April 3, 2006

CA Bioenergy Action Plan - NEVC Recommendations

The California Energy Commission has developed a Bioenergy Action Plan for the state to assist in implementing the recommendations of the 2005 Integrated Energy Policy Report.

On behalf of the National Ethanol Vehicle Coalition (NEVC), Gary Herwick has submitted comments on the plan and suggests more specific actions and targets that might be undertaken to advance the use of renewable transportation fuels. Below are some of his comments.


Recommendations for a Bioenergy Action Plan for California
By Gary Herwick, Transportation Fuels Consulting Inc.
On behalf of Phillip Lampert, Executive Director, National Ethanol Vehicle Coalition

The NEVC wishes to express its support for the Draft Consultant Report and its conclusions. While the report represents a good first step in the process of defining a bioenergy action plan, more specific actions and targets are needed. The following comments provide a basis for NEVC’s support of California’s bioenergy plan, and offer several suggested additions to the Action Plan to the Governor on March 31, 2006.

The 2005 Integrated Energy Policy Report documents California’s concerns about petroleum fuel supply and price issues, and recommends aggressive targets for alternative fuel use that go far beyond national policy goals. Governor Schwarzenegger’s response to the report is an indication of the State’s resolve to address these issues. As a result, California is uniquely positioned to take a leadership role in developing a rational and data driven alternative fuel policy to guide other states and future national energy policy.

Ethanol and especially E85 represent perhaps the best near term alternative to address petroleum fuel use concerns. A growing body of research indicates that in 15 to 20 years, 30 percent of national gasoline consumption could be supplied by ethanol on an energy equivalent basis. No other alternative fuel offers the supply potential of ethanol in the near term. With only minor modifications, E85 can use the existing liquid hydrocarbon infrastructure. The nearly 5 million flexible fuel vehicles on US roads today make E85 an attractive alternative to increase the use of ethanol as soon as the infrastructure can be built. California is estimated to have approximately 350,000 FFVs that can use any combination of E85 and gasoline.

In addition to offering the best near term alternative to reducing petroleum fuel consumption, ethanol is one of the most effective ways to reduce greenhouse gases from transportation according to research and analysis by the US Department of Energy Argonne National Laboratory. E85 using ethanol from corn reduces greenhouse gas emissions by more than 20 percent. When ethanol is made from cellulosic biomass sources, greenhouse gases can be reduced 70 percent or more.

Although almost no public E85 infrastructure exists in California, the successful experiences of several Midwestern states can provide data on the practical level of infrastructure and retail fuel price incentives. NEVC has access to nominal financial support for a limited number of new E85 dispensing stations from US DOE grants. Based on Midwestern state experience, and depending on the price of unleaded regular gasoline (ULR), E85 should be priced between 40 cents per gallon less than ULR and “energy equivalent” (25 percent less than ULR). For example, if ULR is $2.50 per gallon, E85 should be priced at $1.88 to $2.10 per gallon to be attractive to consumers. E85 suppliers have indicated that in 2005 it was possible to be profitable at a discount of 40 cents per gallon. Successful pricing above energy equivalence will be determined by consumers’ willingness to pay a premium for the environmental benefits of E85 compared to gasoline.

Various states have experience with incentive funding from excise and sales tax programs as well. For example, Illinois has eliminated the state sales on E85; North Dakota has provided a 20 cent exemption for E85 from the states 21 cent per gallon motor fuel tax; Minnesota taxes E85 on a gasoline gallon equivalent basis with ULR resulting in a reduction of 27% from the state excise tax.

The Consultant Report also touches on the need to mitigate regulatory conflicts and barriers to achieving the IEPR goals without sacrificing environmental benefits. In California, the cost and time associated with certification to “Stage II” vapor recovery requirements has been a deterrent to the development of E85 infrastructure. Recently, the Air Resources Board has provided some helpful assistance with these requirements. However, more is needed to support an aggressive ramp up of E85 dispensing stations to help achieve the time and fuel volume recommendations in the IEPR.

NEVC appreciates the opportunity to provide comments on California’s Draft Bioenergy Action Plan, and looks forward to working with the Energy Commission, the Air Resources Board and other agencies and groups in the further refinement and implementation of the plan. We look forward to providing support on technical and policy issues related to ethanol and E85, possible limited financial support from US DOE grants and public education and marketing support.


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