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Ethanol's future unclear as electric vehicles grow in popularity

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Office of Energy
An ethanol plant.

When it comes to South Dakota agriculture, corn is king. Part of the reason for that is corn-based ethanol — an alcohol that's mixed in gasoline.

In South Dakota, two out of every three rows of the state's corn crop become ethanol according to SDSU's extension service.

However, some South Dakotans are growing concerned about ethanol's future considering the rising popularity of electric vehicles.

The state's electric vehicle (EV) fast charging plan was just approved by the Biden Administration. The state says it will guide the creation of a network of fast chargers throughout South Dakota.

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South Dakota DOT
"Global Share of Total Annual Passenger Vehicle Sales by Drive Train"

The White House has a goal of 100% electric light-duty vehicles by 2027 and all vehicles by 2035. And California, the country's largest auto market, has approved a plan to phase out new gas cars by 2035 — a move that will likely lead other to states to follow.

The transition to electric vehicles also has support from the auto industry. General Motors announced it would phase out gas-powered vehicles by 2035.

Former South Dakota Sen. Tom Daschle, the co-founder of a bipartisan political strategy group, spearheaded legislation to create the nation's ethanol industry. He anticipates a real transformation in the way energy is produced, and how our transportation adapts.

"I don't think anybody should expect the current situation, the status quo, is going to be something we can expect to see for many more years into the future," Daschle said. "We've got to be resilient. We've got to be innovative. We've got to find ways to adjust and adapt to the new market, and if we fail to do that, I think that it's going to be a real tragedy for American agriculture," Daschle said.

That means younger farmers need to be prepared for the economy of the future. Doug Sombke, president of the South Dakota Farmers Union said he's concerned about the stability of the state's ethanol market.

“It takes leadership that's willing to accept and do that, and I'll just tell you, right now in South Dakota, I don't see that leadership coming from either the Governor’s office and/or from the legislators, and even the Department of Ag,” Sombke said.

In 2005, Sen. Daschle introduced the Renewable Fuel Standard (RFS). Congress passed the law requiring a certain volume of ethanol to be mixed into the nation's fuel supply. The renewable standard resets at the end of this year. Moving ahead, the Environmental Protection Agency will decide on corn-based ethanol’s future.

That makes Doug Sombke a little nervous.

“There’s no longer the standard set by law. EPA could actually remove it and say, ‘we no longer allow it.’ So, the future is no longer in the ethanol industry's hands or Congress's. It's really the EPA from now on,” Sombke said.

Politicians need to see South Dakota's corn used for ethanol as part of the electric vehicle energy transition, according to Silvia Secchi, a natural resource economist at the University of Iowa.

“What I'm afraid of is that this is gonna hit us like a brick at some point," Secchi said. “This is happening whether we like it or not. And so we shouldn't resist it. We should embrace it and think about ways to make it work for our economy.”

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EPA

Even as that energy transition takes place, it is still going to require some ethanol. Those in the industry say they want to maintain and even increase demand.

Doug Durante, the executive director of the Clean Fuels Development Coalition, said the industry could maintain corn-based ethanol's demand by blending more of it into the nation's fuel supply.

“Even though the total demand for fuel might go down, the percentage of ethanol could and should go up. And that's one of the things we're working on, just to get a higher percentage,” Durante said.

For example, rather than mixing about 10% ethanol and 90% fossil fuels (marketed as E-10), Durante said the EPA could endorse mixing 30% ethanol and 70% fossil fuel (or E-30).

A look back

To understand the future of ethanol, people need to understand its history. Jeffrey Manuel, assistant professor at Southern Illinois University, is currently writing a book on the history of ethanol fuels in the U.S. and Brazil.

“All throughout the 20th century, American corn-belt farmers, in particular, have been dogged by 'the overproduction problem,' and so, there's always been a debate about trying to develop new markets, especially for corn, and I think that has been the major driver of the industry," Manuel said.

During the 1973 Arab-Israeli War, Arab members of the Organization of Petroleum Exporting Countries (OPEC) imposed an embargo on the United States that created fuel shortages and skyrocketing prices. Manuel said OPEC's power over the global oil supply renewed political interest in ethanol fuels.

“At the time, they kind of saw it mainly as, what they called, 'Hamburger Helper for the gasoline supply,' kind of a way to stretch out a finite gasoline supply in the face of these shortages," Manuel said.

Then came the terror attacks of Sept. 11 and a fresh push for less dependence on foreign oil, Manuel said.

Daschle was the prime sponsor of the 2005 Renewable Fuel Standard, and a co-sponsor of an amendment to remove lead from the U.S. fuel supply and replace it with ethanol.

"Sen. Bob Dole and I offered an amendment to the Clean Air Act that outlawed lead and gave ethanol the first real toe hold in the fuel industry, and then Dick Lugar and I introduced the first RFS legislation in the late 90s, but it didn't pass for several years," Daschle said, "But the RFS established a floor and that floor really created the confidence, and the investor confidence, and the agricultural confidence that we could really transfer our whole infrastructure around ethanol into the transportation industry."

The Renewable Fuel Standard they pushed for came with a caveat, ethanol made by corn would be temporary. The standard required a transition to the use of cellulose, the non-food parts of the plants, to generate 'cellulosic ethanol.' But that never happened, said Daschle.

"I must say, cellulosic has been a disappointment. I don't think anyone would be able to say with any confidence that cellulosic has the kind of future that many of us thought it would have down the road," Daschle said.

'Bridging to electric,' political reality

Today, ethanol sometimes markets itself as a bridge to electric vehicles, but in Washington D.C., some lobbyists are working to make the nation's trip across that bridge as long as possible, said University of Iowa natural resource economist Silvia Secchi.

“The thing is that making that bridge as long as possible is very expensive. It's not like we're just coasting along, doing more of the same. Making that bridge as long as possible is involving things like the CO2 pipelines," Secchi said.

Secchi said the shorter we can make the transition to electric vehicles, the better the outcome for climate change. But she also said the institutions against electric vehicles are incredibly powerful.

“And not just producers. All the industries upstream. Think about it, corn uses a lot of fertilizer, corn requires pesticides, it requires seeds, it requires all this machinery," Secchi said.

Supporters of the corn ethanol industry believe it plays an essential role in the future.

Doug Durante, executive director of the Clean Fuels Development Coalition, lobbies on behalf of the ethanol industry in the nation's Capitol. He said the 'bridge to electric' phrase was a mistake from the beginning.

“Because by definition you cross a bridge and you're on the other side. That's where you're going. I don't think that's correct. I mean, that term is used a lot and, you're right, that was a term, but I think as people started really trying to look at that definition, and so no, I don't think that's a strategy or marching orders at all," Durante said.

Durante takes issue with the way some politicians are defining the transportation future with primarily electric vehicles. He said that limits consumer choice.

Not everyone who cares about the ethanol industry agrees.

Daschle looks at ethanol as a transitional fuel.

"I think we have to put a real emphasis on the fact that engines themselves have changed a lot, high compression engines require higher octane, and there's no better component for higher octane than ethanol," Daschle said.

The U.S. government decides what the nation's energy future will look like, and the EPA decides on ethanol's future soon. But this energy transition is happening in a political climate with enormous pressure, said lobbyist Doug Durante.

"The political reality will be, if you try to do all-electric, then there's going to be people that can stop that. We've got to find that balance," Durante said. "These days, I'm just so cynical on this. You could have a Democrat introduce something that would help a Republican's District. He's gonna oppose it just because the Democrat introduced it, you know, we're really in a bad place as far as that goes."

That's upsetting to many.

Author and rancher Dan O'Brien has won several awards and written multiple books on the conservation of the Great Plains. He also founded Wild Idea Buffalo Company and the Sustainable Harvest Alliance. O'Brien said because of the political realities, people need to be ready for the worst when it comes to climate change.

"The ethanol boondoggle, which it is, if that goes away, that is a good thing. And I know some people are gonna have their bottom lines hurt by that, but maybe we would have a chance to put all that money into rebuilding soil to the point that it was when we found it back in 1830," O'Brien said.

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Wild Idea Buffalo
Wild Idea Buffalo in western South Dakota has made improving our ecosystem its mission.

Ethanol's uncertain future

The ethanol industry needs to get very creative if it's to navigate the energy transition smoothly, former Sen. Tom Daschle said.

"We need to think out of the box with new ideas, especially around the need for higher octane, and the greater role that ethanol can play in the fuels of the future," Daschle said.

The key lobbyist who worked with Daschle, David Hallberg, spent time in the Middle East and then studied international relations and economics at Johns Hopkins. He said hybrid cars using high ethanol blends are best for national security because the transportation sector still has an alternative fuel powering it.

“What we're saying is why not emulate Brazil? They're doing it successfully, their cars are really no different than our cars. For the EPA to say you can't use more than E-15 in the United States is ludicrous,” Hallberg said. “We did it with E-10 when they said we couldn't do it. We're gonna do it with E-30 and E-40. I know it.”

Brazil’s total 2019 sugarcane ethanol production was about 9 billion gallons, and biodiesel production there was estimated at 1.5 billion gallons.

But critics of the sugarcane energy industry point out that demand for more sugarcane comes at a cost. Amazon rainforest deforestation, party driven by ethanol demand, increased by 85% in 2019 compared to the previous year.

Updated: September 20, 2022 at 12:23 PM CDT
The original report said Brazil’s total 2019 sugarcane ethanol production was about 90 billion gallons, not 9 billion.

The original post said the RFS 'ends' this year and the EPA takes over. For accuracy, the language was changed to 'resets.'
Joshua is the business and economics reporter with SDPB News.
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