By Jennifer Kho
In the family of clean energy technologies, so-called “clean coal” is the embarrassing, illegitimate cousin. Advocates of solar and wind power and other renewables scoff at old-world coal because it’s a fossil fuel, and environmentalists say a technology that relies on earth-damaging mining can never be considered clean.
“I would not use the word ‘clean’ anywhere near the word ‘coal,’” says Robert Wilder, CEO of WilderShares, which manages three energy indices. “It’s a misnomer; coal is inherently dirty.”
Ouch. That’s particularly harsh coming from the manager of an index which tracks cleaner fossil fuel technologies, the WilderHill Progressive Energy Index. It’s no secret that coal is dirtier than any other fossil fuel. Companies developing clean coal technologies, including GreatPoint Energy and CoalTek, don’t deny the fact; instead, they want to find ways to reduce emissions from the world’s dirtiest fuel.
“Coal is definitely not going away,” says Andrew Perlman, CEO of Cambridge, Massachusetts-based GreatPoint Energy, which has a technology to turn coal into natural gas. “We can plaster our country with solar cells, which aren’t economic, and windmills, and everything else, and we’re still not going to make a dent in our energy needs.”
Hailing Coal’s Reign
As countries reach for more energy independence, coal’s reign is only likely to grow. Global coal consumption is expected to nearly double from 5.4 billion short tons in 2003 to 10.6 billion short tons in 2030, according to the U.S. Department of Energy’s Energy Information Association (EIA) International Energy Outlook for 2006.
The report also projects that coal’s share of the energy mix will grow from 24 percent in 2003 to 27 percent in 2030. Because coal is so entrenched, advocates of clean-coal technologies argue that the potential impact of reducing emissions from coal is “orders of magnitude” greater than that of introducing renewables.
Coal could certainly use a clean-up job. While coal supplies about 52 percent of U.S. electricity, it generates 84 percent of the electricity emissions, according to the EIA. Coal emits twice as much carbon dioxide as natural gas, the cleanest fossil fuel, according to environmental nonprofit Environmental Defense.
The data borders on scary: a single 500-megawatt-per-year coal plant produces as much carbon dioxide as 800,000 cars. Coal plants also emit mercury, and methane emissions from coal mining made up an estimated 9.3 percent of the total in 2005, according to the EIA.
And it’s not just China and developing nations that use coal for energy. According to the EIA, the United States has the largest recoverable coal reserves—enough to last more than 200 years—followed by Russia, China, India, and Australia.
Greener, Cleaner Coal
Faced with this reality, a growing number of entrepreneurs are working to make coal “cleaner” in today’s greener political environment. With even U.S. President George W. Bush calling climate change a “serious challenge,” and the fourth Intergovernmental Panel on Climate Change releasing a report that’s expected to predict billions of people will suffer from water shortage and millions will go hungry by 2080, “clean” is in.
Governments are now sinking serious cash into clean coal, and entrepreneurs are happy to take the money. In 2002, President Bush committed $2 billion over 10 years to clean-coal research. Then in January, Democratic U.S. Senator and presidential hopeful Barack Obama of Illinois and Republican U.S. Senator Jim Bunning of Kentucky reintroduced a coal-to-liquid bill that would provide incentives for converting coal into diesel fuel.
And again in January, in the Philippines, all 10 member countries of the Association of Southeast Asian Nations agreed to promote and develop clean coal in a declaration underscoring everyone’s goal to reduce dependence on fossil fuels and promote clean technologies. Australia and China also signed a pact to work together on clean-coal technology at the summit.
While governments may be backing clean coal, venture capitalists have so far shied away from the sector. In 2006, VC firms invested less than $100 million in clean-coal companies worldwide, according to London-based clean energy research firm New Energy Finance. That compares with $400 million invested into the much trendier solar space worldwide last year.
Piqued VC Interest
But there are signs that VC interest is growing. According to the Cleantech Venture Network, venture investment in clean coal in the U.S. more than doubled last year, from $14.7 million to $35 million. Of course, at those amounts, doubling isn’t a major feat, but with more government incentives mitigating risk, VC interest should continue to grow.
After all, coal’s biggest appeal is its price. In 2005, the latest date available from the EIA, coal cost an average of $1.54 per million Btus (British thermal units, standard units of energy), petroleum cost $6.48 per million Btus, and natural gas cost $8.20 per million Btus. “Coal is still the lowest cost per Btu, and at this stage of the game, I don’t think we’ve seen the full platform of what clean coal can achieve,” says John Quealy, a principal and senior research analyst in financial firm Canaccord Adams’ Boston office.
The biggest VC deal in 2006 was a $30-million investment in GreatPoint Energy by Advanced Technology Ventures, Draper Fisher Jurvetson, Khosla Ventures, and Kleiner Perkins Caufield & Byers. Then there was a $5-million funding for Tucker, Georgia-based CoalTek, which uses electromagnetics to turn low-grade coal into cleaner and more efficiently burning coal; Draper Fisher Jurvetson again came in on that, along with Braemer Energy Ventures and Warburg Pincus.
At the low end of the scale, there was a $3-million investment in Golden, Colorado-based Luca Technologies by BASF Venture Capital devoted to helping develop technology to turn oil, coal, and shale into natural gas.
Economic Reality
These VCs are convinced that clean coal can pay off as an investment in the near future. Bill Wiberg, general partner with Advanced Technology Ventures, says the reality is the economics. His Palo Alto, California-based venture firm invested in GreatPoint, as well as in solar and ethanol companies, and Mr. Wiberg says he believes all three sectors can succeed. “In the end, all technologies need to prove they can be both clean and cost-effective,” he says. “The losing technology is the one that doesn’t pencil out economically anywhere.”
Other, still-cleaner coal technologies aren’t yet ready for commercialization. For example, government researchers around the world are working on carbon storage, which involves capturing all of the carbon dioxide from coal-burning and burying it underground. The U.S. government’s FutureGen project is developing technologies to create an emission-free coal plant and store the CO2 in deep geologic formations. The U.K. government is working on a project to capture carbon emissions and pump them under the North Sea.
But even if research succeeds in turning coal into a zero-emission fuel, its critics won’t be assuaged. “Mining coal is dirty work, so you can’t get ‘clean coal’ unless you ignore the fact of getting coal, which is ridiculous,” Mr. Wilder says.
Mr. Perlman counters that the purists ignore reality. “It’s easy to say, ‘we never want to dig anything up again,’ but the reality is that coal is increasing as a fuel supply,” he says. “We think we have a realistic way of converting the dirtiest of commercial fuels into the cleanest of commercial fuels, and we think this is the only way to really make a big difference to environmental issues and global warming.”
Despite their potential advantages, new coal technologies will have to fight to be labeled clean. “‘Clean coal’ has more of a basis as a marketing term than a scientifically accurate phrase,” Mr. Wilder says. “The real problems are ecological and immensely serious, and it doesn’t help anybody to use terms like ‘clean coal.’”
Still, if coal can buck its dirty image, it could translate into a fantastic inheritance.