increases. In the less-common Mobil process, the syngas can be converted to methanol, which is subsequently converted to gasoline via a dehydration sequence. Indirect liquefaction of coal during Fischer Tropsch produces a significant amount of CO2 that is removed from the fuel as a necessary step during the final stages of the process. However, recent research has suggested a modified Fischer-Tropsch method that could significantly reduce CO2 emissions during liquefaction.ii The second category, direct liquefaction, requires creating a chemical reaction at high temperatures and then using hydrogen gas and a catalyst to produce a liquid fuel. Direct liquefaction usually produces low-quality liquid fuel that is expensive to make compliant with U.S. standards for purity. Therefore, although the process is used in China, it is not a viable option for meeting the United States' liquid fuel requirements and will not be discussed for the remainder of this brief.

Costs

In terms of economics, coal-based liquid fuel becomes viable when the per-barrel price of oil exceeds the $45-50 range, according to separate studies. This is because of high front-end expendituresa 10,000 barrel-a-day plant could cost $600-700 million or more to construct. All told, the refinement process is three to four times more expensive than refining an equivalent amount of oil. When biomass is mixed with coal, the process becomes even more expensive, and is only viable with oil prices above $90 per barrel, according to the Department of Energy.

Not included in the above estimate is the cost of sequestrating the captured CO2, which would increase the price of the end product by a projected $5 a barrel. The imposition of a strict carbon cap and trade regime would also raise the cost of fuel produced with CTL technology, because of the CO2 emissions associated with it. While there is significant uncertainty, the recent RAND study estimated that CTL production plus carbon storage could produce fuel at a cost of anywhere from $1.40 to $2.20 per gallon or more by 2025iii.With current oil prices hovering around $50 per barrel, it is debatable whether CTL is currently an economically attractive alternative, but this could easily change with a consistent rise in oil prices.

Advantages of Coal-Based Liquid Fuel

Proponents of using coal-based liquid fuel for the transportation industry say that it would help the United States achieve energy independence. Currently, the United States consumes nearly 14 million barrels of liquid fuels for transportation each day and imports more than 55 percent of its oil. The more than 270 billion tons of recoverable coal the country has in its reserves could replace up to 800 billion barrels of oil per year, or over 2 million barrels per day, according to industry analyses. Other benefits of fuel made from liquefied coal cited by proponents are that it can be used in gasoline engines and that plants designed for indirect CTL processes can easily be converted to hydrogen fuel cell production plants, once fuel cell technology becomes more viable.

Disadvantages of Coal-Based Liquid Fuel

Opponents of CTL technology note that the lifecycle of synthetic fuel derived from coal produces large amounts of greenhouse gas. If the CO2 removed from the fuel during the refinement process is not sequestered, the quantity of CO2 released by extracting, refining and burning coal-based liquid fuel is more than twice the amount emitted by conventional hydrocarbons. Even with carbon sequestration, the emissions benefits over conventional fuel appear negligible at best, though there is significant debate over the true impact. While some studies have found CTL produces greater emissions than conventional fuel even with sequestration, the recent RAND study found no difference between CTL and petroleum emissions, and a Department of Energy study found that CTL emissions with sequestration were actually 5-12% lower.iv A similar debate accompanies emissions from coal-to-biomass mixtures, though mixtures certainly offer an emissions advantage compared with pure coal. In addition to the emissions debate, reliance on coal as a transportation fuel would increase the other environment stresses associated with coal mining in the United States and potentially affect other energy markets. The MIT study estimates that an additional 250 million tons of coal, equivalent to 25 percent of the United States current annual production, would have to be mined each year to replace 10 percent of the country's present consumption of liquid transportation fuel.v The RAND study puts the estimate at closer to 400 million tons of coal annually.

Research Needs

Coal-to-liquid technology is a well established process that does not necessitate future research to successfully produce liquid transportation fuels. However, making the greenhouse gas emissions of synthetic fuels derived from coal comparable to those of oil requires further research into emissions from CTL and CBTL production and large-scale carbon sequestration. Although sequestering massive amounts of CO2 is possible in theory, questions still remain about the length of time the sequestered CO2 would remain in place, the long-term ecological impacts of sequestration, the costs of constructing a CO2 storage facility, the geologic formations that make the best storage sites, monitoring leaks, and general commercial viability. Because of the United States' heavy dependence on coal as an energy source, however, these research steps will likely be taken regardless of whether CTL technology becomes widespread.

Updated April 10, 2009iFranz Fischer and Hans Tropsch, U.S. Patent 1,746,464. Feb. 11, 1930.iiDiane Hildebrandt, David Glasser, Brendon Hausberger, Bilal Patel, and Benjamin J. Glasser, Producing Transportation Fuels with Less Work, Science 2009 (323): 1680.iii RAND Technical Report, Unconventional Fossil-Based Fuels Economic and Environmental Trade-Offs, sponsored by the National Commission on Energy Policy, 2008.ivDOE National Energy Technology Laboratory Report, Affordable, Low-Carbon Diesel Fuel from Domestic Coal and Biomass, January 2009vMIT Interdisciplinary Study, The Future of Coal, 2007.