Coal to Liquids: Why and How It Makes the Case in ChinaNing Wu*Senior Economist,TOTAL Exploration and Production, USA(Houston, TX)
The People’s Republic of China (China) is actively developing coal-to-liquids (CtL) technologies. Meanwhile in Europe and the United States, these technologies have evolved to an unfavorable stage because of the intense capital investment and economic uncertainty caused by the volatility of crude oil prices, technological risks, and significant carbon-dioxide discharge (Vallentin 2008a, 2008b).
CtL is a process of coal liquefaction with the action of a catalyst, and CtL includes two types of technologies: direct coal liquefaction, DCL, which turns coal directly into liquid products, and indirect coal liquefaction, ICL, or Fischer-Tropsch synthesis (FTS), which gasifies coal into syngas and then produces liquids from the syngas. Originated in Germany in the 1940s to meet urgent needs of liquid transportation fuels, CTL’s peak production capacity reached 4.2 million metric tonnes per year (Mt/y) for DCL, and 0.6 Mt/y for FTS in Germany (Dadyburjor and Liu, 2004). Then the development of coal liquefaction was largely determined by the availability and price of petroleum. For example, in the 1950s due to the discovery of inexpensive oil in the Middle-East, the coal liquefaction development was essentially ceased in the world except in South Africa which lacked access to petroleum.
Currently in China there is one DCL project (the only one in the world) and five ICL projects being developed by state-owned major coal companies, with a total annual capacity of 2.6 million tonnes for the first stage. Developers all aim to expand production capacity after the success of the first-stage operation, and there are more CtL projects being planned or at the stage of feasibility studies.
Then why are CtL technologies being planned and developed with real investment and projects in China? One well-received explanation is the energy-security policy. China has a serious quest for energy security, especially oil for which over 50% of the consumption relies on imports, and CtL meets this demand through converting coal, the abundant fossil fuel in China, into oil (Sun et al. 2005; Zhang 2007; Wu 2008, Wu 2009; Su et al. 2008; USCEC 2009). Also, unlike Europe and the United States, China gives low priority to carbon-dioxide (CO2) mitigation, a rather favorable policy framework for CtL, which makes CtL encounter many fewer barriers. In such an environment, CtL is advocated and developed with other favorable conditions, including economic advantages (low CtL capital costs), and strong CtL investors (large state-owned companies) (Vallentin and Stuttgart 2010).
However, this type of top-down argument, i.e., national policy implemented by state-owned enterprises (SOEs), can only partially explain why CtL make its case in China: this did move CtL development at the beginning, but could not sustain the proactive pursuit of CtL by those major developers. A bottom-up force, for instance, from the coal companies, cannot be overlooked when examining the development of CtL in China. National energy-security policy, state ownership of coal majors, low capital costs, and priority of carbon regulation provide low entry barriers for CtL, but do not constitute sufficient incentives for companies to develop CtL projects, which demand investment of billions of Yuan and still carry technical or financial risks. If we only consider the national policy or the will of central government as the driver for CtL, then we miss the fact that in China, SOEs are transitioning into entities that also operate in the market economy and pursue business interests: CtL as an immature technology carries risks, unlikely to provide return on investment within just a few years. Government mandate or interest is not sufficiently convincing to explain the active pursuit of CtL by those SOE developers.
In this analysis, I hypothesize the following about CtL development in China: after being initiated by the central government, CtL development in China has been largely spurred from the bottom up: those coal majors’ strategy of diversification and active pursuit for business opportunities. Exploring and testing this hypothesis can shed light on understanding why and how CtL can succeed in China. I also point out that, from the perspective of technology innovation, Chinese companies play a critical role in developing or upgrading CtL technologies. While developing CtL technologies and projects, the developers, mainly major coal companies, benefit from the knowledge spillovers of this advanced coal technology, and embrace the diversification into the coal-chemical industry. This would imply that the Chinese system is capable of innovation and change, unlike what some western analysts observed. Another contribution of my research is to understand China’s innovation system.
To test my hypothesis, in the following section, I introduce the CtL origin and development in China. Then, I analyze how CtL makes its case within the technological system intertwined with energy policy, technology innovation, and interests of parties involved in this development. Then, I elaborate why and how those state-owned major coal companies pursue CtL technologies as a diversification strategy in order to improve their business, within the background of China’s economy, policy, and industries in the 1990s and later. Then I further support my hypothesis regarding business diversification with three case studies about the Shenhua Group, Yankuang Group, and Jinmei Group, three major coal companies and CtL developers in China. In the last section, I conclude this analysis.
CtL in China
Currently, South Africa and China are the only two countries developing commercial CtL technologies and plants, although the United States and Europe have some companies focusing on CtL research or small-scale demo plants. Since the 1950s, the South African Coal Oil and Gas Corporation (Sasol) has been operating two commercial indirect coal liquefaction plants, producing about 30% (150,000 barrels per day) of South Africa’s automotive fuels (Sasol 2009).
In China, CtL technology was initially charged with the mission of maturing into a strategic technology to enhance energy/oil security, and also breeding a new ‘coal liquefaction industry’, as reported in the 1990s in the 11th five-year plan for the coal industry. In China, some major coal companies are CtL project developers, but the central government provided the initial and important support for research on CtL technologies, through the state high-tech “863” program. Governmental supports covered fundamental research topics of DCL technology, including process development, catalysts and kinetics, reaction engineering and reactor design and simulation, et al. (Liu, Shi, and Li 2009). In the 1990s, the State Council, after comparing three companies, selected Shenhua Group, the largest coal company in the country, as the developer for the world’s first modern DCL facility, with a support of an 11-billion-Yuan “Coal Replace Oil” fund. Since then Shenhua has been active in DCL technology research and development (R&D) and project development.
For the indirect liquefaction, or FTS technologies, China started the research in the 1970s through the Institute of Coal Chemistry (ICC) under the Chinese Academy of Science (CAS). ICC focused on iron catalysts and fixed-bed reactors in 1979-1987 and precipitated iron and fixed-bed reactors in 1986-1993. From 1995 to the early 2000s, ICC switched research to the slurry-phase technology and operated a 750 tonnes/year plant since then. In 2003, Yankuang Group, another major coal company in China built a 4,500 tonnes/year FTS facility using iron catalysts and a slurry reactor. ICC/CAS was the major carrier for fundamental FTS research. Still today, ICC remains as the major technology provider for ICL. Synfuels China, the ICL technology company I interviewed during my China trip, is a spin-off of the Shanxi Province ICC branch. In addition to ICC, Yankuang Group acts as another technology developer, through Yankuang Energy Technology Company headed by Dr. Qiwen Sun returning to China from Sasol. China Coal Research Institute (CCRI) is the largest R&D institute for a broad spectrum of coal technologies. In terms of CtL technologies, CCRI built two 0.1 tonne/day bench scale DCL plants in the 1980s. Several leading coal chemical experts from CCRI were recruited by Shenhua or other companies to direct CtL development. CCRI still remains as the leading developer of coal technologies.
Currently in China, there are one DCL plant and four ICL plants that are constructed and have conducted some trial operations. The DCL plant is developed and owned by the Shenhua Group. Four ICL plants are also owned by major state-owned coal companies in China. The following table summarizes these CtL projects in China. Totally these plants account for a gross capacity of 2.6 million tonnes per year (Mt/Y). However, those coal companies all have plans for larger-capacity facilities. For instance, Shenhua Group is planning to invest 30 billion Yuan more to expand the Erdos DCL plant capacity to 3 Mt/Y in the coming few years. The CtL development is projected to have an investment of 400 to 500 billion Yuan by 2020, with total liquids production capacity of 50 Mt per year.
Figure 1: CtL Plants in China
Source: US-China Energy Center (USCEC) 2009
Why and How SOEs Develop CtL
It is true that at the beginning some state-owned coal companies were encouraged or directed by the central government to develop CtL. For instance, The Chinese State Council provided 11 billion Yuan (about $1.3 billion US Dollars) from the “Coal-Replace-Oil” fund to Shenhua to initiate CTL development in January 1998. Since then, Shenhua has developed a business strategy, and it began CTL development in northwestern China’s major coal production areas. However, the government did not allocate funding for other companies to develop capital-intensive CtL technologies and projects. Then, why did several other enterprises, together with Shenhua Group, become advocates for this CtL development? For example, these companies seek to lobby NDRC to approve their projects after the NDRC halted their development due to “technological and business risks” in 2008.
I argue that it is the diversification strategy that motivated those coal companies in the late 1990s to develop CtL, which could extend their industrial chains into coal-chemicals, a significant profit growth source. To highlight the diversification strategy of coal companies, I start with reviewing the situation of the coal industry and the economy during that period. Under this economic situation, diversification became a viable business strategy for the coal industry.
Coal Producers in China: Declined during the 1990s
Before the 1980s, under the planned economy and priority strategy of heavy industries, coal output, a symbol of strength of a new communist nation, grew rapidly from 66 million tonnes in 1952 to 636 million tonnes in 1979, an annual growth rate of 9% (Wang 2007). This significant output growth still could not meet the national demand. The central government decided to ease the entry for coal producers and encourage small mines: local government, collective, and private-owned coal mines were allowed and flourished. This policy effectively boosted coal output after 1980, until coal production became oversupplied toward the end of the 1980s (Figures 2 and 3).
Figure 2: Coal Production and Consumption in China, 1981-2001
Mtoe: million tonnes of oil equivalent
Source: BP Statistical Review of World Energy, 2010
Figure 3: Coal Production-consumption Gap in China, 1981-2009
Source: BP 2010
Then, in the 1990s, the output of coal declined. Coal was oversupplied and there was excessive competition among coal producers, which extended into the 1990s. The central government initiated the policy of “closing small mines, and limiting output” to bring down the coal production. China’s economy was overheated in the early 1990s: GDP growth in 1992 reached a record high at 14.2%. The central government started a restrictive monetary and fiscal policy during 1993 and 1996 (Hu 2007). This macroeconomic control achieved the “soft-landing” for the economy: the consumer price index decreased from 24% in 1994 to 8.3% in 1996, and the GDP growth decelerated to 13.5% in 1993, and then to 9.6% in 1996. Coal demand also decreased after 1996, and hit the trough during the Asian Financial Crisis in 1998.
Coal producers also faced unfavorable low coal prices during the 1980s and 1990s. Although the dual-track pricing policy was introduced in 1985, which allowed a higher coal price for output above the given quota, the low-price for coal output within the given quota still reduced the sector’s profitability. After 1994, the government decided to lift price controls, but also removed the subsidy, and the government also imposed a higher tax rate on coal producers, from a 3% sales tax to a 13% value-added tax. Meanwhile, the restrictive macroeconomic policy also translated into a shrinking coal demand. Given these, and also due to low efficiency, overstaffing, high expenses for welfare, and a fierce competition from small mines, state-owned coal mines or companies had a significant loss for a long period through the late 1980s and 1990s (Table 2-3, Wang 2007).
Figure 4: China GDP Growth, 1994-2010
Source: TrandingEconomics, NBS
Figure 5: China Inflation Rates, 1995-2010
Source: TrandingEconomics, NBS
Figure 6: Coal Price in China, 1998-2010
Note: based on 5500kcal/kg Shanxi coal, FOB price at Qinghuangdao Port; Unit: Yuan/tonne
Source: China Coal Resource Net, http://www.sxcoal.com
Diversification Strategies in the Late 1990s
Although most coal producers reported a loss during the 1990s, some public coal companies witnessed a relatively strong performance by implementing a diversification strategy. For instance, the seven listed coal companies (Table 2-4) had positive earnings per share during 1999 despite some decrease in revenue due to the macroeconomic environment, and their average earnings per share (EPS) was 0.127 Yuan, above the average of Shenzhen and Shanghai Stock Exchanges. Hu and Hao (2000) examined this phenomenon and identified the strategy of diversification as the key driver for this strong performance. For example, Lanhua Kechuang acquired four fertilizer and chemical plants, and also invested in some biotech companies.
During the 1990s when coal producers faced an unfavorable economic environment, diversification became a strategy which could improve or sustain their business. In line with this trend, the CtL developers also explored the opportunities to diversify their business. In the following section, I examine the CtL initiatives of three coal companies: Shenhua Group, Yankuang Group, and Jincheng Coal Group, based on interviews from my trips to China and literature.
Case Studies: CtL as Diversification Strategy
To test my hypothesis of this bottom-up driver for CtL in China, I interviewed Shenhua, Yankuang, and Jinmei, three major CtL developers in China. I have come to find that my findings support this hypothesis:
- Shenhua views DCL, which was originally a ‘political’ task assigned by the central government, as an opportunity of expanding into the coal chemical industry, and is also pursuing ICL development, to diversify into the coal chemical industry;
- Yankuang, stated explicitly their business strategy of CtL development, and moved with real project development;
- Jinmei, diversified into CtL amid the 1990's market, and based on their coal reserves portfolio.
In the following sections I explore in greater details how these coal majors started their CtL development and their related business strategies.
Shenhua Group is the only DCL project developer in China, and is also developing ICL project in Inner Mongolia. Originally picked and assigned by the central government with the charge of DLC development, Shenhua later viewed this development as an opportunity of diversifying and expanding its business and improve the company’s performance. In this context, I argue that the business diversification strategy plays a key role in Shenhua’s pursuit of coal liquefaction.
Shenhua was incorporated in 1995 during the “depressing” time for the coal industry, as the largest coal company in China, and also a key Central SOE, with integrated business of coal, power, railway, port, shipping, coal to liquids and coal to chemicals. By the end of 2009, the Shenhua Group has a total of 37 wholly-owned and shareholding subsidiaries, with 163,745 employees and total assets of 530 billion Yuan. The Group’s operation revenue reached 161.2 Billion Yuan with the top net income among the companies under the supervision of the Central Government. In 2010, Shenhua Group was ranked 356th in global Fortune 500. The following table summarizes Shenhua Group’s operational performance for the first half of 2010 and organizational structure. China Shenhua Energy Company Limited (China Shenhua) is the listed subsidiary (listed in both Shanghai and Hong Kong Stock Exchanges) and the main body of Shenhua Group, with total revenue of 121 billion Yuan in 2009.
Shenhua’s diversification in the late 1990s was largely attributed to the political connection of its top leadership (Table 2-7), especially Mr. Qing Ye, with presidency from 1998 to 2003. Mr. Ye brought to Shenhua a fund of 20 billion Yuan, the “Coal Replace Oil” fund from the State Council when he took the presidency in 1998. This fund was initially approved by then-Premier Peng Li in 1995 when Ye and Li discussed Shenhua’s high debt rate: 87%. Mr. Ye used this fund for two purposes: buying four power plants (incorporated into Guohua Power Company, the flagship firm of Shenhua’s electricity business), and developing DCL technologies. The former was to expand the market for coal during that coal depression – a vertical diversification, and the later was to implement the “assignment” from the State Council to enhance national energy security, and also generate another revenue source – also a strategy of diversification.
The development of DCL technologies provided Shenhua with a unique opportunity to practice and improve advanced coal technology innovation and managerial and business experience. China Shenhua Coal to Liquid Company (CSCLC) is the subsidiary charged with CtL development and coal chemicals. Currently, CSCLS is developing the DCL project in Erdos, Inner Mongolia and has twice put its 1Mt/Y DCL plant into successful trial operation at the end of 2008 and the middle of 2009. The DCL technology development took a long time. In early 2001, after finding the DCL technology licensed from HTI an US-based company, unsuitable to be scaled up, Shenhua adopted the design of HTI facilities, but started from scratch for key technology development, such as catalysts, engineering integration, and operation. They recruited top experts from CCRI who later led the whole DCL project in Inner Mongolia, they attracted talents from refineries in oil companies including PetroChina and SinoPec, and they assembled a team with technicians from industrial design institutes, engineering integration companies, and those coal chemical experts. CSCLC can send new employees for on-site training. Through developing their own DCL technology and catalyst, both of which are patented, and through assembling an R&D team, project design, engineering construction and managing teams from various industries and companies, Shenhua has established a team for the whole DCL process, and, more importantly, they host a pool of top coal chemical scientists in the country. Shenhua is also planning a CCS demonstration project at the Erdos DCL Plant, which is a good example for spillovers from DCL development: benefiting CCS technology. By the end of 2009 the project feasibility study and the process simulation test were completed. Their short-term objective is to erect the CCS demonstration facility and accomplish an annual CO2 storage capacity of 100,000 tons. The future development trend of DCL technology is to be combined with the CCS technology so as to accomplish near-zero emission of CO2. The Shenhua CCS study is conducted by West Virginia University under the support of a joint fund by the US Department of Energy (DOE) and NDRC.
Shenhua conducts CtL development as a business, not a political assignment. For instance, to hedge the risk from the project failure, in 2005 Shenhua Group purchased insurance with a compensation value of 7.5 billion Yuan for its 10-billion-Yuan Erdos DCL Project, from a consortium of four major properties’ insurance companies in China. Also, they are planning to sell this project to China Shenhua Energy Company Limited, the listed sister company under the Group, once the plant can be operated stably for commercial production. This implies a way of recouping their investment costs and hedging the business and technological risks.
In addition to DCL, Shenhua also develops ICL projects, as described in Table 2-1. Shenhua contracted Synfuels China as ICL technology developer. Unlike in the case of DCL, Shenhua as a coal company considers herself as an ICL technology user, not a technology developer: they are interested in final products from ICL, not the technology itself. This further confirmed their interest of business diversification into coal chemical products and the market, through both practices in DCL and ICL.
Jincheng Anthracite Mining Group (Jinmei Group) is another CtL developer, in Shanxi Province. Jinmei’s pursuit of CtL originated from their portfolio of coal reserves, and the company further enforced their plan of pursuing CtL amid the market in the 1990s. They have established their Methanol-to-gasoline (MTG) plant to convert coal into methanol and then gasoline, and have a plan of improving the capacity in the future.
Founded in 1958, Shanxi Jincheng is a state-owned enterprise with total assets of 100 billion Yuan (as of 2010), revenue of 62.3 billion Yuan, and over 110,000 employees. Jinmei is ranked as No. 9 out of the top 100 coal companies in China in 2010, and No. 106 out of the top 500 enterprises in China. Jinmei is comprised of six business segments: coal, coal-bed methane, electricity, coal chemicals, coal mechanicals, and miscellaneous operations. Coal chemicals are an important industry where Jinmei has invested and achieved significant development. This segment is centered around the clean coal technologies utilizing high sulfur, high ash, and high ask-melting point (three Highs) coal, which is abundant in Jingmei’s coal mines.
For the segment of coal chemicals, Jinmei has invested a total capital of over 1.2 billion Yuan, holding stakes in 10 chemical companies, with annual ammonia production about 4 million tonnes. In Jinmei’s 12th five-year plan, in 2015, Jinmei will have annual production of 1 million tonnes of syn-fuel, and an ammonia production of 20 million tonnes. This goal indicates Jinmei’s ambition in developing its coal chemical industry, including CtL (1 million tonnes of syn-fuel from coal by 2015).
Jinmei initiated the move for coal chemicals as a business diversification strategy, based on their resource structure and the market situation in 1990s. In the later 1990s when the coal price was low in a depressing market (as discussed previously), Jinmei management was considering strategies to improve their performance by diversifying into the coal chemicals. Jinmei, due to their resource base of anthracite coal, did not have an advantage in utilizing pulverized coal, thus they decided to explore the usage of anthracite. They also had a good connection with Shanxi Institute of Coal Chemistry (SICC) a branch of CAS, which had yet to test, but was interested, in testing their gasification technology with anthracite coal. Based on these, Jinmei’s decision then was to move into the coal chemicals industry by taking advantage of the abundance of raw materials, No. 9 and 15 anthracite coal.
No. 9 and 15 anthracite coal are high in sulfur, ash, and has a high ask-melting point. There are 4.2 billion tonnes of resource reserves of No. 15 anthracite in Jincheng metropolitan area. In addition to this abundance, this type of low-grade anthracite is well preserved deep underground, and the thickness of the coal bed (1.5~2.5 meters) is suitable for mining operations, and also suitable for immediate mining as the infrastructure already exists in those mining areas.
Jinmei adopted a two-stage way, different from Shenhua or Yankuang, to develop their CtL project: using coal-gasification technology from SICC to produce syngas which can be converted into methanol, then adopting MTG technology by licensing from Uhde Gmbh (one of the largest chemical engineering company in the world, in Germany) to produce liquids from methanol. Since 2003, Jinmei, set up a joint-venture company, Tianhe Co. Ltd., with SICC, to test SICC Pressured Ash Agglomerating Fluidized Bed Coal Gasification Technology (AFB), which is suitable for various types of coal and for being localized with its lower cost compared to gasification technologies by Shell and Chevron-Texaco. In 2006, the coal-based syn-fuel project was erected with a target capacity of 100,000 tonnes/year, and was selected as a key project by the Eleventh Five-year Plan of Shanxi Province. Jinmei invested 2.3 billion Yuan in this project, adopting AFB and MTG technologies. In 2008, Tianxi Coal to Liquids Company was established from Jinmei Group to specialize in Jinmei’s CtL development. According to the project description, this factory can produce 100,000 tonnes of Euro 3 standard gasoline, 13,000 tonnes of LPG, and 16,000 tonnes of sulfur. It can also be adjusted to produce 300,000 tonnes of high grade methanol (the interim product for the whole CtL chain). The annual revenue from products is estimated at 700 million Yuan. This flexibility of products reflects the risk-hedging strategy Jinmei is using: their technology/facilities allow the switch to methanol production if the CtL production is not economical or technologically feasible.
Jinmei mobilized internal and external resources to ensure the progress of the CtL project. When SICC tested the AFB technology, Jinmei utilized the industrial boilers from its subsidiary, Jinshi Chemical Fertilizer Company for the interim experiments. Staff for this gasification process development came mainly from SICC and Jinmei internally. After Jinmei licensed MTG technology from Uhde, Uhde sent engineers to Jincheng City to direct the installation and set-ups. The design and construction were outsourced to the Third Design Institute of China Chemcial Engineering, a top institute in chemical engineering design and construction in China. Meanwhile, Jinmei solicited over 40 experienced engineers from Jinju Chemical Fertilizer Company in Zhejiang Provinces, a subsidiary of Jinmei to be trained on spot in MTG facilities. These employees were assigned a three-year contract, and they became the core group of operating the MTG operation.
In summary, Jinmei determined to diversify into the coal chemical business through CtL, after analyzing the market situation and their resource portfolio, and since then they took efforts and succeeded in building their MTG project. Meanwhile, according to my interview, Jinmei management view Jinmei as a CtL technology user, instead of an technology owner. They adopted or licensed these technologies and put them into use for their CtL projects. Currently, the Jinmei CtL project is the only one in the world that uses MTG technology to produce oil liquids from coal. The project went through an experimental operation and was reported to be under ‘stable’ running in March 2010.
China’s energy structure, emphasis on energy security, and nonexistence of carbon regulation, make it feasible for the diffusion of CtL technologies. To explore the drivers for CtL in China, I proposed the hypothesis that, after being initiated by the central government, the key driver for CtL development in China is the business diversification strategy of major coal companies.
China’s energy structure and the central government’s policy initiated the CtL development in China. However, afterwards, it is the coal majors’ proactive plans for business diversification that drove CtL projects in China. The Central government assigned financial resources to the Shenhua Group to develop the only DCL project; but Shenhua also pursued ICL projects with the intent to conduct business in coal chemicals. Jinmei’s ambition in CtL was driven by the structure of their coal reserves: their large low-grade coal resources makes good economic sense for them to develop CtL projects in order to diversify into coal chemicals.
The low coal price, weak market performance, and reform of the coal and electricity sectors in the 1990s motivated coal companies to diversify in order to cope with competition and to improve their business performance. Coal companies perceive CtL as a value-adding business as they diversify into coal chemicals, given China’s growing demand of oil and chemicals from rapid economic growth. Shenhua, Jinmei (and also Yankuang Group which is not discussed in this article), coal majors in China, all decided to move into the CtL field, with the purposes of diversifying their business, as I demonstrated in the case studies.
Although these CtL developers view themselves as technology users, they still maintain internal technology R&D force, in order to master some industrial know-how, and keep some competitive advantage. Therefore, technology innovation is also an inherent part of this CtL development. Shenhua and Yankuang both have their technology focused on CtL in order to keep their competency in this industry. Shenhua, Yankuang and Jinmei, through CtL projects, have enhanced their R&D capability, extended their industrial chain and network, and improved managerial and business development experience. Chinese SOEs know how to innovate and change, and pursue their business interest. This indicates that the Chinese system is now capable of innovation and change, contrary to what some western observers thought.
Notes and References
* PHD, MIT 2011; Senior economist, TOTAL Exploration and Production, USA. (713)-294-6586. Email: email@example.com. The author is indebted to Professor Edward Steinfeld from the Department of Political Science at MIT who provided funding for this project and insightful discussion along the project. He has credits in this paper. The author also thanks Professor Karen Polenske from the Department of Urban Studies and Planning, MIT for her insights and comments on this project.
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 See Steinfeld, Lester, and Cunningham (2009) for more description regarding this pessimistic stance.
 See the full-text document at http://www.china.com.cn/policy/txt/2007-01/22/content_7694688_3.htm; and http://info.chem.hc360.com/2007/08/03104919629-2.shtml
 These three were: (1) Shenhua Group based in Inner Mongolia, (2) Yilan Coal Group from Heilongjiang Province, and (3) Xianfeng Coal from Yunan Province.
 See CCRI website, http://www.ccri.com.cn
 from personal interviews with Yankuang Group during the winter of 2009 in China
 Case study on Yankuang Group, see http://www.yygpzx.com/gzpd/jxzyg/dl/1/21/1/kzzl.htm
 About 80% of coal companies had a loss during this period (Hu and Hao 2000)
 Shenhua Group, http://www.shenhuagroup.com.cn/english/about0us/profile0of0shenhua/index.shtml
 Shenhua Miracle: the story of YE Qing, see http://finance.sina.com.cn/leadership/crz/20050420/10201533998.shtml
 PetroChina and SinoPec are two major state-owned oil and gas companies in China.
 See CSEC 2008 annual report and press conference at http://www.csec.com/htmlen/investor/page_3_7_1.html
 From my interview with Dr. REN Xiangkun, president of CSCLC, Shenhua, in November 2010.
 The company website, http://www.jccoal.com
 From interviewing Jinmei management, in charge of Ctl/MTG and coal chemicals business segment
 Sulfur content 2.4～3.6%, ash 22～35%, and melting point higher than 1500℃; in contrast, No.3 anthracite is a high grade coal and flagship coal product of Jinmei Group. Source: http://www.hgjob.com/resume/util/183967.html
 See http://www.hgjob.com/resume/util/183967.html
 Introductory material by Tianxi CtL Company
 See http://www.coalchina.org.cn/page/info.jsp?id=18262