E85 will produce more power in a given engine if the fuel system is set up to meter it properly. When the highest performance is needed. alcohol is always the fuel of choice. The basic problem is that alcohol has a low specific energy and much larger quantities of it must be burned to produce the same power that gasoline would yield. That sounds confusing but it is really simple: Alcohol will provide more power but will also require more fuel (per unit volume) to be consumed.
The question here is whether or not alcohol's much higher anti- knock rating (octane rating) is acknowledged on the pump when you buy it.
Brian
For a gasoline to be sold as a certain grade, it has to test out at the minimum rated octane at which its sold. Typically, distributors will formulate blends to minimally meet octane requirements so they can minimize their costs. The two major fractions in gasoline are octane (more expensive to manufacture, greater knocking resistance) and heptane (cheaper to manufacture, less knocking resistance.) By definition, octane is the percentage of octane in a straight octane/heptane blend and that in fact is what is used to calibrate an ISO test engine.
In reality though, octane is cut with other hydrocarbon fractions besides heptane, and alcohol, which affects the measured octane value. So, let's say the distributor is going to sell an 87 octane 10% ethanol blend - which fraction will the alcohol replace? Octane, obviously, so they adjust the blend to maximize the heptane (or other cheaper fraction) content until 87 is minimally achieved in the ISO test engine.
E85 is another animal though, and I suspect the only reason they bother to add a 15% gasoline blend is just so petroleum suppliers can get rid of junk fractions they would have to otherwise crack or polymerize to make useful. My guess is E85's test octane is actually substantially higher than even it's rating but I don't know for sure.