Ammonia Use in Thermal Power Plants Could Be Worth $100BN in 2050, Wood Mackenzie Says

Ammonia co-firing in thermal power plants could be worth $100 billion by 2050 as green transition efforts by governments globally increase demand for the compound, according to energy research consultancy Wood Mackenzie.

Ammonia, a derivate of hydrogen, does not emit carbon dioxide when burnt and is “an increasingly attractive proposition,” in the thermal power generation sector to cut emissions, the energy consultancy said.

“The possibility to burn low-carbon hydrogen and ammonia in thermal power plants provides countries with an additional tool for decarbonising the power generation sector,” Prakash Sharma, vice president of multi-commodity research at Wood Mackenzie, said while speaking at the APPEA (Australian Petroleum Production and Exploration Association) conference on Wednesday.

“Just a 10 per cent use of ammonia co-firing in coal plants could result in a 50 per cent growth from today to 200 million tonnes of ammonia demand by 2050, and this is a $100bn market opportunity. Additionally, co-firing will deliver a 10 per cent reduction in carbon emissions, a strategic benefit in markets with physical limitations to build renewables and CCUS capacity.”

One of the lightest and most abundant elements in the universe, hydrogen is being prioritised across the world as a viable alternative fuel as they focus on cutting emissions to limit global warming.

Ammonia allows for the easy transport of hydrogen, the blue form of which is derived from gas and the green version from splitting water into hydrogen and oxygen using renewable sources.

Currently, thermal generation is the largest source of power and heat in the world. In 2021, the share of thermal generation was 70 per cent in Asia Pacific, and 50 per cent in Europe and Americas combined, according to Wood Mackenzie.

“Amid rising power demand and a strong focus on decarbonisation globally, there is an urgent need to replace thermal power generation plants with renewables and battery storage or pair with new technologies such as carbon capture, utilisation and storage (CCUS) to abate emissions. A quick replacement of these thermal power plants will be costly as the thermal fleets in several countries still have many years of useful life,” the energy consultancy said.

"The ability to co-fire ammonia or low-carbon hydrogen in the thermal generation is an increasingly attractive proposition, even if costs may be higher."

Globally, the size of the hydrogen industry is expected to hit $183bn by 2023, up from $129bn in 2017, according to Fitch Solutions. French investment bank Natixis estimates investment in hydrogen will exceed $300bn by 2030.

A number of countries set net-zero targets in the coming years that could push demand for ammonia and hydrogen higher, according to Wood Mackenzie.

The US, the world's largest economy, aims to become carbon neutral by 2050, while China, the second-largest economy, plans to reach the net-zero target by 2060. The UAE, Opec's third-largest oil producer, aims to become carbon neutral by 2050, with clean and renewable energy investments worth Dh600 billion ($163.5bn) planned over the next three decades.

Japan’s power utilities are taking a lead in co-firing ammonia in both coal- and gas-fired power plants. South Korea also recently expanded plans to co-fire hydrogen and ammonia in thermal power plants.

“When looking at power generation, ammonia is one available option to be used directly either by itself or by co-firing with no reconversion cost needed,” Mr Sharma said. “Our analysis shows on average the delivered cost of low-carbon ammonia to Japan is expected to fall 60 per cent from $1,250 per tonne currently to under $500 per tonne by 2050.”