Hydrogen Economy

The Power Generation Demand for Clean Ammonia: Could Be Huge, but The Economics Matter
April 2, 2024
This Week:
Blue Ammonia Is an Interesting Alternative to Coal
Next Week:
Are The Optimistic Forecasters Not In The Industry’s Best Interest?

The Hydrogen Economy #40

The Power Generation Demand for Clean Ammonia: Could Be Huge, but The Economics Matter

Key Points

  • If Japan can show tangible success in co-firing its coal facilities with ammonia, and as many regions struggle to keep up with the growth in power demand and transition needs, other countries may look to mimic Japan.
  • Demand would be very price sensitive, but depending on how carbon values develop, power generation could put a floor under ammonia pricing through the 2030s – we have only looked at developed Asia.
  • Blue ammonia is the obvious choice here because of costs, but also because large-scale investments like blue ammonia lend themselves to the “cost plus take-or-pay” offtakes that are needed to get financing.
  • We set up next week’s report by looking at whether too much optimism is a constraint to progress – if the consensus is that costs and prices will fall over time, why buy today? No progress = no better costs/pricing.
  • We show very little project activity this week but have some views on why the agricultural side of ammonia may be worth investing in this quarter and a lot more on power.

Exhibit 1: If Japan has real success, high carbon values anywhere could pull more towards coal co-firing.

Source: Capital IQ and C-MACC Analysis



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