Small businesses and even private citizens could soon be producing their own ethanol for vehicles, thanks to a Californian company which has developed a miniaturised ethanol production unit.

The MicroFueler from E-Fuel enables ethanol to be produced from sugar, yeast and water and draws power from a conventional domestic mains electricity supply. It will produce fuel for under $1 (50p) per gallon, claims the manufacturer.

The unit can also produce ethanol for around 10c per gallon from waste alcohol, making it an attractive proposition for businesses such as breweries, restaurants, pubs and bars.

Tom Quinn, E-Fuel founder and chief executive, sees similarities between the MicroFueler and the PC.

“Just as the PC brought desktop computing to the home, E-Fuel will bring the filling station to the home,” he said. “Making local sugar-based ethanol fuel production possible, E-Fuel can solve the commercial ethanol transportation and pump station problems while providing consumers lower cost fuel due to micro-efficiencies.”

The product will be sold in the US for $9,995 from fourth quarter 2008. It will also be distributed in China and Brazil.

Despite the fact that ethanol produces 85 per cent less carbon emissions than burning fossil fuels, biofuels such as ethanol have come under fire from environmentalists and economists recently because of the environmental and economic damage caused by diverting agricultural land to growing grain for ethanol production. For example, recent steep rises in food prices have been linked directly to corn-based ethanol production in the US.

Private production of ethanol would alleviate some of these issues.