Clean gases and liquid products derived from coal have the potential for substantial future use. At present, natural gas and refined petroleum are much less costly than comparable products from coal. However, both of these resources are expected to become more costly (EIA, 1994).
DOE's primary strategic objective for advanced fuel systems is to demonstrate by 2010 advanced concepts for producing liquid fuels and other products from coal that can compete with products produced from petroleum, when petroleum prices are $25/bbl (1991 dollars) or greater.8 At this price, coal-derived liquids may become competitive with nonconventional oil sources, such as tar sands and shale, and may also compete with the higher worldwide oil prices projected for the mid to long-term.
It is likely that national efforts to reduce CO2 emissions, as well as other environmental legislation and regulatory actions, could lead to increased emphasis on improved efficiency for technologies that convert coal to gaseous and liquid fuels. However, the cost of coal alone is too low to justify large additional investments for efficiency improvement. To date, DOE has not adopted environmental emission goals for coal liquefaction process plants, as it has for electric power plants. Future plants will likely have to meet air, land, and water emission requirements that are more stringent than those in place today, which could increase the overall cost of coal conversion processes relative to processes that use oil or gas.
The conversion of coal to cleaned gas with current technology incurs a loss of the inherent useful energy in the coal of approximately 20 percent, corresponding to an efficiency loss of 10 percentage points in IGCC systems using coal-derived gas (see Chapter 6). This loss can be largely attributed to temperature cycling and increased energy requirements for compression. Commercial high-temperature, oxygen-blown, entrained-flow systems with cold gas cleanup would have a loss of around 13 percentage points. The committee believes that further
The committee notes that DOE's costing method employs assumptions common among electric utilities but not among oil companies. In particular, the interest rates assumed in amortizing the capital cost of a liquefaction plant are based on a lower assumed risk and therefore lower rates of return than are commonly used by the petroleum industry (see Chapter 2 and Glossary). This difference in required rate of return will result in higher costs compared to DOE estimates (DOE, 1993b).