Japan’s largest energy producer bets on ammonia and hydrogen for net zero

Japan’s largest energy producer bets on ammonia and hydrogen for net zero

10% to 0%. Can you believe it!

Power generation accounts for roughly a third of global greenhouse gas emissions. So when Japan’s biggest power producer, Jera Co., announced last October that it aims to achieve carbon neutrality by 2050 — but not by relying exclusively on renewable power — it took even some energy experts by surprise, with many wondering if that is actually possible.

But the company, which emitted 139 million tons of carbon dioxide in fiscal 2019 and is responsible for nearly 10% of Japan’s emissions, is determined to lead the world in making a bold transition away from fossil fuels to net zero emissions as it bets its survival on ammonia and hydrogen, which unlike fuels such as oil and gas do not produce carbon dioxide when burnt.

While European power producers are planning to go big on expanding solar and wind power to meet the vast majority of the European Union’s carbon neutral targets by 2050, Japan’s limited availability of flat land and steep coast lines, as well as frequent earthquakes and typhoons, make it comparatively more difficult to rely on solar and wind power alone to achieve net zero.

Against that background, Jera, which generates power for its parents Tokyo Electric Power Co. and Chubu Electric Power Co., is picturing a complete shift to ammonia and hydrogen, which would be produced using renewable energy or technology that offsets carbon dioxide emitted during production.

“Since our company’s foundation in 2015, we have operated globally, and as a big producer responsible fora third of Japan’s electricity, we knew we had to play an active leadership role in global warming countermeasures,” Jera President Satoshi Onoda said in a recent interview. “Despite our best efforts, it would be difficult to realize a stable supply of electricity using renewable energy alone. There are some challenges with using hydrogen, so we aim to burn ammonia at coal plants as a first step.”

Considering that hydrogen burns in an instant, as with gas, while ammonia burns slowly over time like coal, Jera plans to mix ammonia with coal at coal-fired plants and mix hydrogen and gas at liquefied natural gas power plants until sufficient amounts can be procured.

Jera sees ammonia as more viable than hydrogen in the midterm, as it is easier and far less costly to transport than hydrogen, which would need to be chilled to minus 250 degrees Celsius in a special tanker.

Ammonia, the global majority of which is used as fertilizer, requires a fraction of the electricity for liquidation and has also been used regularly at power plants to reduce nitrogen oxide emissions.

“Overall, we think it would likely require far less cost to build the overall supply chain for ammonia,” Onoda said.

He added that to procure hydrogen supplies to mix at gas-fired power stations in the 2030s, it would likely be less costly to convert imported ammonia to hydrogen via thermal cracking rather than to import hydrogen directly.

A four-year pilot project to mix ammonia at a coal-fired plant is set to officially start as soon as Jera secures a grant from the state-run New Energy and Industrial Technology Development Organization (NEDO).

After the installation of a special pipeline, a tank and a special burner at its Hekinan coal-fired plant in Aichi Prefecture, the company plans to mix ammonia with coal for power generation in 2024 and 2025, which would mark the first such experiment in the world.

“The test of mixing ammonia with coal in a burner has been done in Japan on a laboratory basis, but ours would be the first to mix ammonia at a 1-gigawatt commercial coal-fired unit,” Onoda said. “I think other companies will be closely watching our moves (to see) what progress we achieve.”

The company plans to achieve a 20% cofiring rate of ammonia — the amount of the original fuel that has been replaced — at the 1-gigawatt unit at its Hekinan plant for the pilot project. Technologically, that will likely not be as big of a problem as the creation of a supply chain for vast amounts of ammonia.

If the project is successful, it will require 500,000 tons of ammonia annually, which is equivalent to about half of Japan’s total annual consumption — in 2019, that was 1.08 million tons, 21.7% of which was imported from Indonesia and Malaysia.

If all coal plants in Japan start mixing ammonia, the required supplies would become far larger. The trade ministry has calculated that Japan would need 20 million tons of ammonia annually if all coal plants in the country had an ammonia cofiring rate of 20%. That would also be equivalent to 10% of global ammonia production, about 200 million tons, of which only about 10% is allocated for exports.

Jera’s ambitious net zero challenge proved timely, as its announcement early last October came two weeks before Prime Minister Yoshihide Suga committed the nation to achieving carbon neutrality by mid-century. Since then, Jera’s zero-carbon goals have been adopted by all other major Japanese utilities, such as Kansai Electric Power Co.

Reiji Ogino, senior analyst at Mitsubishi UFJ Morgan Stanley Securities, praised Jera’s efforts on ammonia usage in reducing its carbon footprint as the only such project in the industry, but added that the goals look to be extremely difficult to attain.

“I would say the chances of success of generating power using carbon dioxide-free hydrogen and ammonia as feedstock and still being profitable by 2050 would likely be less than 10%,” he said. “It’s not possible to purchase carbon dioxide-free ammonia and carbon dioxide-free hydrogen at the moment, and there’s no supply chain. And even if it became technically viable to build the supply chain, I don’t know if that could be done at a low-enough cost.”

Obtaining vast amounts of ammonia is key, but procuring only so-called green ammonia produced using renewable energy will be difficult. That’s why Jera is also looking to procure “blue” ammonia, which is produced by converting hydrocarbons, with carbon dioxide generated during production being captured via carbon offset technology, Onoda said.

To secure ammonia supplies, Jera signed a memorandum of understanding with Malaysia’s state-run oil firm Petronas in February. Onoda indicated that the company will pursue other opportunities besides Petronas as well.

“Petronas already produces ammonia for fertilizer, so we will jointly look at opportunities to create ammonia using carbon dioxide-free electricity from hydro plants, among various options,” Onoda said. “In terms of having multiple options, countries such as Saudi Arabia come to mind where it’s possible to take advantage of solar or wind power.

“We could also look at producing ammonia from natural gas in the Middle East or Australia by injecting carbon dioxide into existing gas fields in what’s called an enhanced oil recovery technique. We are also looking at the U.S., where it’s possible to use renewable energy.”

The trade ministry calculations have shown the cost for power generation using 100% ammonia would be ¥23.5 per kilowatt-hour, while generating power by burning 100% hydrogen would cost ¥97.3 per kWh. That compares with an average cost of ¥13.1 for power generated from corporate solar panels in 2019. Onoda said the company would consider selling environmentally friendly power at premium prices in the future.

“Europe, for example, charges no customs duty to companies selling carbon dioxide-free electricity inside the eurozone,” he said. “We may be able to charge higher prices for carbon dioxide-free power, but that will be one of the big challenges ahead, as we’re considering whether we can do that structurally.”

Shifting to 100% ammonia fuel at all of Japan’s coal-fired plants would require 100 million tons per year but would halve annual carbon dioxide emissions from the power sector to about 200 million tons, the Ministry of Economy, Trade and Industry says.

The prospect of vast business opportunities for the next-generation fuel has already attracted interest from many firms such as Marubeni Corp., IHI Corp. and Australia’s Woodside Energy Ltd., which have been jointly working with Jera on a NEDO-funded feasibility study on the cofiring of ammonia and the creation of a supply chain by utilizing a large-scale ammonia production plant.

“There are a lot of challenges, but to keep the costs down, we would like to explore various possibilities,” Onoda said. “If we can create a structure where the industry as a whole can work together and consume ammonia and hydrogen as fuel, the costs would become much cheaper.”

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