Green ammonia, produced with green hydrogen, is costly—in a steady-state situation, four times as expensive as conventionally produced ammonia. Ammonia is a versatile chemical needed all over, but particularly in the manufacture of fertilisers.
However, now that the Russia-Ukraine affair has raised the prices of fertilisers, it is tempting to hope that the fertiliser sector could give a demand push to green ammonia.
The conventional route of producing ammonia, using the Haber-Bosch process, uses natural gas as feedstock. Global gas prices have been on the rise—they increased from US$10.75/MMBtu (metric million British thermal unit) in January 2021 to US$33.00 in January 2022.
Broadly, if gas prices rule between $ 6-10 per MMBTU, the cost of ammonia production in India would work out to anywhere between ₹30,000 and ₹40,000 a ton.
As such, the sharp surge in gas prices is going to tell upon India’s fertiliser subsidy bill, which is over ₹1 lakh crore. The market price of Urea, the main nitrogenous fertiliser is produced with ammonia, is ₹60.4 a kg; it is sold to farmers for ₹5.3 and the difference is borne by the government of India.
Furthermore, long-term fertiliser demand in India is projected to grow to ~130MT by 2050 from the current ~55MT – which means a bloating subsidy bill.
Isn’t this an excellent setting for shifting to green ammonia and green ammonia-based fertilisers?
It is a bit too early to bet on it. According to a recent report by the Institute for Energy Economics and Financial Analysis (IEEFA), for green ammonia to come within reach, the cost of green hydrogen should fall, for which in turn, the costs of two other factors should decline—electrolysers and green electricity. “For green hydrogen to become cost competitive with fossil hydrogen, it is imperative to reduce the cost of the two critical inputs, electrolysers and renewable energy, which account for 55% and roughly 25% of production costs, respectively,” IEEFA’s analyst, Kashish Shah, says.
Quoting the International Renewble Energy Agency (IRENA), IEEFA says that the electrolyser costs should reduce from US$500-1000/kW for alkaline electrolysers and US$700-1400/kW for PEM to below US$200/kW to produce green hydrogen at below US$2/kg. And, the per kWhr cost of electricity produced from renewable sources must fall below ₹1.6/kWh to achieve cost parity by 2030. Today, the cheapest renewable electricity costs ₹2.4 a kWhr.
But despite the fact that green hydrogen and green ammonia are still costly, now is the time to push for them because the gap between them and conventionally-produced hydrogen and ammonia is narrowing fast.
“Green ammonia is the most viable of all applications in the green hydrogen economy. The projected growth in fertiliser demand in India will further intensify dependence on subsidies and imports unless it is switched to a cleaner and domestically produced feedstock,” the IEEFA report, titled “Green Ammonia: Low-Hanging Fruit for India’s Green Hydrogen Dream”, says.
Green ammonia could significantly help the government in reducing the trillion-rupee subsidy bill from the fertiliser sector. In the long term, it also has the potential to reverse India’s dependence on energy imports.
“India’s new green hydrogen policy puts equal emphasis on green ammonia, identifying it as a top use for the clean fuel, and provides the vital incentives to encourage pilot-scale production facilities. For proponents, this will be an important learning-by-doing experience, a model almost all green hydrogen to green ammonia projects is employing before betting big on commercial-scale expansion,” says IEEFA.