For immediate release: August 16, 1999
Media Contact: Claudia Chandler -- 916 654-4989

Energy Commission Report
Highlights State Ethanol Benefits, Risks

The potential exists for a new industry in California that would make ethanol from such biomass sources as wood chips, rice straw, municipal trash and solid waste. The question is: What role should State government take in helping to develop it?

That is the subject of a California Energy Commission staff report, Evaluation of Biomass-to-Ethanol Fuel Potential in California, released today in draft form to elicit public comment.

Ethanol has been an important topic since Governor Gray Davis ordered the additive MTBE (Methyl Tertiary-Butyl Ether) to be removed from the State's gasoline supply "at the earliest possible date, but not later than December 31, 2002." Growing evidence indicates MTBE can contaminate groundwater supplies. Ethanol -- a form of alcohol presently made from farm products like corn in the Midwest -- is seen as one of the most likely replacements for the gasoline oxygenate.

In his Executive Order banning MTBE, Davis directed the Energy Commission to evaluate California's "potential to develop a waste-based or other biomass ethanol industry." As a transportation fuel additive, the State's demand for ethanol could be as high as 1.1 billion gallons a year, nearly the current yearly production of the entire United States. At present, only one small biomass-to-ethanol plant -- with a capacity to produce 7.5 million gallons of ethanol a year -- operates in California.

The 90-page staff report released today indicates that creating an industry to make a renewable liquid fuel from biomass sources offers a number of energy, environmental and economic benefits to the State's citizens. It may help reduce the production of greenhouse gases that may contribute to global climate change. It may also help to solve the problem of how to dispose of large amounts of waste from cities, farms and forests. It could create new jobs and tax revenues for the State's rural and urban areas.

The roadblocks to creating the new industry, however, are as formidable as the benefits.

At present, the cost of producing ethanol using Midwest corn remains high; continued price supports of 54 cents per gallon from the federal government, along with income tax credits and number of subsidies from Midwestern states, are required to make it competitive as a fuel additive.

The technology to produce the liquid fuel from biomass and other waste products remains in the demonstration phase today. Since the economics of biomass-to-ethanol production are uncertain, it qualifies as a high-risk venture. For that reason it may be difficult to raise the large amounts of capital needed to build the first large-scale facilities, and to guarantee a supply of reliable, low-priced biomass material to support such a plant.

While the Energy Commission's draft report summarizes the benefits and the risks of ethanol production, it highlights the need for a clear, integrated State policy to encourage the development of a biomass-to-ethanol industry. The report is designed to open discussion on ways to encourage the creation of a California-based ethanol industry. Industry experts are reviewing the report, and public comment on the proposals will be taken at a workshop on September 10, 1999.

The draft report, Evaluation of Biomass-to-Ethanol Fuel Potential in California, can be ordered by calling the California Energy Commission's Publication's Office at (916) 654-5200 and requesting publication #500-99-011. It can also be downloaded from the Energy Commission's Web Site at

EDITOR'S NOTE; Members of the media who wish to receive the four-page Executive Summary by FAX may contact the Commission's Media and Public Communications Office at (916) 654-4989. To receive a copy of the entire report, which totals 90 pages, by mail, please call the same number.

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