Asia Embraces Ammonia for Power Generation Amid Coal Reliance

Asia’s heavy reliance on coal, which constituted 54% of the region’s power mix last year, poses a significant challenge in achieving net-zero emissions. In response, several Asian nations are increasingly turning to ammonia as a cleaner alternative for power generation. This shift primarily involves co-firing, where low-carbon ammonia is blended with coal or natural gas. According to Rystad Energy, key players in this transition include China, Indonesia, Japan, and South Korea.

Despite this pivot, there is a notable supply gap. Approximately 8.8 million tonnes per annum (Mtpa) of ammonia will be necessary to meet the targets set for 2030. Asia’s historical dependence on coal means that the region currently lacks the robust policy frameworks and market demand to justify the requisite investments in ammonia infrastructure. Additionally, countries like Japan and South Korea face challenges related to limited natural gas resources and insufficient renewable capacity, which restrict domestic production of clean ammonia. To align with net-zero objectives, these nations will likely need to import clean ammonia from abroad, allowing for the replacement of coal as a baseload power source while ensuring energy security and cost-effectiveness.

While ammonia co-firing presents a promising avenue, it is currently hindered by high costs associated with low-carbon hydrogen production, ammonia conversion, and transportation. Rystad Energy projects that under a hypothetical low-carbon hydrogen price of $5 per kilogram—equating to an ammonia price of $1,000 per tonne—the levelized cost of electricity for a 10% ammonia blend could be around 50% higher than coal-only generation. Overcoming these financial barriers will require innovation, economies of scale, and perhaps a meaningful carbon pricing mechanism to make ammonia co-firing a viable option.

China’s Strategic Approach to Ammonia Co-Firing

While Japan and Indonesia have been early adopters of ammonia co-firing, China is taking a more decisive approach by integrating it into its National Development and Reform Commission (NDRC) Action Plan for 2024-2027. The country’s strategy prioritizes national targets ahead of large-scale feasibility trials. Starting in 2027, newly upgraded or commissioned coal plants will be required to reduce emissions by half compared to 2023 levels. This initiative includes a mandate for 10% co-firing of biomass and green ammonia, coupled with carbon capture, utilization, and storage (CCUS) technologies. If successful, ammonia co-firing could play a crucial role in achieving China’s targets of peaking emissions by 2030 and reaching carbon neutrality by 2060.

Nevertheless, the extent to which existing coal plants will adopt this technology remains uncertain. Given the vast number of coal power generation facilities in China, the implementation of ammonia co-firing may take longer than the anticipated two years, particularly as existing plants will need retrofitting. China is well-positioned to produce low-carbon hydrogen and ammonia at scale, thanks to ample renewable resources in Inner Mongolia. This year, Envision Energy commissioned the world’s largest green ammonia plant in Chifeng, Inner Mongolia, with an initial capacity of 0.32 Mtpa and plans for expansion to 1.5 Mtpa by 2028. As agreements accelerate, China could emerge as a reliable ammonia supplier for the region, although the required volumes for export remain unclear.

South Korea and Japan’s Commitment to Clean Hydrogen

South Korea is also advancing its hydrogen-for-power initiatives, aiming for implementation by 2029. The Ministry of Trade, Industry and Energy (MOTIE) has initiated its second clean hydrogen power generation auction, with winning bidders required to start generating power using hydrogen or derivatives such as ammonia under a 15-year contract covering 3 terawatt-hours (TWh) of electricity. This volume is 3.5 TWh less than the inaugural auction, yet Rystad Energy estimates that fulfilling this requirement will necessitate around 200,000 tonnes of low-carbon hydrogen annually.

In the previous auction, only six out of approximately fifty-nine power plants participated, and only one plant met MOTIE’s evaluation criteria. MOTIE awarded Korea Southern Power (KOSPO) 750 gigawatt-hours at its Samcheok power plant, accounting for just 11.5% of the total volume offered. To enhance participation this year, MOTIE is introducing two new mechanisms: an exchange rate-linked settlement system and a hydrogen volume borrowing system. These adjustments aim to mitigate currency risk and provide additional flexibility for power generators facing unplanned events or maintenance challenges.

Japan, an early adopter of ammonia co-firing, is making strides in securing contracts and attracting foreign investment to ensure a steady supply of low-carbon ammonia. The nation is planning to source blue ammonia from the United States and green ammonia from China and India to bolster its domestic supply. Early next year, Japan will announce the winners of its contract for difference program, which is anticipated to further support its ammonia-for-power ambitions and help the country meet its emissions reduction targets.

This concerted effort across Asia to embrace ammonia for power generation reflects a significant shift in energy strategies as nations strive to balance economic growth with sustainability commitments. The path forward remains challenging, but the willingness to innovate and adapt could pave the way for cleaner energy solutions in the region.