Last week Keshni Sritharan, Senior Associate Business Development and Investment spoke on a panel at Argus’ Clean Ammonia North America Conference to discuss the four Ps we need to make scalable blue ammonia happen: Policy, Proper definitions, Production, and Projects.
Her key takeaways:
- Policy needs to lead the way
- In Asia there is much more clarity than in Europe today.
- Japan and South Korea are leading the way in ammonia co-firing demand application and with subsidies supporting cost differentials.
- Both countries are already importing ammonia and investing in the essential infrastructure needed to scale up use of ammonia for power generation.
- Japan’s Ministry of Economy, Trade and Industry (METI) has taken a clear stance, stating that ammonia co-firing is more cost effective and results in lower emissions for newer coal power plants than retiring them early and replacing them with renewable energy now.
- Properly defining low carbon ammonia
- We need to move away from using colors to define ammonia and instead focus on carbon intensity.
- Asia is again taking the lead in this and we expect others to follow suit.
- Production economics comparing grey and low carbon ammonia
- Regulation and policy are crucial.
- Europe as we know is the marginal producer of ammonia globally with TTF gas driven costs setting the floor for grey ammonia pricing and we have seen cost curve economics in Europe play out in the last 18 months.
- With the implementation of the European CBAM from 2026, CO2 costs will be increasingly embedded in grey ammonia marginal costs, which adds another $200/t given where CO2 is trading today and makes the demand uptake of blue more competitive compared to grey SMR based ammonia.
- Blue ammonia in Europe is expensive to produce, given the lack of regulatory incentives and access to hydrogen infrastructure. With the 45Q in the US, producers in the US are incentivized, but once you factor in significant capital expenditure for a new greenfield blue ammonia plant and investment needed for ammonia infrastructure it starts to become less economic.
- This calls for a higher CO2 price, or faster phase-out of carbon allowances in Europe to accelerate the transition to blue from grey.
- Green today is significantly more expensive because it relies on access to cheap renewables, and significant improvements in technology and fiscal support for demand are needed to be make scalable green ammonia production feasible.
- Projects are struggling to come to FID
- Argus is tracking 18.4 mt of new ammonia supply between 2025 and 2030, but if we look at the prior ammonia build cycles, also in the US, less than 15% will actually get built.
- We took FID on our blue ammonia plant in Texas last year with production on track for 2025 and are the only large-scale greenfield project in the US to have done so given our existing global asset base with essential and scarce ammonia infrastructure in the US and Europe.
