Given my love of experimentation with charcoal, I'm surprised I never tried this earlier. Perhaps I was afraid, as I love charcoal precisely because it is a dry medium. But it is a wonderfully water-soluble material, and though I routinely paint with charcoal dust, I have never painted with charcoal dust and water. Until now! I don't have any finished drawings (or even in-progress drawings) to show using this technique, but I am so excited by it that even though I really should be going to bed I am instead writing this post.
The method is simple. Grid up some soft charcoal with sandpaper or purchase a bottle of charcoal powder, and find a decent paintbrush. The one I chose was a $2 soft round-tip brush, the one I use for painting with dry powder. I'm sure any brush for watercolor would be fine.
For this test, I just poured a small pile of powder onto my paper, which happened to be a scrap of smooth bristol paper. Then I wet the brush and swirled it around and started playing. The results are wonderful. The paper doesn't hold up well, though, which I expected. Typically water media do better with rougher paper. You can get a wide range of values from very light to pretty dark. I can foresee uses for underpainting as well as just plain painting in black and white. The best way to implement this is not to mix your charcoal right on the paper, of course, but to have perhaps another paper or a plastic palette to mix first, test the value, then apply to the drawing. Try it out! And apparently it works for graphite, too.