Ratan Tata, the chairperson of the investment commission, has asked the Centre to experiment with a new technology--turning coal to liquid (ctl) fuel.
He has submitted a report in this connection in January 2007. The report says it is essential to meet India's growing energy requirements. In response, the prime minister has asked the planning commission to set up an inter-ministerial committee to study the recommendations and come up with an action plan.
To create ctl fuel, two kinds of liquefaction processes are used. In the indirect process, coal is subjected to intense heat (between 950C and 1,100C) and pressure. It is then converted to synthesis gas, which is then treated to remove mercury and sulphur. Next, the treated gas is converted into clean liquid fuel high quality diesel.In the direct coal liquefaction process, coal is pulverised and mixed with oil and hydrogen in a pressurised environment. Here, coal gets converted into a synthetic crude oil, which can be refined into a variety of fuel products.
The ctl story starts from the 1920s. It was the pet fuel of the Nazis who had little access to oil resources. Many global oil firms also experimented with this carbon to liquid technology, but discovered that it was too expensive.
The last ctl plant was built in South Africa in 1980, which was a success story. In South Africa, ctl fuel contributes 30 per cent to transport requirements. South Africa began experimenting with ctl technology in the 1950s. The country had enormous deposits of coal. However, it had a limited market value thanks to its poor quality. In 1950, the South African government set up Sasol, a state-owned company. Sasol initiated the country's first project, a ctl facility called Sasolburg. Sasol emitted huge volumes of carbon and other pollutants but was immensely profitable. Sasol now plans to invest in similar projects in China.
Despite this seeming success story there are serious concerns. Hunt Ramsbottom, chairperson of us-based energy solutions provider Rentech Inc, admits that carbon emission from the ctl process is an issue.
Companies backing ctl fuel claim that improved technology can reduce emissions, which will, however, add to production costs. If a country has tough emission rules, companies will have no incentive to produce ctl. But in countries like India, which have lax emission regulations, investment in ctl can be very profitable. The fact that India does not have facilities to capture and store carbon dioxide will, therefore, be no deterrent.
In South Africa, Sasol's ctl facilities have emitted huge volumes of pollutants, including sulphur dioxide. Environmental groups hold the company responsible for a host of respiratory problems that affected communities living near the plant. The Natural Resources Defence Council, a us-based environmental advocacy group, estimates that the production and use of a gallon of liquid fuel made from coal emits about 49.5 pounds of carbon dioxide. Production and use of other fuels from crude oil release about 27.5 pounds of carbon dioxide per gallon.
Whether ctl projects will offer an acceptable return, say energy analysts, depends on crude oil prices. If oil prices are below us$30 per barrel, the projects won't be competitive, unless tax incentives are provided. Since coal is cheaper than oil, ctl technology can produce oil at us$25-45 per barrel, which includes the cost of carbon capture and storage.
There is also a supply-side problem, which will intensify environmental and livelihood problems. If ctl projects are implemented in India, coal mining will have to increase. The exact dimensions of the problem will have to be ascertained. The fallouts of ctl technology in South Africa are still being researched.
Though China and the us have experimented with ctl technology, since they have huge coal reserves, India must work out all the angles before following suit.