California Can Benefit From Ethanol Industry

California has the potential to develop an in-state industry to supply ethanol for its transportation energy needs.

SACRAMENTO, California, US, 2001-03-27 <SolarAccess.com> A report prepared for the California Energy Commission by the consulting firm Arthur D. Little, concludes that the benefits of a biomass-to-ethanol industry to California’s economy are potentially greater than the cost of state support for such an industry. The study estimates that the state would benefit from $1 billion from new jobs and increased tax revenues over a 20 year period, if the government were to provide $500 million of incentives for a 200 million gallon a year ethanol industry. Additional benefits include reduced risks of wildfires and associated air emissions, and decreased agricultural burning and landfilling of waste materials that could fuel biomass-to-ethanol plants, according to the report. Ethanol is derived from corn and is seen as a likely replacement for MTBE (methyl tertiary-butyl ether), which will be phased out of California’s gasoline supply by the end of next year. Governor Gray Davis ordered that the additive be removed due to environmental damage. California’s demand for ethanol as a transportation fuel additive could reach 700 millions gallons a year, or 40 percent of current total output of the U.S., as MTBE is phased out. With demand for ethanol expected to rise in other states following California’s lead, local ethanol production could reduce imports. The ADL report was prepared for the Energy Commission, which was directed to study the economic costs and benefits associated with the development of a biomass-based ethanol production industry in California. The report is expected to go before the Legislature by March 31. The report evaluates California’s 200 million gallon a year ethanol industry assuming a state investment of 20 cents per gallon to producers and a 10 percent capital cost support for new plant construction. It says technologies for producing ethanol from forest residue, orchard pruning, rice straw and municipal waste products have not yet reached commercial scale and these uncertainties, combined with a doubtful market for ethanol, discourage private investment. For the industry to take root in California, further government action may be necessary, the report concludes. The state must lower the cost of collecting and transporting biomass and it must finance production facility construction and operation. Even with such support, the report notes that ethanol production from facilities within California facilities will not be in place until 2004 or later.

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