1. Western States Biofuels Production Scenarios 2015 October 10, 2007

2. Foundation for Strategic Analysis of Biofuels A continuation of the CDEAC strategic assessment of the development clean energy resources in the West Augmented feedstock database Liquid fuels production technology models Enhanced supply analysis methodology Policy recommendations from WGA Transportation Fuels of the Future task force

3. Strategic Questions for Bioenergy in the West 1.What contributions to the Western States energy supply could Bioenergy make by 2015? 2.What are the barriers to achieving the full potential of Bioenergy supply? 3.What is the full set of policy measures needed to enable this transformation to increased Bioenergy supply? 4.What is the potential cost for these measures, what are benefits, and what is the cost benefit ratio? 5.What are the regional differences within the West with regard to capability to produce Bioenergy 6.What is the technology progression for the transition to tomorrow’s vision? 7.What is the variation in resource by region – how does that inform policy and resource development choices?

4. Task 4 Production Scenarios for Biofuels Set a Target Product Price for Biofuels that will correspond to the Target Product Price (TPP) established for Biopower by the CDEAC –$80/ MWh for Wholesale Power –$17.50/MMBtu for Gasoline Substitutes ($2.03/gge) –$17.76/MMBtu for Diesel Substitutes ($2.06/gge) Determine potential production capacity for Biofuels in the Western States by 2015 up to the target price Formulate a set of policies for biobased transportation fuels to complement the set developed for electricity Lay out resource and technology development scenarios Suggest timeline for transition to Bioenergy

5. CDEAC Biomass Power Supply Curve 2015 8 ¢/kWh Target Price  10 GW Biopower

6. Biomass Power Supply Curve Notes The WGA supply curves show cumulative amount of product (power or fuel) delivered (grid or terminal) at or below each price point –For a target price of 8¢/kWh a total 10 GW of power could be profitably produced and sold to the grid Many facilities produce power at lower costs – Average cumulative power price may be lower than 8¢/kWh –Competition for biomass increases the value and price of the lower cost feedstocks pushing them up toward a market price –Regional power demands and supply vary significantly

7. Target Price for Biofuels Methodology: Use projected prices for electricity, gasoline and diesel in 2015 (DOE EIA) Calculate Ratio of biomass power target price to projected wholesale power price Apply ratio to projected wholesale petroleum fuel prices to determine biofuel target price –Diesel and gasoline substitutes evaluated –Ratio applied an energy basis not volumetric

8. EIA Retail Petroleum Products Price Projections Source: EIA AEO 2007 Should other forecasts be evaluated?

9. Projected Price Data Power –2006 Wholesale Market Data for California and Texas ISO from EIA –Projected to 2015 based on EIA’s 2007 Annual Energy Outlook (AEO) retail price escalation factors Fuels –2006 Wholesale Price Data for Gasoline and Diesel in Western States from EIA –Projected to 2015 based on EIA’s 2007 Annual Energy Outlook (AEO) retail price escalation –Converted to $/MMBtu

10. Fuel Target Analysis Projected electricity, gasoline, and diesel prices based on data from EIA Average Wholesale Price Price Range in Western Region $23.44/MMBtu

11. Western Region Biofuel Supply Curve 2015 Target ethanol Price $17.50/MMBtu ($2.03/gge)  ~ 4 Billion GGE/year (6 BGY ethanol) Western Region Ethanol Capacity in Jan 2007 was 1.7 Billion Gallons per Year Should other ratios be evaluated?

12. Fostering the Transition to Bioenergy Recommended Policy Tools for Biofuels –Leverage Federal Incentives for Biofuels –Support RD&D - Federal and State levels –Financial support to expand feedstock production –Create demand for Biofuels (RFS expansion, government fuel and FFV purchases …) –Funding support for infrastructure changes Estimate the transition cost and value the benefits

13. Existing Federal Incentives Existing federal incentives are intended to lower the consumer price of the biofuels Biopower: Renewable Electricity Production Tax Credit –1.9 ¢/kWh for closed loop biomass –1.0 ¢/kWh for open loop biomass –Set to expire in 2009 Biofuels: Biodiesel and Ethanol Tax Credit* –$0.51/gallon for pure ethanol (or percentage in mix) –$1.00/gallon for agri-biodiesel –$0.50/gallon for waste-grease biodiesel –Set to expire in 2009 * Also known as the Volumetric Ethanol Excise Tax Credit (VEETC)

14. Fuel Target Analysis – Federal Incentives $23.44/MMBtu

15. Mixed Production Scenarios How will the competition for feedstocks between the various Bioenergy Products play out? How will changes in transportation technology drive the mix of Biofuels and Biopower, CHP and Process Heat –Plug in-Hybrid Vehicles –Diesel vs Gasoline vs FFV engine demand –Fuel cell and other advanced vehicles

17. Gasoline Price Breakdown Aug 6Sept 3Oct 1 Avg. % of Total Wholesale Price $2.17$2.12$2.3375% Distribution Costs $0.27$0.10$0.065% Taxes $0.58$0.57$0.5820% Retail $3.02$2.79$2.97100% Source: CEC Estimated Price Breakdown, October 2007 Wholesale Price is the average gasoline price at the rack – includes all costs associated with gasoline production