Coal-to-liquid fuels poised for a comeback

Converting coal into liquid fuels is known to be more costly than current energy technologies, both in terms of production costs and the amount of greenhouse gases the process emits. Production of coal-to-liquid fuel, or CTL, has a large carbon footprint, releasing more than twice the lifecycle greenhouse gases of conventional petroleum fuels. However, with the rise in energy prices that began in 2008 and concerns over energy security, there is renewed interest in the conversion technology.

Researchers from the MIT Joint Program on the Science and Policy of Global Change (JPSPGC) recently released an assessment of the economic viability of CTL conversion. The researchers looked at how different climate policies and the availability of other fuel alternatives, such as biofuels, would influence the prospects of CTL in the future.

Coal-to-liquid technology has been in existence since the 1920s and was used extensively in Germany in 1944, producing around 90 percent of the national fuel needs at that time. Since then, the technology has been largely abandoned for the relatively cheaper crude oil of the Middle East. A notable exception is South Africa, where CTL conversion still provides about 30 percent of national transportation fuel.

But will there be a resurgence of CTL technology? To determine the role that CTL conversion would play in the future global fuel mix, researchers examined several crucial factors affecting CTL prospects. Different scenarios were modeled, varying the stringency of future carbon policies, the availability of biofuels and the ability to trade carbon allowances on an international market. Researchers also examined whether CTL-conversion plants would use carbon capture and storage technology, which would lower greenhouse gas emissions but create an added cost.

The study found that, without climate policy, CTL might become economical as early as 2015 in coal-abundant countries like the United States and China. In other regions, CTL could become economical by 2020 or 2025. Carbon capture and storage technologies would not be used, as they would raise costs. In this scenario, CTL has the potential to account for about a third of the global liquid-fuel supply by 2050.

However, the viability of CTL would be highly limited in regions that adopt climate policies, especially if low-carbon biofuels are available. Under scenarios that include stringent future climate policies, the high costs associated with a large carbon footprint would diminish CTL prospects, even with carbon capture and storage technologies. CTL conversion may only be viable in countries with less stringent climate policies or where low-carbon fuel alternatives are not available.

“In short, various climate proposals have very different impacts on the allowances of regional CO2 emissions, which in turn have quite distinct implications on the prospects for CTL conversion,” says John Reilly, co-director of the JPSPGC and one of the study’s authors. “If climate policies are enforced, world demand for petroleum products would decrease, the price of crude oil would fall, and coal-to-liquid fuels would be much less competitive.”