Pangea SI Expert: Approximately 90% of the ammonia produced today is used as fertiliser. If we want to survive at the current level of populations on this planet, ammonia is necessary to fertilise the soil and allow the soil to achieve the levels of productivity that we need. I believe that the single most important factor for why we can fit over 8 billion people on Earth today is conventional synthetic ammonia.
Pangea SI Expert: Today’s production of ammonia on average generates 2.9 tonnes of CO2 per tonne of ammonia produced. This number varies widely depending on the production process and the geography and the feedstock that is used. But you know, as an average it’s pretty high. This puts ammonia at the top of existing industrial processes in terms of CO2 emissions.
This means that ammonia production is responsible for more than 1% of the total share of emissions today, and some estimates put it at 4%. And so, there’s no future green scenario or decarbonised industry if we do not considerably reduce the CO2 emissions associated with ammonia production.
Pangea SI Expert: Green ammonia is conventionally defined as ammonia produced from green hydrogen. But is hydrogen that is produced from the electrolysis of water renewable? If such electrolysis is fuelled with 100% renewable power, then the resulting ammonia is green or, to be more precise, approximately 90% green. However, and this will be a recurring theme in this podcast, there is no real definition for green ammonia today, and the only way to properly define what green ammonia is would be to establish a rigorous lifecycle assessment methodology – a practice used in the world of fuels to assess how renewable the fuel is.
In terms of ammonia production, the level of “greenness” would be measured as tonnes of CO2 equivalent emitted per tonne of ammonia produced. In the case of fuels, each tonne of ammonia produced is usually measured as two megajoules of fuel produced. Over the decades, this methodology – largely based on Greek models – have seen a lot of success in the fuel sector and has spearheaded the entire industry of renewable fuels.
The entire industry of renewable fuels whether it’s ethanol or renewable diesel or biodiesel or second-generation renewable fuels. We need that sort of scientifically rigorous system to assess the level of the greenness of ammonia and qualify it properly.
Pangea SI Expert: There are essentially two ways that ammonia is produced today. Steam reforming of natural gas, which is employed in Russia, the Middle East and North America primarily, and coal gasification which is employed in China.
The steam methane reforming (‘SMR’) process usually produces approximately 2 to 4 metric tonnes of CO2 equivalent, but ammonia produced using the coal-based process would be probably in the range of 6 to 8 or even higher than 8 tonnes. Now that’s when we assess the production of ammonia from a life cycle perspective using the fuel industry’s Well-to-Wheel (‘WtW’) assessment
In our case, we should probably call it the Well-to-Soil (or Mine-to-Soil) approach where we count the GHG footprint of every single input into the production process. In addition, we also take into account the GHG footprint of delivering, distributing, and storing the final product so that the final consumer can use it, which in this case would be in the form of fertiliser for farmers.
If we do this analysis for green ammonia, which is again conventionally defined as the ammonia produced by water electrolysis, we would probably come up with something like 0.3 tonnes of CO2 equivalent per tonne of ammonia produced, which is approximately 10 times less than then what the current value for regular ammonia production. However, I want to point out that green ammonia is only as green as the power that is used to fuel the electrolyser. For example, if we have 100% renewable power going into the electrolyser then the resulting ammonia will have a GHG footprint of approximately 0.3, which is again 10 times lower than today’s pathways for ammonia production.
If we were to feed the electrolyser with 50% renewable power, let’s say solar or wind and 50% average US grid power, then the resulting ammonia would have a footprint in excess of 4 metric tonnes of CO2 per tonne of ammonia, which is worse than the current ways of producing ammonia in the United States through reforming or natural gas. Therefore green ammonia is only as green as the power that is used in the electrolyser, and the process is far from being linear. It takes a very little amount of non-renewable power to essentially destroy the greenness of green ammonia.
Pangea SI Expert: Absolutely, I would concur with that notion 100%. In fact, if you look at what’s happening today, some of the green ammonia projects that have been announced or are in the process of being executed are generally structured as the addition of an electrolyzer to an existing steam reforming based ammonia plant. One of these, for example, is the project by Yara in Australia and another one is the one that CFI is conducting at the US Gulf Coast. Therefore, this hybrid method of production might be the answer.
Pangea SI Expert: There is an entire rainbow of hydrogen production methodologies and that directly applies to ammonia production. Ammonia is essentially hydrogen production plus a step of reacting hydrogen with nitrogen from the air. There is blue ammonia, which is probably the most economical way of producing low carbon ammonia today – as long as the infrastructure for carbon sequestration is paid for by somebody else, not the ammonium producer. There is turquoise ammonia production that is associated with hydrogen generated via methane pyrolysis. Pink ammonia, which is usually referred to as ammonia produced from hydrogen that is produced from nuclear power. And finally, the properly defined green ammonia which usually stems from producing hydrogen via water electrolysis powered by renewables. This classification is very qualitative and cannot be considered to be the cornerstone for any global industry that relies on carbon pricing incentives, mandates or strict regulations.
We are in dire need of a rigorous method that can assess how much carbon is associated with the production of ammonia. A method that essentially defines what green, pink, turquoise, and any other ammonia colour type, is based on the tonnes of CO2 equivalent generated in the production of 1 tonne of ammonia, regardless of the pathway selected.
Pangea SI Expert: Not at the moment. Approximately 98% or more of the hydrogen produced today is black, grey or brown hydrogen, so a large portion of the hydrogen produced today is produced for ammonia production. There is one example of a large capacity production of blue ammonia. I believe it’s the Nutrien plant in Canada that is connected to the sequestration infrastructure available in the Edmonton area, and I believe that Nutrien is considering expanding the production of blue ammonia. Some pink ammonia/turquoise ammonia is being slated to be produced in combination with carbon black production through the Monolith Material project in Nebraska.
I’m not exactly sure what the status of that project is, and then, as I mentioned before, there are several smaller-scale green ammonia projects that are located globally from South America to Australia, to North America. The unannounced projects will unlikely see the light of the day unless the basic challenges related to economics, the lack of infrastructure and regulations are overcome.
Pangea SI Expert: It is down to three factors: economics, regulation, and infrastructure. So, let’s start with economics.
Most of the ammonia produced today, at least the market-based produced ammonia and not considering China, is based on natural gas conversion to hydrogen and then to ammonia. From a cash cost perspective, it takes approximately 30 million BTU of gas to produce one tonne of ammonia, and most ammonia is produced in regions where gas prices are between $1 to $3 per million BTU, for example in regions such as North America, Middle East, and Russia. In some cases the prices can be below $1 per million BTU, so the feedstock cost of ammonia production is somewhere between $50 and $100 per tonne. The total cash cost is probably in the region of $150. Certain plants can achieve a quasi-100% utilisation rate because gas is always available in the quantities required – in most of the cases where ammonia plants exist.
Their capital cost is usually about the range of $1,000 to $1,500 per metric tonne of annual capacity. If we compare these numbers with a green ammonia process, we’re probably looking at something like $300 to $500 cash cost production based on globally available renewable power prices. The CapEx capital intensities are around $2,000 to $3,000 for a future scale larger than what is possible currently, with various utlisation rates depending on the source of the power.
I think we can summarise the entire status of green ammonia economics by saying that it’s today probably anywhere between two to three times more expensive than traditional ammonia. Blue ammonia is usually less expensive to make because the ammonia process releases approximately two-thirds of the CO2 emissions in the form of purity.
Pangea SI Expert: Regulations are key. In the history of renewable, sustainable products, one lesson that we learned is that both products are usually more expensive than their black, grey, or brown counterparts. This is true for commodities. But, just because in a commodity process the production process is streamlined to deliver the minimal cost possible and a key part of this minimum cost is the fact that the atmosphere can be used as a sink for the CO2 emissions.
History has also demonstrated that there are three basic ways we can adopt. The first one, which is probably the most desirable is, consumers are good-hearted and willing to shell out the extra premium necessary for green products. Now, this usually happens for things that are not commodities. Things that are either higher value products or we have the contribution of the renewable component to the final price of the product is relatively marginal. An example is Coca Cola bottles. Like if we increase the Coca Cola bottle by 5 cents and you’re selling a leader for a dollar well, chances are a better consumer is willing to pay $0.05 or $0.10 more to just enjoy a green packaging green bottle. The second method relates to, which is probably more applicable to commodities like we’re talking about, relates to regulators establishing incentives for the green products and/or penalties on the black, grey, whatever brown products. The third way is to use mandates where a certain fraction of the volume either produced or consumed by a sector has to be fulfilled by a renewable process. So, if we look at these three ways of overcoming the economic challenge through regulations, I will say but number one is probably not likely to occur for a product like ammonia, which is very distant from the final consumer. Number two and three are what has been used for things like renewable fuels.
For the case of green ammonia, there’s no penalty or incentive for green ammonia or penalty for black ammonia or establish a mandate for green ammonia until there is a scientific, rigorous methodology of classifying green ammonia and assessing its low carbon nature.
Pangea SI Expert: Why today’s ammonia is so cheap? In the beginning of ammonia production, where Haber Bosh invented it in the 20s and the 30s over the last century, ammonia wasn’t that cheap at all. But today is very, very cheap. It’s because the infrastructure developed over a century where there’s a fully amortised process but allows the entire value chain to function. So, for example, we have the natural gas production and distribution value chain already fully in place in all the geographies where production is taking place.
Ammonia production itself is very much amortised. Most of the 100 or so ammonia plants in the world are fully amortised at this point, so we’re only paying for the cash cost of producing better ammonia, and finally the entire infrastructure of converting ammonia to the final fertiliser that is being used for transporting or storing it. If we look at establishing a new value chain for ammonia, clearly blue ammonia can reuse all the above existing infrastructure. So, it’s possibly the cheapest form of low carbon ammonia that one can think of. However, given the fact that the renewable power is generally not produced by the existing ammonia infrastructure, we would need infrastructure to either generate renewable power close to where the existing infrastructure is or we would need new ammonia infrastructure nearby where the cheap renewable power is available.
The main use of ammonia is as a fertiliser, but ammonia is not used as a fertiliser. Ammonia is usually converted into urea and urea is the largest nitrogen fertiliser globally utilised. North America, which is the only place on Earth where ammonia liquid is used directly as a fertiliser. To produce urea, we need CO2, and that’s what an ammonia plant usually does. It has an ammonia plant followed by a urea plant, and then the entire fertiliser complex, and so the CO2 produced by the ammonia plant is directly utilised as a feedstock in the urea plant. If we were to produce either blue ammonia or green ammonia or pink ammonia or whatever colour of ammonia you prefer, we would be missing CO2, which means we would be incapacitated or producing urea. This also means that the entire agricultural infrastructure in the world would have to change to utilise liquid ammonia, which is highly toxic, difficult to store and difficult to transport.
Pangea SI Expert: Approximately 90% of the ammonia produced today’s user’s fertiliser. The remaining 10% is dominated by explosives, and then there are obvious uses of ammonia or chemical input into other processes. So, going forward clearly the explosive market is one where possibly green ammonia could start. This is probably a higher value market and the mining companies are probably keen on greenifying production processes.
I can see a small volume of ammonia being produced forever and there are two new users of ammonia that have been talked about. One is ammonia as a transportation vector for green hydrogen. So instead of transporting and storing liquid hydrogen, one would convert such hydrogen into ammonia, and then ammonia would be transported and stored and then either re-converted to hydrogen or used directly as a fuel at the location where the energy production is needed, and then obviously the further that the other category which is directly related to the use of ammonia as fuel and specifically marine shipping.
The neon project in Saudi Arabia where a mega-scale green hydrogen project associated with green ammonia production in Saudi Arabia. When such ammonia is transported to Europe, re-converted to hydrogen and the final hydrogen is used for energy production.
Now obviously one simple question is whether when one takes in all these steps going from renewable power to hydrogen to ammonia to transportation to reconversion, so eventually of the original renewable power one could say less than 20%, would be probably available at the end of the chain.
Finally, ammonia as a fuel has gained a lot of traction for marine shipping. But there are still lots of steps that need to be taken to validate that use. It probably makes more sense than liquid hydrogen, and it probably makes more sense than methanol. I can see an application for ammonia as a fuel.
Pangea SI Expert: We need 200,000,000 tonnes of ammonia today and more in the future to sustain 8 plus billion people on this planet. We have more than 3 tonnes of CO2 per tonne of ammonia as the GHG footprint associated with ammonia production. Therefore, there’s no future on this planet without green ammonia. We need a way of decarbonising ammonia production. It will require national and more importantly, cross-national policies that establish a global low carbon ammonia industry. These policies can only exist if supported by science-based regulations that can assess the level of greenness, or be precise data to conduct a life cycle analysis. In the short-medium term, I think that we’ll see some trends that are likely to emerge.
We will most likely see governments subsidise the construction of infrastructure for a CCUS. So, for carbon capture and sequestration, and ammonia is one of the very few processes that spit spews pure CO2 into the atmosphere, so it’s a primary candidate for carbon sequestration.
A low carbon green ammonia will likely start in very niche markets where the green premium can be sustained either by the company producing and selling it directly or by the final user offset ammonia or using regional incentives, grants or so on.
As a fertiliser product, it will likely be possible in developed countries especially you know in the next decade or so it requires a lot of changes in the agricultural infrastructure to be able to use liquid cryogenic ammonia as a fertiliser directly.
There is a place for ammonia outside of agriculture. For sure the explosive market is where the initial projects may start and then there will be some use of ammonia, either as an energy vector for air for hydrogen or as a fuel directory. But, for sure there will be geographies and areas where ammonia as fuel or ammonia as an energy source will make sense.