London, 24 June 2021
Green ammonia is increasingly heralded as a carbon-free energy source of the future that can replace carbon dioxide (CO2)-emitting fuels and help drive “energy transition”.
The difficulties of the road ahead are highlighted, however, by a new price series launched by global commodity market specialists Argus. The series shows green ammonia costs are more than twice that of conventional carbon-intensive ammonia supplies. How then can green ammonia hope to displace fossil fuel-derived “grey” ammonia?
Energy companies and energy consumers are interested in ammonia because it is one of the most stable ways to transport hydrogen, and hydrogen is — in theory — the cleanest fuel in the universe. Burning it produces only water as a by-product.
Regular so-called “grey ammonia”, however, is primarily produced from natural gas, and the process emits CO2, negating the idea of using the resulting product for low-carbon energy. As a result, grey ammonia is 80pc used as fertilizer, with the balance consumed in various industrial processes.
Green ammonia, on the other hand, is created by electrolysis, passing renewable electricity through water, so its carbon footprint is essentially zero. The energy stored can be extracted by direct combustion or through fuel cell technology, which reverses the electrolysis process to generate electricity.
Argus has modelled a weekly price for green ammonia delivered to northwest Europe based on a theoretical “typical” production plant in the Middle East. This model currently yields a notional value of $1,196/t — more than twice the price of the conventional grey alternative. When compared with conventional fuels, in areas where green ammonia is seen as a promising substitute, the contrast is even more dramatic. Green ammonia is, for example, nearly four times the cost of fossil fuel-based marine shipping fuels, compared on an energy content, or British thermal units (Btu) basis.
But despite the apparently unattractive economics, a new strategy report from Argus claims that green ammonia will go on to play a key role in the transition away from fossil fuels. Argus VP, Sustainable Fertilizers, Oliver Hatfield, says: “We expect a significant reduction in the costs of producing green ammonia as process technology develops and projects increase in scale and number, similar to the trajectory for renewable power generation fuels such as wind and solar, where costs have fallen by 80pc over the past 10 years.” He added: “Meanwhile, a combination of incentives and regulation will be needed to ensure that green ammonia can thrive and play its vital part in the move to a minimal carbon global economy”.
There are multiple potential uses for green ammonia, but two of the most promising are marine fuels and power generation. The International Maritime Organisation (IMO) requires that vessels reduce their CO2 emissions by 40pc by 2030 and by 70pc by 2050 from 2008 base levels. Green ammonia in theory would allow the shipping world to meet these targets at a stroke. Such a transition, of course, would require the development of viable ammonia-driven ship engines and ammonia-based fuelling systems, which currently are at a prototype stage. Meanwhile, some countries, in particular Japan, are aggressively pursuing the idea of green ammonia in power generation because ammonia is a stable “transport vector” for hydrogen, facilitating long-haul transportation.
Argus Media chairman and chief executive Adrian Binks said: “We are very pleased that we have been able to construct a price for green ammonia at this very early stage of its market development. Green ammonia will play a key part in the energy transition and the added transparency created by our price, will help the market develop efficiently.”
More resources on green ammonia
- Argus green ammonia podcast
- Argus green ammonia webinars
- Argus Green Ammonia Strategy Report
- Argus Ammonia
- Argus Marine Fuels
- Argus Green Ammonia Live – Virtual Conference
About Argus Media
Argus is an independent media organisation with almost 1,100 staff. It is headquartered in London and has 26 offices in the world’s principal commodity trading and production centres. Argus produces price assessments and analysis of international energy and other commodity markets and offers bespoke consulting services and industry-leading conferences.
Companies in 140 countries around the world use Argus data to index physical trade and as benchmarks in financial derivative markets as well as for analysis and planning purposes.
Argus was founded in 1970 and is a privately held UK-registered company. It is owned by employee shareholders, global growth equity firm General Atlantic and Hg, the specialist software and technology services investor.
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