Engines can retrofit to run on half ethanol and half water

Perhaps the most significant advantage of using dilute ethanol (aka hydrous ethanol) is that it shoul dbe less expensive to make. It takes a lot of energy to remove the last bit of water from ethanol.
GRAINNET News and Information for the Grain, Milling, Feed, Seed and BioFuels Industry: "Sand Point, ID—An Idaho company is developing an internal combustion steam engine that will run on 50% water and 50% ethanol."