California Energy Commission Hearing on Report to Governor: Evaluation of Biomass-to-Ethanol Fuel Potential in California Pat Perez, Project Manager November 19, 1999

Purpose of Todays Presentation Provide recap of what has happened since September 10, 1999 Workshop Discuss changes made to August draft report Present the major findings & conclusions of the October report Present the recommendations to foster biomass-to ethanol development Identify next steps and finally, Obtain comments and input on draft report

Governor Davis Executive Order Executive Order D-5-99 (Item 11) Evaluate the potential for development of a California waste-based or other biomass ethanol industry in California and, Evaluate what steps, if any, would be appropriate to foster waste-based or other biomass ethanol development in California should ethanol be found to be an acceptable substitute for MTBE.

Recap of September 10 Workshop Over 40 people attended Eighteen presentations delivered Workshop Comments: –Hearing transcripts available on Web Site –Summary in appendices to report

What Was Said at Workshop? A biomass policy is needed. There is a need for public funding to help ethanol industry gain a foothold. Public benefits ought to be better quantified. Ethanol potential for municipal solid waste and economics of collocating with municipal refuse facilities is not adequately addressed. Global climate change and potential role of ethanol needs further discussion.

What Changes Were Made to August Report? Combined Executive Summary and Introduction : –Expanded list of key findings and recommendations Added new sections on: –President Clintons Bio-based Products Executive Order –Requirements for siting a biomass-to-ethanol facility in California Developed steps to foster ethanol development

What Changes Were Made to August Draft Report? Contd Other areas expanded and clarified include: –10% diversion credit –Federal and state taxation for ethanol production –Global Climate Change impacts from biomass to ethanol production –Discussion of existing biomass power plants –Collocation of MRFs with ethanol facilities

Major Findings & Conclusions Ethanol fuel produced from waste and residual materials offers potential for meeting the states oxygenated gasoline needs. As a renewable fuel, biomass-to-ethanol fuel production offers potential energy, environmental and economic benefits. Creating a viable in-state ethanol industry to capture these benefits, however, poses a major challenge. The cost of producing ethanol remains high, requiring continued government price support to make it a competitive fuel additive.

Major Findings & Conclusions Developing a California ethanol industry will also require a state government role to overcome economic, technical and institutional barriers and uncertainties. California-produced ethanol fuel will face stiff competition from out-of-state ethanol supplies and in- state petroleum products Commercializing new technologies for converting biomass to ethanol raises uncertainties and presents challenges that must be overcome to foster and nurture a commercial ethanol industry in California.

Major Findings & Conclusions The lack of commercial experience with biomass-to-ethanol conversion in California and elsewhere suggests that the state would be prudent to co-fund the first several production facilities as part of a near term demonstration effort. A demonstration would be particularly valuable to gain insight into the actual benefits and drawbacks to siting, building and operating such facilities in California.

Major Findings & Conclusions Developing a clear biomass-to-ethanol state policy to guide and coordinate actions can help reduce the many challenges that exist in developing this industry. Supporting activities to encourage the production and use of ethanol fuel as a renewable energy source complements Californias ongoing efforts to develop transportation energy alternatives.

Recommendations to Foster Biomass-to- Ethanol Development in California Energy Commission staff recommends that the state take several actions to develop a longer-term state policy and other strategies. These actions are broken into 4 categories: Policy Research, development and demonstration Market development and commercialization Further study needs

Policy Recommendations Develop and adopt a biomass-transportation fuels energy policy, which is consistent with the Energy Commission goals for the transportation sector. Consider adopting carbon reduction goals. Study and, if possible, propose adopting fuel diversity goals for Californias motor vehicles.

Policy Recommendations Contd Develop, adopt and periodically review a position on the long-term need for the federal alcohol fuels subsidy, as it would effect the emergence of a biomass-to-ethanol or biomass-to-transportation fuels industry in California Consider changing the 10% waste diversion credit limit that applies to transformation technologies

RD&D Recommendations Pursue joint funding opportunities that support demonstrations of several biomass-to-ethanol projects in the state. Develop and share the cost of a program through a private/public partnership directed at improving the collection, transportation and processing of feedstocks. Initiate advanced engine development projects that use biomass transportation fuels.

Market Development Recommendations Study and recommend the most appropriate forms of state financial and non-financial assistance and other actions to support market development and commercialization activities should demonstration projects prove that biomass-to-ethanol projects are technically and economically feasible.

Further Study Needs Recommendations Develop a method to determine the cost and public benefits associated with developing biomass-to-ethanol and biomass to transportation fuels industry in California.

Where Do We Go From Here? Incorporate Todays Public & Committee Input and Revise Draft Report as Necessary. Release Suggested Changes and Revisions to October Report via Energy Commissions Web Site in early December Approve Final Report on December 15, 1999

And Finally, Deliver Final Report to Governor on New Years Eve!

For More Information about the report... Call Pat Perez, Project Manager, Biomass-to-Ethanol Report è (916) è (916) fax è or visit our Web site at: è