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Ethanol and Energy Security: How the lessons from the rise of ethanol inform clean hydrogen today

Every day, every hour, every minute, we rely on energy to traverse our daily lives. On the security that energy affords us, whether it is used to work, to learn, or just to relax. Our economic stability depends on the knowledge that energy is available at any time we feel the need to call upon it. During the Oil Crisis of the 1970s, when the price of gasoline rose 40% in just one month, creating panic and shortages, politicians scrambled for an answer to the energy crisis. That is when ethanol stepped in.

Interesting note; the use of ethanol in gasoline did not begin in the 1970s. As early as the 1800s, ethanol was used to power some engines and even used as an octane booster during the 1920s and 1930s because of gasoline shortages. But the modern ethanol industry really had its inception in the 1970s, when it was proposed as a solution to the oil crisis. Ethanol from corn was plentiful and relatively easy to break down into the components required to be added to gasoline from oil. It was a neat, though not perfect, solution, to a complex problem; if ethanol could be used to supplement the current oil supply for vehicle gasoline, the weaponization of oil by OPEC could be countered by the usage of ethanol.

The corn ethanol program was further pushed during a period of high oil prices in the early 2000’s. The United States created a substantial number of incentives to jumpstart the corn ethanol program in order to decrease US oil imports. The ethanol incentives included a tax credit for gallons of ethanol blended with gasoline, a tariff on imported ethanol, loan guarantees for ethanol producers and research and development grants. These incentives were designed to make ethanol production more profitable and to encourage the development of the ethanol industry. The ethanol industry grew rapidly in the early 2000's, and the ethanol market share in the U.S. gasoline tripled in under a decade. Today, ethanol is still benefiting from many incentives and continues to be blended into US gasoline.

Yet, this program was not without its controversies. While ethanol usage started as a solution to energy stability, it transformed into a different type of solution; a cleaner energy source than oil. The transition from energy stability to clean energy source created years of debate regarding lifecycle efficiencies, government incentives and GHG emissions. While the cleanliness of the ethanol can still be debated, its initial usage, as a supplement to oil supply to allow for energy security, played a role in helping to stabilize the US economy.

Today, we find ourselves once again in need of energy security. With the rise in renewable generation now that renewables are the lowest cost source of energy and the continuing war in Ukraine, both the US and the world are rapidly increasing their investments in renewable energy sources. And, just like during the Oil Crisis of the 1970s, there is need for energy security. One critical piece of energy security in a renewable energy world is long term storage, which is where hydrogen comes into play.

The need to store energy and to decarbonize heavy industry has led to increased interest in clean hydrogen. Clean hydrogen production uses electrolzyers that run on zero emission electricity to help balance grid load and create a means to store excess clean energy for later use. The main purposes of hydrogen are to balance the grid during periods of excess wind and solar production and to provide a longer-term storage option for renewable energy than batteries allow representing a neat and needed, although not perfect, solution to storage of renewable energy overproduction.

This US hydrogen initiative is very reminiscent of the push for ethanol, since it includes a per kg tax credit of $3 a kg under certain conditions, large numbers of grants for hydrogen refueling infrastructure, FCEV tax credit and DOE grant and loan programs to jumpstart this drive. While the initial push for ethanol occurred in the US, with the ethanol program focusing on the unique availability of corn in the US, the push for hydrogen is happening on a global scale. Almost every major economy in the world has now created major incentives to scale up hydrogen production and usage. This push is the strongest reason we believe clean hydrogen will play a major role in the energy transition.

Even with the benefits of hydrogen, and the important role it will play in the energy transition, there is pushback. Hydrogen is not as efficient as other types of energy storage, such as batteries. Yet, the usage of hydrogen as energy storage is required in order to allow renewables to scale-up at the pace required to meet carbon neutral benchmarks and to take full advantage of the low-cost structure of renewables. The energy transition is a decades-long process, and the faster the world is able to scale up, the sooner we are able to decrease the amount of carbon emissions being released into the atmosphere. Hydrogen is needed for that scale up.

Another argument against hydrogen is the subsidies required to keep it competitive. Like all forms of energy, i.e., oil, coal, etc., hydrogen will need those subsidies - because all forms of energy receive subsidies. Subsides have been the backbone of energy creation and scaling, and that trend will continue during the energy transition. These issues, while important to consider, will not keep clean hydrogen from becoming a major source of energy storage.

Clean hydrogen, despite drawbacks in terms of efficiency, is needed to decarbonize. The world needs both long-term energy storage and decarbonized industrial processes. Hydrogen offers solutions to these issues and an economically competitive price at scale. As the world works to decarbonize, letting perfect be the enemy of good is not effective. As ethanol was once used as a piece of the energy security puzzle, hydrogen will do the same in our changing, energy transition world.

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