Coal Liquefaction Becoming Less Attractive as Alternative Fuel

Philip Cho — Tue, 21 Oct 2008 23:33:30 -0700

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Coal-to-liquid increasingly seems an unlikely candidate for a clean and economical alternative energy of the future. According to a recent RAND report the environmental cost of coal-to-liquid fuel remains high. Coal liquefaction produces about twice the CO2 emissions of conventional oil and carbon sequestration on a large scale has not proven technically or economically feasible on large scale. Coal-to-liquid fuel only "appears to be competitive" with crude oil if crude prices stay above $94 a barrel for an extended period. Moreover, even with carbon sequestration, "neither alternative fuel offers a path toward large long-term reductions in total carbon dioxide emissions to limit climate change."

This report follows other studies in countries such as China that have also come to equally negative conclusions, resulting in the termination of nearly all coal liquefaction projects in the country. http://www.rand.org/pubs/technical_reports/TR580/

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China's Coal Liquefaction Projects Terminated Under Threat of Bad Loans

Philip Cho — Tue, 07 Oct 2008 07:57:49 -0700

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In a startling move, China’s National Development and Reform Commission (NDRC) has terminated all but two coal liquefaction projects. According to Zhou Dadi, former director of the Energy Research Institute of the NDRC, development of the technology had proven too risky an investment as domestic expertise and equipment was simply inadequate. With an investment of 120 billion yuan (US$17.55 billion)，the combined output capacity of the existing and the planned coal-to-liquid (CTL) projects was to be about 16 million tons. In a revealing statement Zhou added that, “many small CTL projects…were financed by bank loans. It will be troublesome if the loans default, which will hurt the interests of many depositors…Small investment in coal-to-liquid projects does not make sense. Heavy investment, however, is likely to turn sour if the mid-and-small enterprises cannot be freed from the technology obstacles." Falling oil prices nailed the coffin on many of the unprofitable projects.

This is a major development that has gotten no attention outside of China. As the nation has abundant coal resources, China’s leaders originally heralded coal liquefaction technology as the last-best-hope to solve the impending energy crises that other alternatives such as nuclear power could not solve. CTL was to keep China’s factories running at break-neck speed, without which leaders fear social unrest from rising unemployment. China also cannot hope to fuel its military in anything but a short term engagement because of very limited reserves. Military leaders had hoped that CTL might assist in solving this problem.

China: Science & Technology