The 44-year-old worker was taken into custody for questioning on Thursday after the first cache of explosives was found. He later led investigators to a second, nearby warehouse where officials found "a whole bunch more bomb-making stuff," said Sherman Ackerson, a police spokesman.
The employee's home in San Francisco was also searched, but Mr Ackerson said he did not know what was found. Police said the worker, who was not arrested, has no local criminal record. His name was not released.
Authorities declined to comment on a motive for the explosives. The first bomb-making operation was discovered after a Pacific Gas and Electric Company employee discovered water in a warehouse basement and followed the trail. Upstairs, the worker found 250lb of ammonium nitrate thawing inside a storage locker.
Police ordered 30 workers out of the building and evacuated another building across the street. They were concerned that the fertiliser had been mixed with volatile substances and frozen to keep it from exploding.
A 33-gallon drum of chemicals and books on making bombs were found elsewhere in the building, as was a "small quantity of ready-to-go explosives," Mr Ackerson said. "There's significant information, significant material to show there's a bomb-making operation going on, so we're being very cautious."
Scott Blakey, a Pacific Gas and Electric Company spokesman, said there was no reason for ammonium nitrate to be in the centre, which combines warehouse space and offices for employees who supervise the utility's meter readers. Mr Blakey said there had been no recent threats against the utility.
Mr Ackerson did not offer specific details on what was found by police at the second warehouse.
Ammonium nitrate fertiliser was combined with fuel to make the 4,800lb bomb that destroyed the Oklahoma City federal building in 1995, killing 168 people. (AP)