July 26, 2024 - China's green ammonia capacity is in focus as it plans to decarbonize coal-based power -- among its biggest polluting sectors -- using new technologies, with market participants awaiting more policy clarity.

The country will be testing decarbonization technologies at coal-fired power plants, including cofiring with ammonia and biomass, and carbon capture and storage, to reduce their carbon intensity, its top economic planner National Development and Reform Commission said July 15. The tests aim to cut carbon intensities of coal plants by around 20% by 2025 and 50% by 2027 from the average industry levels in 2023. The NRDC has proposed a fuel blending mix for biomass and green ammonia of over 10%.

There are 26 green ammonia probable and possible projects planned in China until 2026, with an estimated annual 4.3 million mt capacity, according to S&P Global Commodity Insights data. These projects are mainly located in Inner Mongolia and northeastern part of the country.

Based on 2023 data, China will require around 200 million mt green ammonia/year if the country mandates a 10% replacement of coal for all existing coal power plants, said Anri Nakamura, principal research analyst at Commodity Insights. However, to achieve 50% emissions reduction, this capacity will not be enough.

If the CCS option is available, it is more likely to allow a plant to meet the emission reduction target of 50% by 2027, and at a lower cost, Nakamura said.

"Substituting the fuel cost of coal with ammonia is very expensive process," Nakamura said. "So, whether ammonia from currently available developments will stay in China or go elsewhere will be very much dependent on how much Chinese government is willing to subsidize the power plant operators to pay for the premium. It will be cheaper for the government to subsidize the fertilizer industry to encourage green ammonia production instead."

Coal power is still the primary source that supports power systems in China, and the NDRC announcement is seen an important first step toward coal power transition, according to Yu Han, director of coal transition at non-government organization Energy Foundation China.

"Green ammonia will be used particularly where [there's] potential high wind and solar curtailment, but the volume is not likely to be significant as the current policy is to encourage innovations and [to] enhance lower carbon emission technology in coal power, [instead of specifying a] mandatory fuel mix," Yu said.

Export Interest

Trade sources have largely expected the bulk of China's green ammonia production to mainly target the export markets, despite the NRDC announcement, amid a lack of clarity on subsidies from the government.

"There have been questions on who will absorb the volume with no possible end-users in the domestic market," said a fertilizer market source. "The fertilizer sector will still be utilizing conventional ammonia, as green ammonia used for fertilizer production will inevitably increase the costs for farmers that would in turn lead food prices to soar."

A producer source, who is eyeing the export market, said there has been more concrete demand for green ammonia from the international markets, including East Asia.

Japan is expected to require 3 million mt ammonia by 2030, with JERA concluding a 20% ammonia cofiring test at its coal-fired unit at the Hekinan thermal power plant in June. Meanwhile, South Korea's Ministry of Trade, Industry and Energy in May has launched an auction to trade power produced by clean hydrogen and its derivatives such as ammonia.

Platts, part of Commodity Insights, assessed the low-carbon Japan-Korea ammonia price at $470/mt CFR on July 23, unchanged from a day earlier.