electricity in an advanced IGCC facility indicate an equivalent crude cost reduction of $5 to $7/bbl. For stand-alone direct liquefaction plants, equivalent petroleum prices also are estimated to be in the $30 to $35/bbl range. Use of lower-cost Western coal together with coproduction of electricity and hydrogen for direct liquefaction would further reduce costs.
The above estimated costs of coal liquids are substantially lower than the costs presented in an earlier National Research Council study (NRC, 1990). The differences result from a combination of technological advances, higher prices for the low-sulfur and high-hydrogen content of the transportation fuels produced, the economic bases for the estimates, and, in some cases, the higher efficiencies resulting from coproduction with electricity. While the Fischer-Tropsch process is of great current interest to the petroleum industry for use in parts of the world where low-cost natural gas is available, R&D in direct liquefaction is, to an increasing extent, dependent on the DOE program to reach the target price of $25/bbl (1991 dollars; DOE, 1993b). However, a substantial reduction in funding (50 percent) for the DOE liquefaction program has been proposed for FY 1995. Given the historically unpredictable behavior of international oil markets and the current very limited industrial R&D on coal liquids, the committee believes that an important role for the DOE coal program is to maintain and develop U.S. technical expertise in coal liquefaction, thereby establishing the potential to reduce U.S. petroleum imports.
The more attractive economics for coal-derived liquids suggested in recent studies are dependent on the substantial premium now paid for diesel and jet fuels with zero aromatic and sulfur content. This premium accounts, in part, for the current international interest in converting natural gas to these products; however, overproduction could reduce the premium and diminish the attractiveness of liquids from coal. While such uncertainties reduce the incentive for large pilot plant and demonstration programs, the committee believes that there is a clear incentive for continued cost reduction through systems studies and research, including the evaluation of innovative concepts for direct liquefaction. Since 10 to 15 years are necessary to complete a development and commercialization program, and since an equivalent crude price in the mid-$20/bbl does not seem unreasonable by 2010, there appears to be an opportunity for an important contribution by DOE to coal liquefaction technology.
The committee recommends that DOE's program for coal liquefaction technologies be continued at least at the FY 1994 level, with the goals of decreasing the cost of coal liquids and increasing overall efficiency.
Another opportunity lies in the coproduction of coal liquids and electric power. The commercial deployment of IGCC power systems is anticipated in the mid-term period, and opportunities may arise to establish coproduct plants—or