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The Economics of Fuel Ethanol - COSTS AND BENEFITS OF A BIOMASS-TO-ETHANOL PRODUCTION INDUSTRY IN CALIFORNIA

Background- Why is California Interested in Ethanol Production? . Governor's Executive Order in 1999 set a phase-out date for MTBE - Dec 31, 2002Ethanol - only approved alternate oxygenate for use in California gasoline580 to 715 million gallons of ETOH per year needed Gasoline use growing in C

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The Economics of Fuel Ethanol - COSTS AND BENEFITS OF A BIOMASS-TO-ETHANOL PRODUCTION INDUSTRY IN CALIFORNIA

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    1. The Economics of Fuel Ethanol - “COSTS AND BENEFITS OF A BIOMASS-TO-ETHANOL PRODUCTION INDUSTRY IN CALIFORNIA” Mike McCormack Transportation Technology Office California Energy Commission at the The Oregon Ethanol Forum: A Closer Look At Fuel Ethanol Village River Inn - Eugene Oregon May 8, 2001

    2. Background- Why is California Interested in Ethanol Production? Governor’s Executive Order in 1999 set a phase-out date for MTBE - Dec 31, 2002 Ethanol - only approved alternate oxygenate for use in California gasoline 580 to 715 million gallons of ETOH per year needed Gasoline use growing in California- 300 million gpy projected(15.7 billion gpy in 2004) Gasoline prices are high - ethanol blending economics favorable Conditions and economics may be right for projects in California Why not reduce our dependence on imported ethanol? Job creation and economic growth potential

    3. Background- So, what has happened in the last two years? California Phase 3 gasoline regulations adopted in 1999 California Environmental Policy Council approved ethanol as a environmentally acceptable alternative to MTBE CARB initiated studies (in progress) to deal with vehicle/ fuel commingling and permeation issues Energy Commission evaluated the feasibility of a waste-biomass to ethanol (cellulosic feedstocks) in 1999 (Report to Governor) potential energy, environmental and economic benefits favorable ethanol plant/project economics for a variety of feedstocks…. under the right circumstances established costs of ethanol delivered to California challenges and uncertainties identified lingering issue - how soon can cellulosic technologies be ready?

    4. Background- Recommendations to Foster Biomass-to-Ethanol Development in California (1999 report to the Governor) Staff recommended actions in 4 categories: Policy Research, Development, Demonstration Market Development and Commercialization Further study needs Market development recommendation Study the most appropriate forms of state financial and non-financial assistance to encourage technically sound and economically feasible biomass-to ethanol projects

    5. Background- Recommendations Continued (1999 report to the Governor) Further study needs recommendation Develop a method to determine the cost and public benefits associated with developing biomass-to-ethanol and biomass-to-other transportation fuels industry in California Policy Recommendations Develop and adopt a biomass-transportation fuels energy policy Adopt carbon reduction goals Adopt fuels diversity goals

    6. Background- Recommendations Continued (1999 report to the Governor) RD & D Recommendations Pursue joint funding opportunities that support demonstrations of several biomass-to-ethanol projects in the state Develop program to improve collection, transportation and processing of cellulosic feedstocks Initiate advanced engine development projects which use biomass transportation fuels

    7. State Budget Directive FY 2000/01 (Chapter 52) Determine the economic costs and benefits of a biomass-based ethanol production industry Assess the impact on consumer fuel costs from an in-state ethanol production industry and from imports Evaluate the impact on rice straw burning Provide recommendations on future steps

    8. Ethanol Production Scenarios Study Assumptions

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