CTL follies

Coal-to-liquid is a dead end if there's a price on CO2

Posted by Joseph Romm (Guest Contributor) at 8:45 PM on 09 Sep 2007

Read more about: energy | coal | coal-to-liquid fuel

One final post on this week's liquid coal hearing. Forbes wrote up the hearing and got my bluntest quote:

"Coal-to-liquid is just a dead end, from a climate perspective," added Joseph Romm, a senior fellow at the liberal-leaning Center for American Progress. "Liquid coal will not have a future in this country, no matter how much money Congress squanders on it."

Well, I guess "liberal-leaning" is better than "liberal."

Why is liquid coal a dead end? Because, as I explain in my testimony, even a relatively low price for carbon dioxide is fatal to liquid coal's economics, as made clear in two recent report by the U.S. Energy Information Administration:

In its January 2007 report, "Energy Market and Economic Impacts of a Proposal to Reduce Greenhouse Gas Intensity with a Cap and Trade System" (PDF), EIA examined the impact of a draft version of Sen. Jeff Bingaman's global warming bill. That bill has a safety valve, which limits the price of carbon dioxide permits. In the EIA analysis, the permit price starts around $4 a ton of carbon dioxide in 2012, rises to $7.15 in 2020 and reaches only $14.18 in 2030. This is a relatively low price for carbon dioxide. Indeed, this 2030 price is considerably lower than the current price for carbon dioxide in the European Union -- and the first budget year for Kyoto isn't even until next year. In this scenario, EIA finds:

[I]n 2020, CTL [coal-to-liquids] production is 0.2 million barrels per day (74 percent) lower than in the reference case. By 2030, the change is 0.6 million barrels per day (85 percent) lower than in the reference case.

In short, a relatively low price for carbon dioxide wipes out the vast majority of projected CTL.

In July 2007, EIA released "Energy Market and Economic Impacts of S. 280, the Climate Stewardship and Innovation Act of 2007" (PDF), an analysis of the global warming bill by Senators John McCain and Joe Lieberman. S. 280 sets considerably more stringent reduction targets than Sen. Bingaman's draft bill -- ultimately reaching 60 percent below 1990 emissions levels by 2050. This bill has no safety valve. As a result, the permit price reaches $22.20 in 2020 and hits $47.90 in 2030. The report finds:

None of the 15 coal-to-liquids plants built in the reference case are projected to come on line in the main S. 280 cases. In the reference case [business as usual], coal consumption at CTL plants reaches 109 million tons in 2030.

A moderate price for carbon dioxide wipes out all projected CTL.

Since it is all but inevitable that we will have a low-to-moderate price for carbon dioxide by 2020, and at least a moderate price by 2030, CTL will not achieve any significant market penetration. No amount of federal research and development investment or tax credits or loan guarantees are likely to change that equation.

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3 Comments | Post a Comment

Romm is a CTL fool

To say that CTL is not cost effective without a good price for CO2 is ridiculous, because the cost effectiveness of CTL has been determined WITHOUT the additional revenue stream for CO2.
CTL is profitable with an oil price of 40 to 45 dollars per barrel. Add an extra revenue stream and the picture becomes even better.
CTL (with CO2 sequestration) is inevitable, and will be very big in the US.
There is NO other solution to keep transport going when the second leg of rising oil prices brings it to 100 dollars and beyond. Be a patriot and help CTL (with CO2 sequestration) along, don't help bringing the US society down by working against it.
You may not know it, but you have no option!

by Iredeu at 2:38 AM on 10 Sep 2007

Joseph, Thanks!

Thank you for presenting this testimony before Congress!
Lou

by justlou at 4:56 AM on 10 Sep 2007

Carbon Neutral with Biomass Co-gasification

Co-processing coal and biomass could reduce carbon emissions from synthetic fuels. The use of coal gives you the scale economies needed for these types of plants as well as the ability to use existing technology (co-gasification with biomass is already being done) and the biomass input with carbon capture and storage gives you negative emissions which brings the overall emission rate down to near-neutral thus making this approach viable in a carbon-constrained world.

With CCS, the GHG emission rate for coal F-T liquids could be reduced to about the rate for crude oil-derived fuels. The net GHG emission rate could be reduced further, to near zero, via coprocessing biomass and coal with CCS so as to exploit the negative emissions of storing photosynthetic CO2. At a carbon price of $100/tC the co-processing option is the most economically attractive of all the options considered for F-T liquids production and requires far less net biomass input to realize near zero GHG emissions than conventional biofuels such as cellulosic ethanol.
If the CO2 captured in F-T or IGCC plants were used for CO2-EOR, the economics of CO2 capture and storage would often be attractive even at a carbon price of $0/tC. CO2-EOR pportunities in the USA (and perhaps elsewhere) are sufficiently large to make the CO2-EOR application an attractive way to gain extensive near-term experience with gasification-based energy and CCS technologies and the opportunity to "buy down" the costs of these technologies substantially as a result of learning by doing.

http://www.princeton.edu/~ssuccar/Williams_Pres_NETL_2007 ...

http://www.princeton.edu/~ssuccar/Williams_GHGT8_2006.pdf ...

by samircmi at 8:35 AM on 10 Sep 2007

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