Notes

1 Energy Information Administration, Annual Energy Outlook 2007, DOE/EIA-0838(2007) (Washington, DC,
February 2002), web site http://www.eia.doe.gov/oiaf/aeo/index.html.

2 All energy price and expenditure values in this report are in 2005 dollars.

3 E85 contains approximately 75 percent ethanol and 25 percent gasoline. E85 consumption in 2025 is 4.3
million barrels per day, and the total gasoline pool is 12.87 million barrels per day.

4 Excludes consumptio of ethanol and biodiesel.

5 In followup communications on February 6, 2007, Senate staff also requested that the import tariff on ethanol imports be allowed to sunset, as provided under current law.

6 Energy Information Administration, Annual Energy Outlook 2007, DOE/EIA-0838(2007) (Washington, DC, February 2002), web site http://www.eia.doe.gov/oiaf/aeo/index.html.

7 EIA was asked to adopt two enabling provisions of S.23 as part of the analysis of the Policy proposal. The first provision requires that light-duty vehicle manufacturers must build and certify vehicles that can use high ethanol blends (up to 85 percent ethanol) or diesel and biodiesel blends. The second provision requires that 50 percent of all major-owned or branded gasoline stations must provide dispensing facilities for E85 and biodiesel blends.

8 Renewable Fuels Association, 2005 Annual Industry Outlook, web site http://www.ethanolrfa.org/industry/outlook/.

9 Promar International, “Evaluation and Analysis of Vegetable Oil Market: The Implication of Increased Demand for Industrial Uses on Markets & USB Strategy” (November 2005), pp. 25-35, web site http://www.nbb.org/resources/reportsdatabase/reports/gen/20051101_gen-368.pdf.

10 Precommercial engineering estimates of capital and operating costs of new technologies tend to understate the costs of the first few commercially available plants; there is generally no evidence to suggest that the cellulosic ethanol technology will prove otherwise.

11 Delivered energy does not include losses associated with the conversion and distribution of electricity.

12 It was determined that retail sales volumes were a better indicator of the potential fuel availability to consumers than the number of retail outlets offering an alternative fuel. The intent of this assumption is to capture consumer access/through rates at regulated stations versus those not required to provide the alternative fuel. The retail sales volumes were determined by assuming that fuel marketers required to report on Form EIA-28 fit the owned and branded requirement defined in S.23 (see http://www.eia.doe.gov/emeu/perfpro/btab30.html).

13 Energy Information Administration, Incremental Costs of Installing E-85 Dispensers at Gasoline Stations (Washington, DC, July 21, 2005).

14 The quantity of motor gasoline consumed in 2025, including sales of E85, is 197 billion gallons. The amount of diesel fuel consumed in 2025, as represented by sales of ultra-low-sulfur diesel (ULSD) and biodiesel blends, is 65 billion gallons.

15 To address cold starting issues, the percentage of ethanol actually varies seasonally. The annual average ethanol content of 74 percent is used for the projections.

16 Cummins (a manufacturer of on-highway truck engines with significant market share) has approved B20 from BQ-9000 certified companies. BQ-9000 is the biodiesel industry’s quality control program for biodiesel producers consistently meeting American Society of Testing Materials specification D-6751.

17 The opportunities for large-scale biodiesel production—at the scale envisioned for either corn-based or cellulosic ethanol for this policy proposal—are limited, in part because ethanol receives the same credit price per gallon as biodiesel even though biodiesel contains considerably more energy per gallon, and because ethanol is expected to be cheaper to produce at quantities exceeding 5 billion gallons per year.

18 Because E85 has roughly 75 percent of the energy content of gasoline, energy units (rather than volume) are used in comparing fuel demand across cases.

19 “Gov. [Jeb] Bush Throws Support Behind Ethanol Initiative,” The Miami Herald (December 19, 2006). See http://www.mre.gov.br/portugues/noticiario/internacional/selecao_detalhe.asp?ID_RESENHA=293740& Imprime=on

20 Cambridge Energy Research Associates, Ethanol-Powered Brazil: The Land of Green Gold?, p. 13.

21 University of Campinas, Sao Paulo, Brazil, Study of the Possibilities and Impacts of the Production of Large Quantities of Ethanol with the Aim to Partially Replace Gasoline in the World.

22 Quoted as “installed” capital cost for the facility. See “Not Your Father’s Ethanol,” Business Week (February 21, 2005).

23 For example, http://www.eia.doe.gov/oiaf/aeo/overview/electricity.html, “technological optimism factor reflects the inherent tendency to underestimate costs for new technologies. The degree of technological optimism depends on the complexity of the engineering design and the stage of development,” and EPRI, Technical Assessment Guide, Volume 1: Electricity Supply-1986, pp. B-18 to B-20.

24 See Energy Information Administration, Electricity Market Module Documentation, DOE/EIA-M068(2006), pp. 69-73, web site http://tonto.eia.doe.gov/FTPROOT/modeldoc/m068(2006).pdf.

25 A. Aden, M. Ruth, K. Ibsen, J. Jechura, K. Neeves, J. Sheehan, and B. Wallace, Lignocellulosic Biomass to Ethanol Process Design and Economics Utilizing Co-Current Dilute Acid Prehydrolysis and Enzymatic Hydrolysis for Corn Stover, NREL/TP-510-32438 (June 2002).

26 Escalated by Chemical Engineering Plant Cost Index, from 2000 to 2005 constant dollars.

27 A. McDonal and L. Scharattenhozer, “Learning Rates for Energy Technologies,” Energy Policy, Vol. 29, No. 4 (2001), pp. 255-261.

28 The discount rate used to compute macroeconomic losses in GDP and consumption losses is 4 percent.

29 Using the economic principle of discounting and the time value of money tends to weigh losses at the beginning of a period more than equal losses at the end of a period. For example, a dollar loss in 2030 is valued at about $0.45 in 2010 when discounted at 4 percent.

30 Typically, EIA tries to select pairs of alternative cases for its analyses that represent both more pessimistic and more optimistic assumptions about how key uncertainties will be resolved. In this analysis that was not possible, primarily because assumptions opposite to those used for the alternative cases described in this chapter—low price path for liquid fuels and natural gas, reduced availability and higher prices for ethanol imports, and slower rates for the development and adoption of renewable energy technologies (including reduced availability of biomass supplies)—would raise the cost of the policy substantially and, in all probability, make it outright impossible to achieve in some cases.

31 The High Price Case was specifically requested by Senator Inhofe. The Low-Cost Ethanol Imports Case and High Renewable Technology Case were added by EIA to demonstrate the impacts of two other key groups of parameters.

32 While the Low-Cost Ethanol Import Case shows slightly greater ethanol imports (3.4 billion gallons in 2025) than the Reference Case (3.3 billion gallons in 2025), little else changes relative to the Reference Case. Consequently, results from the Low-Cost Ethanol Imports Case generally are omitted from the tables and figures in this chapter.

33 A portion of the projected increase in primary energy consumption is due to the accounting framework used to translate wind, geothermal, solar energy used for electricity generation to primary resource equivalents. The accounting framework equates a kilowatthour of generated electricity to primary energy by multiplying by a constant but somewhat arbitrary heat rate that is close to the fossil fuel generation system average.

34 USDA/National Agricultural Statistics Survey (NASS), Acreage, June 2007 (Washington, DC, June 29, 2007).

35 USDA/World Agricultural Outlook Board (WAOB), World Agricultural Supply and Demand Estimates, WASDE-448 (Washington, D.C., July 12, 2007).

36Ibid.

37 Using the economic principle of discounting and the time value of money tends to weigh losses at the beginning of a period more than equal losses at the end of a period. For example, a dollar loss in 2030 is valued at about $0.45 in 2010 when discounted at 4 percent.

38 University of Campinas, Sao Paulo, Brazil, Study of the Possibilities and Impacts of the Production of Large Quantities of Ethanol with the Aim to Partially Replace Gasoline in the World.