After years of being derided for hurting the environment, could new uses for coal help revive its reputation?
Energy watchers have begun touting the virtues of coal gasification, a process that converts the carbon-based fuel into a synthetic called "syngas." This can be used as an alternative for both crude and natural gas, the latter of which is quickly becoming instrumental to producing power and manufacturing chemicals.
Recently, Nomura cited coal gasification and creating liquid fuels from natural gas – a technique known as gas-to-liquid (GTL) – as a way to sate global crude oil demand. The firm tied the process to the shale revolution sweeping the U.S., saying it could eventually rival natgas and conventional crude, which could in turn help pioneer a coal resurgence.
"Supply/demand and prices in the global oil market would probably see a huge impact if coal gasification and GTL were to replace oil on a large scale in China and the U.S., the world's two largest consumers of energy," Nomura said.
"We think that syngas made from coal and natural gas could replace as much as 30-40 percent of the expected increase in global crude oil demand between 2011 and 2020," the bank added.
Coal gasification has a lengthy history, yet its proponents point out that the process, which removes coal's most harmful elements before combustion, makes it easier on the environment.
Given that coal is often cited as a leading producer of carbon dioxide emissions, the move to boost its profile may reduce the stiff headwinds the fuel has faced in recent years, as fears over climate change and the shift toward alternative energy pushed coal into a sort of disrepute in some circles. According to the American Coalition for Clean Coal Electricity, a public policy advocacy group, U.S. companies have invested about $90 billion since 1990 searching for ways to make coal a cleaner energy resource.
Duke Energy is one U.S. company at the leading edge of trying to make it profitable to use coal in a cleaner way. The power company recently completed construction on a massive coal gasification plant in Indiana, only recently green-lighted after years of being mired in controversy, largely over the plant's $3.5 billion price tag.. Honeywell, Shell and General Electric are other firms currently involved in coal-based syngas production.
According to energy watchers, Duke's 618-megawatt project underscores how coal has reached a crossroads, amid a broad revival in fossil fuel production. Should the process of generating coal and gas synthetics pick up momentum, it could accomplish two feats: making coal more environmentally friendly, while putting new downward pressure on the price of crude.
Oddly enough, coal demand is on the rise almost everywhere but the United States: In a December 2012 report, the International Energy Agency cited cheap gas for the drop in demand for coal. Still, the agency said that in 2017 the fuel will come "close to surpassing oil as the world's top energy source," burning about 1.2 billion tons per year by then.
Nomura estimates that China – the world's largest coal importer – could invest as much as $160 billion in transforming coal into gas by 2020, while the U.S. could shovel around $25-30 billion into coal gasification.