My take on it is that it's something we need in the short term and it's better than burning coal directly because at least you can extract the mercury, uranium, sulfur, and various other nasty chemicals that would be released into the atmosphere if burned in a conventional fluidized bed burner at a power plant.
The reason I believe we need this in the short term is that we can't convert our entire transportation sector to renewable energy sources right away. We also can't import 70% of our oil without it resulting in the economic situation that we see today. If we succeed in stimulating the economy into actual recovery, the price of oil will go right back up to $150/barrel and the economy will crash again and we'll never have the resources we need to convert our energy sources to renewable sources. The problem will be even larger this time around because in the near term demand from China and India will continue to increase, and if people who are trying to help Africa emerge from extreme poverty are successful, we'll see an increase in demand from that continent as well.
We need to stop exporting all of our capital for fuel, and as long as we are dependent upon other nations for fuel and competing with other major industrial nations for it, there will be the temptation to use military force to steal resources from other countries.
So to me is is the path that I think makes sense; in the short term we immediately need to upgrade the national power grid; and while Obama is proposing 3000 miles of new transmission infrastructure, that falls far far short of what is really needed. We lose approximately 17% of the energy we generate in the electrical grid; the majority of it in long distance transmission, and the majority of that loss is radiative, that is to say that the wires play antenna and radiate power away. There is also loss due to resistance (usually referred to as "copper loss" even though the wires are mostly aluminum), corona loss (very small), and some loss in the transformers at either end (again small). There is loss due to phase shift in the lines changing as wires heat and sag.
Most of these losses could be eliminated by changing all long distance transmission lines from AC to DC transmission. This uses rectification to convert AC to DC at the feeding end, and electronic commutation to convert it back to AC at the terminating end, and generally the equipment that does this can perform either function so the line can still be used bidirectionally.
Doing this could cut the grid losses to around 3%, and would save the energy equivalent of all the oil that we presently import. Now, presently coal still provides around 48% of our electricity and natural gas around 20%, nuclear provides about 20%. Now, if we divert the coal and natural gas presently used to feed that 17% loss to liquid fuels; we can eliminate all of the imported oil; and all of the carbon dioxide burning that imported oil would have generated. And we've also eliminated a lot of other pollutants because when you convert natural gas into liquid fuels via the Fischer-Trope process, we get a fuel completely devoid of sulfur and mercury and other contaminants present in crude oil. Similarly, coal can be converted into gasoline that is devoid of these components. If the coal had been burned, this stuff would have gone into the atmosphere, but instead the sulfur can be sold for industrial processes such as manufacturing automotive batteries, and well as some new battery technologies that could be used for electric vehicles (there is an iron-sulfur chemistry that requires heating, but is extremely cheap).
So in the short term I believe that coal to liquid conversion is a good idea; if done right and waste products aren't allowed to be discharged into environment. There does have to be regulation in that area though to prevent that from happening, because given a choice the industry is going to do what's cheapest without regard to the environment.
Now eliminating that grid waste is one HUGE place we can save energy, the equivalent of ALL of the oil we import, but it's more than that, more efficient delivery means that our costs for electricity will go down, because more of what's put into the grid will get to the consumer and we won't have to pay to irradiate ourselves with 60 Hz radiation. Converting power lines to DC eliminates the radiation, but it does other good things as well. It eliminates skin effect so that the entire cross-section of the conductors can be utilized. This lowers the effective resistance of the lines reducing copper losses.
It eliminates phase shift issues caused by sag, and this has double benefits; it means that source of loss is eliminated, but it also means we can run higher currents through the lines because sag induced phase shift is no longer an issue. Because the peak value of voltage on an AC line is 1.414 times the average voltage, insulators have to be designed to handle 1.414 times the average voltage. But with DC lines, the peak voltage is the average voltage, and so we can increase the average voltage by 1.414 times. So between these two factors we can close to double the capacity of existing lines thus making the transmission per kilowatt hour costs much lower. It also increases reliability because frequency is no longer related to load, and so the load-shedding chain-reactions no longer occur.
Now doing this will also drive the cost of coal up; and as things stand, wind generation is presently less expensive than coal. Altogether electricity generated by renewable sources in 2008 increased 32% over 2007. It didn't do that because of law, it did it because of economics. Converting coal to liquid fuels will drive up the cost of coal, making electricity generation from renewables even more economically attractive.
Right now electricity generation is the easiest thing to convert to renewable sources, it's where we can get the most bang for the buck in terms of carbon dioxide reduction, and eliminating oil imports would do more for this nations economy than any stimulus package.
Now, in long term, we also need to convert our transportation sector to renewable energy sources, but keep in mind the average automobile is on the road for ten years, and the rate that people can afford to replace automobiles is even lower when the economy is depressed, so to me this just makes the most sense. Add to that the fact that there is new battery technology that will make plug-in hybrids and all electric vehicles far more practical but production of these new technologies has not yet ramped up, and it makes even more sense to attack the stationary energy generation situation first and transportation second.
Also along that line, North America is the only continent in the world that hasn't electrified it's railroads. Railroads are FAR more efficient at moving goods than trucks. It's my belief that we should invest in electrifying, modernizing, and expanding our railroads. This country is so large that we really need efficient transportation. Cars can be electrified for short trips, and perhaps local delivery trucks, but trucks are just not an efficient option for long-haul transportation.
Existing biofuels are not very efficient as an alternative either. While there are technologies that look promising, such as algae that are almost 40% oil by weight when they grow and cellulistic alcohols, those technologies are still in development, but DC high voltage transmission, we've got the technology to do that now, and that in combination with coal-to-liquids and natural-gas-to-liquids diversion of fuels presently used for electricity generation to transportation could eliminate all the oil we import and the carbon dioxide equivalent of burning all of that oil in a relatively short time frame, while reducing the cost of transmission and increasing reliability.
Also, the efficiency of DC high voltage transmission is high enough to make east-west transmission across the country practical; and this would allow us to take advantage of the different time zones so that the peak load would be spread out, making more efficient use of existing generating capacity. While this represents a huge capital investment, also consider that it will save us from having to make a huge capital investment in generating capacity for years to come.
So I can't agree with the environmentalists that think this is a bad thing; I don't think they're really looking at the big picture and how we can cut our carbon foot print the most the fastest.