OPINION | Does it make financial sense to export hydrogen-derived green ammonia worldwide?

As Russia’s war in Ukraine and related natural gas price crisis increase economic and political pressure on countries dependent on fossil fuel imports, many nations are hoping that imported green hydrogen could be their savior, they can simply swap out a fossil fuel for a greener molecule.

Germany, reeling from the strategic mistake of relying on Russian fossil fuels, is at the forefront of this movement, quickly signing international hydrogen cooperation partnerships with countries like India, Namibia, Morocco and, more recently, Canada, in a bid to accelerate green H importtwo.

Canada has some of the cleanest energy in the world and a proven track record of generating profitable electricity at scale, particularly hydropower, and is now showing a willingness to harness these resources and export green energy.

Using clean electricity to produce green hydrogen, or its derivative ammonia, and exporting it to Germany is certainly a laudable idea, but is it feasible or affordable?

A Case Study — Nujio’qonik GH2 Project

In August, Prime Minister Justin Trudeau and Foreign Minister Olaf Scholz met in Stephenville, Newfoundland, to sign the Canada-Germany Hydrogen Partnership. The location was important as it has been proposed by a local consortium as a green hydrogen hub known as the Nujio’qonik GH2 Project.

Combined with a deepwater port and existing grid connections, the consortium sees it as an attractive location to speed up the export of green hydrogen.

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The first phase of the project is a $2.6 billion, 1 GW onshore wind farm coupled with a $1 billion, 500 MW electrolyser to produce hydrogen, which would then be combined with nitrogen from the air to produce ammonia for export.

Ammonia is widely considered to be a more cost-effective method of transporting hydrogen than pure or compressed liquid H2.twodue to its higher energy density by volume and relative ease of handling.

According to the consortium’s environmental assessment report, 164 wind turbines will be installed west of Stephenville. With an estimated net capacity factor of 43%, the levelized cost of electricity would be approximately $50/MWh.

According to the IEA, it takes 10 MWh of electricity to produce one ton of green ammonia, so we’ve already factored in $500/ton in energy costs. The problem is that the low capacity factor means that a very expensive ammonia plant sits idle most of the time. This would increase the total cost of ammonia to nearly $1,500/ton.

To solve this problem, developers are oversizing wind turbines, which could mean the electrolyser runs closer to 66% of the time and lower the cost to around $1,300/tonne.

But ammonia plants have another problem. The Haber-Bosch process is not compatible with variable power sources as it must run at nearly 100% capacity, so the developer would have to store hydrogen with expensive storage or connect to the grid to ensure power 24 hours a day, 7 days a week.

Ironically, Canada is probably one of the only countries where renewable green power is cheaper than variable. So assuming the Nujio’qonik project can get low-cost hydropower from the local utility when the wind isn’t blowing hard enough, the developers will be able to run their 500MW electrolyser at near full capacity. This would bring the cost down to $1,050/ton and if they can sell the excess electricity at the same price, it will make it another $80/ton cheaper.

John Poljak, founder of the Keynumbers energy analysis website. Photo: Key Numbers

But is this cheap enough?

Compared to historical prices, where ammonia has traded between $200 and $400 per tonne, this is very expensive. Project developers could try to access cheap debt and investors willing to accept lower rates of return. If they can do this, they could potentially hit $800/tonne.

To compete with historical prices, they would have to cut capital costs from $2.6 billion to $1.28 billion to reach $400 a tonne and to $570 million to reach $200 a tonne. This isn’t going to happen, but recently ammonia has been trending around $1,000/ton and trading up to $1,600/ton due to high natural gas prices (conventional ammonia is made from hydrogen derived from fossil gas without diminish).

Due to those sky-high prices, several ammonia producers in Europe simply shut down production. But if that high price persists, is it worth sending green ammonia to Europe?

How much does it cost to ship ammonia?

Stephenville to Hamburg is approximately 3,000 nautical miles (5,500 km) and traveling at 18 knots (33.3 km/h), it would take about seven days to travel.

The University of New South Wales in Australia recently published a paper on hydrogen shipping methods, which calculated that ammonia was the cheapest clean fuel. Using the attached hydrogen shipping calculator, we see that exporting from Canada would incur a shipping cost of $40 per ton of ammonia.

Eastern Canada to Germany would be one of the cheapest international shipping routes, much cheaper than Doha at $80/tonne, or Western Australia at $115/tonne. Looking at the cost of energy, $40/ton based on energy content is just over $2/MMBTU ($7.70/MWh), most likely not a deal breaker for customers desperate for energy. Energy.

So what will Germany do with him?

Hydrogen is often mentioned as a potential direct replacement for fossil fuels, for use in vehicles instead of gasoline or diesel, for use in home heating instead of natural gas, or to replace fossil gas in power plants, where Germany gets 14% of its electricity. . Many proponents believe that exchanging Htwo in power plants would be the easiest to achieve.

Others disagree. Paul Martin of the Hydrogen Science Coalition believes that “hydrogen advocates seek ammonia not by choice, but out of desperation at the unchanging and undesirable properties of hydrogen itself.”

The problem is efficiency and lack of.

Take 10MWh of electricity and you can produce a ton of ammonia. This contains 18.6GJ (minimum heating value), or approximately 5.2 MWh of primary energy. Converting primary energy back into dispatchable electricity means using some kind of ammonia-fueled gas turbine. Assuming the same efficiency as a natural gas turbine, this would lead to an additional 40-60% energy loss. You will have 2-3MWh of electricity left over from the original 10 MWh.

Can it be made cheap enough to mask this inefficiency?

Not at $840/ton ammonia. This is the equivalent of $170MWh for primary power and $300-425/MWh for dispatchable wholesale electricity, or eight times more than the original Canadian wind source.

What about the need for heat?

German homes use a lot of natural gas in the winter and hydrogen could be used as an alternative. One ton of ammonia decomposed to hydrogen is endothermic, meaning it will contain 5.88 MWh of energy. This will cost $142/MWh. Natural gas has recently shot up to $200-350/MWh, but has historically trended at $20-30/MWh.

Is this acceptable for Germany?

A common saying among economists is that the cure for high prices is high prices. And at these energy prices, it brings into play local wind and solar installations, long-distance transmission, and demand response. $425/MWh is the equivalent of using solar at a 2% capacity factor or wind at 5%, so there will be many companies that can be much more efficient and enter below this price. Effectively, this will eliminate competition from Canadian green hydrogen as a source of electricity.

For residential and commercial heating, heat pumps can extract 30MWh of heat for every 10MWh of electricity, but historically the price of gas has been so cheap that efficiency has not been a consideration. With this price gap between natural gas and electricity narrowing, it makes more sense to move to heat pumps. Converting ammonia to hydrogen does not solve this problem, and instead the estimated price only exacerbates it.

Sensibly, this would leave green ammonia to focus on meeting the demands of fertilizers and other chemicals. It will still have a hard time competing with fossil fuel-based ammonia in the long run. Based on previous estimates, it’s two to four times more expensive, but other projects will learn from these early attempts and drive costs down to a point where the extra amount should be acceptable.

John Poljak is the founder of keynumbers.com, an Australian website dedicated to energy and economic analysis.

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