The share of renewable liquid fuels (ethanol, fatty acid methyl ester, biogas, and renewable electricity) in the total transportation fuel in Sweden, has increased by the end of 2009 to such level that e.g. domestic bioethanol production is unable to satisfy current ethanol fuel demand. Regional small-scale ethanol production can assist the region in covering the regional needs in transport fuel supply. Current case study system includes the production of ethanol, biogas, heat and power from locally available cereals straw. A mixed integer programming (MIP) model is developed for cost optimization of regional transport fuel supply (ethanol, biogas and petrol). The model is applied for two cases, one when ethanol production plant is integrated with an existing CHP plant (polygeneration), and one with a standalone ethanol production plant. The optimization results show that for both cases the changes in ethanol production costs have the biggest influence on the costs for supplying regional passenger car fleet with transport fuel. Petrol fuel price and straw production costs have also a significant effect on costs for supplying cars with transport fuel for both standalone ethanol production and integrated production system. By integrating the ethanol production process with a CHP plant, the costs for supplying regional passenger car fleet with transport fuel can be cut by 31%, from 150 to 104 (sic)/MW h fuel, which should be compared with E5 costs of 115 E/MW h (excl VAT). (C) 2011 Elsevier Ltd. All rights reserved.