Sunday, September 24, 2023

Japanese industry steps up ammonia push in CO₂ reduction efforts -Dlight News

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IHI’s Chief Technology Officer Nobuhiko Kubota is tasked with reinventing the nearly 170-year-old Japanese industrial conglomerate for a new era of green energy.

IHI – like its peers including General Electric and Mitsubishi Heavy Industries – is racing to come up with new technologies that can reduce its heavy carbon footprint, in line with climate targets. And the company, which makes products ranging from aircraft engines to turbochargers, liquefied natural gas storage tanks, boilers and rocket boosters, is currently pinning its hopes on using ammonia as a low-carbon fuel.

This bold bet on ammonia — a combination of hydrogen and nitrogen often used to make fertilizer — has gained little traction with investors in the absence of concrete targets for its contribution to earnings. But IHI executives say the success of its technology will have far-reaching implications for energy policy in Japan and in Asia more broadly.

“It’s not necessarily the only option but the use of ammonia is a key tool in moving towards carbon neutrality,” says Kubota. “The key is to gain social acceptance for widespread distribution of ammonia.”

In 2017, Japan became the first country in the world to create a nation Hydrogen strategy – and, within this, that highlighted the potential of ammonia.

But, since then, Japan has lagged behind other nations in developing regulations for hydrogen use. More recently, the US is catching up with the EU in the Hydrogen Strategy, through President Joe Biden’s $369bn inflation reduction legislation.

Column chart of forecast market size for carbon-neutral fuels (¥tn) showing ammonia as part of Japan's energy mix

Japan, heavily dependent on coal, natural gas and oil, has set a target of generating 1 percent of its total electricity by 2030 from hydrogen and ammonia co-firing power.

To that end, in June, the government unveiled a public-private investment of ¥15tn ($104bn) to build hydrogen and ammonia supply chains. Tokyo also has ambitions to sell technologies from IHI and other Japanese companies to Southeast Asian countries, such as Indonesia, Malaysia and India, to help them replace some coal with ammonia — thus reducing carbon emissions from coal-fired plants. .

However, Japan’s promotion of hydrogen and ammonia as clean fuels received strong pushback from other G7 nations in April, when officials and environmental groups criticized its policy of extending the lifespan of existing fossil fuel infrastructure. Although ammonia itself does not contain carbon, its production relies heavily on fossil fuels and is not yet commercially viable.

According to research group Bloomberg NEF, a co-firing power plant with 20 percent ammonia and 80 percent coal would emit more carbon dioxide than a combined cycle gas turbine, which is widely used to generate electricity from gas.

But co-firing rates of 50 percent ammonia or more are expected to be too expensive to be competitive against other low-emission technologies.

Column chart of volumes ('000s tonnes) showing ammonia production in Japan

One option for Japan is to import ammonia produced in countries with large renewable energy sources, although that would increase its dependence on imported energy and potentially pose economic security risks.

IHI executives say ammonia has its advantages: it is liquid at minus 33C, while hydrogen needs to be cooled to minus 253C to become liquid. And the infrastructure for ammonia shipping is already in place.

“For long-distance transport and storage, ammonia has more economic benefits than hydrogen,” says Kubota. “Our motivation is certainly not to prolong the use of fossil fuels but to contribute to reducing CO₂ emissions as much as possible.”

IHI aims to introduce a gas turbine powered entirely by liquid ammonia in 2025, and in January it signed a memorandum with GE to collaborate on a large gas turbine using 100 percent ammonia. That too said recently It will spend about ¥250bn on its own ammonia development to create a new earnings driver alongside its core aero engine business.

Akihiko Numazawa, general manager of IHI’s business development headquarters, notes that some of its existing business — given its heavy carbon dioxide emissions — could shrink significantly within three years. For example, coal-fired boilers generate only less than 10 percent of the company’s annual revenue.

“There is a strong sense of crisis at the management levels and that is why we want to change our business while we are still generating profit,” explains Numazawa.

But analysts say IHI’s ammonia technologies have not excited investors as much as the marketing of liquid hydrogen by rivals such as Kawasaki Heavy Industries. “In the eyes of investors, it doesn’t do anyone any favors for not being certain [financial] targets,” says Citigroup Bank analyst Graeme McDonald. “Because they can’t quantify it, ammonia doesn’t get the attention the company would like.”

But Edward Bourlet, analyst at brokerage CLSA, adds: “Ammonia has not been marketed or portrayed as effectively as hydrogen, and perhaps it offers potential. IHI could be the dark horse of heavy industry.

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