Coal has a lot going for it. It’s abundant. It’s cheap. And for those patriots among us, it’s distinctly American. That’s the good news. The bad news is that coal, among other things, is still, in a word, dirty!
Despite being our most abundant energy producing natural resource in the United States—there’s more coal here in terms of potential energy creation than there are oil reserves in Saudi Arabia—it is also the single biggest contributor of carbon in the atmosphere, the root cause of global climate change. Though coal is responsible for over a quarter of the world’s power generation, and half of America’s own energy production, it is equally responsible for 40% of overall carbon emissions annually. And despite what anyone says, particularly the coal industry itself, there is simply no way to make coal “clean.” Cleaner, certainly, but not clean.
Therein lies the problem—and the opportunity—for green investors. As an abundant and cheap available resource—and with the market looking for new solutions to burn this resource more efficiently, cleanly, and in line with more stringent government regulation sure to come—coal has become an interesting area of focus alongside biofuels, solar, wind and other sought-after cleantech investments.
CoalTek, the first coal darling of the VC world, has attracted significant investment capital since its Series A round in 2005. The company has raised a total of $63 million in funding from the likes of Braemar Energy Ventures, Draper Fisher Jurvetson, Lightspeed Venture Partners, Technology Partners and Warburg Pincus.
According to the company, CoalTek’s proprietary technology uses electromagnetic energy to reduce the moisture, ash, sulfur and mercury in coal, thus allowing coal to burn more efficiently and cleanly. Through this process, CoalTek can convert low-BTU, sub bituminous coal from Wyoming’s Powder River Basin to a high-heat, ultra low-sulfur product as an alternative to Appalachian and Colorado coals. (Powder River Basin coal is cheaper and easier to mine, though geographically further from the bulk of East Coast power plants, and because it is lower in sulfur it allows utilities to more easily comply with new sulfur emission restrictions.)
It’s this “pre-combustion” solution (cleaning before burning), what CoalTek refers to as “designer” coal, that has suddenly gained traction in the marketplace. “Existing SOx- [sulfer oxides] and NOx- [nitrogen oxides] scrubbing technologies can be effective via approximately 90% removal, but can also be space, cap-ex and op-ex expensive,” says Ian Richards, chief operating officer of coal startup MicroCoal in Boulder, Colo. “Cleaning coal post-combustion is the equivalent of trying to catch fish once they’ve been released into the ocean, while cleaning coal pre-combustion is like catching fish in a barrel.”
Though coal is responsible for over a quarter of the world’s power generation, and half of America’s own energy production, it is equally responsible for 40% of overall carbon emissions annually.”
MicroCoal uses radiation to eliminate many of the same harmful impurities from traditionally mined coal as CoalTek. It claims its technology has thus far proven effective at reducing multiple contaminants such as SOx, NOx and Mercury by a 30% to 50% reduction, while improving combustion efficiency and yielding as its key byproduct lots and lots of clean water.
MicroCoal is at a far earlier stage in terms of its company development than CoalTek. It is backed by Australian mining company Orica, but is only now seeking its first $5 million to $10 million in venture funding to build its initial pilot facility. Still, it claims that its technology actually improves on the economics of producing “cleaner” coal than CoalTek’s process.
MicroCoal contends that its process allows customers to be coal agnostic (i.e. the customer can purchase whatever coal it wants, rather than purchasing proprietary “designer” coal from CoalTek and other specialty producers), while also eliminating feedstock particulate size limitations and unnecessary moving parts in the production and cleaning process.
The problem with both companies is that neither addresses the true carbon issue, which is at the root of the problem of climate change. You can pull all of the nasty stuff you want out of coal, but at the end of the day, if you continue to allow carbon to enter the atmosphere, can you truly say you’re addressing climate change?
Perhaps the question is academic for the realists among today’s community of cleantech investors. But it is also practical, in the sense that investing in coal as a truly green investment will thus have to remain at this pre-combustion level for the time being.
The true next innovations are going to have to be done at what’s known as the carbon capture and sequestration (CCS) level, where true carbon emissions can finally be addressed. Right now, CCS remains highly developmental and far from commercialization.
As an abundant and cheap available resource, coal has become an interesting area of focus alongside biofuels, solar, wind and other sought-after cleantech investments.”
Governments are certainly becoming more stringent in terms of regulating carbon emissions, introducing carbon cap and trade schemes and requiring utilities to meet certain pollution limitations before bringing new plants online, but the whole notion of requiring plants to capture and store carbon underground remains far too costly and largely technologically unviable at scale, as to make CCS early stage venture investments worthwhile.
One thing that might change this scenario, and one that bears watching by venture investors, is the boost for coal-related R&D in the recent stimulus bill. “We are looking at roughly $2.5 billion devoted to research in funding low-emission coal plants and carbon capture and sequestration sites/technology,” says Jeremy Sussman, an energy analyst with French investment bank Natixis Bleichroeder. “The DOE’s budget under Bush for CCS was closer to $100 million. As such, we will likely see this type of technology develop at a much faster rate.”
Taken together, does the stimulus bill, the trend toward pre-combustion technology solutions, tighter government restrictions on carbon, mercury, sulfur and other emissions, combined with the public’s embrace of all things green, mean that investing in coal—not just at the project finance level, but at the venture finance level, as well—finally make sense? The answer, if not yet a resounding yes, appears to be at least a nod in that direction.
As Sussman further notes: “Coal will be around for the foreseeable future, as it accounts for 50% of this nation’s electricity. We could double the current wind and solar capacity and it won’t make a dent in coal. Thus, from a base load fuel perspective, this is the only real green investment.”
Well, perhaps not “green” with a capital G, but at least “greener” for now.
Peter Henig is a managing partner with Greenhouse Capital Partners, a Sausalito, Calif.-based seed stage firm that focuses on cleantech and other emerging technologies. He sits on the boards of Renewable Fuel Products, Milo Media and Linkage BioSciences and is a board observer with InsideView. Henig may be reached at email@example.com.