Producing green ammonia can be commercially viable without domestic subsidies, but obstacles to scaling remain
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The world’s first pure ammonia-powered demonstration vessel making its maiden voyage in Hefei, Anhui province, June 2025 (Image: Zhou Mu / Xinhua / Alamy)
About 70% of the ammonia produced globally goes into making nitrogen fertilisers, with the rest used in pharmaceuticals, textiles and mining industries. But the gas has the potential to play an increasingly important role in tackling climate change.
“Green ammonia”, made with renewable energy, can be used as a zero-carbon fuel for ships or power generation, as well as a “carrier” for hydrogen. Consisting of hydrogen and nitrogen, ammonia is easier to liquefy than straight hydrogen and can be transported in pre-existing tanks and pipelines. At the destination it can be “cracked” back into hydrogen using catalysts.
Making green ammonia is more expensive than the conventional variety because it requires sustainably produced hydrogen and a stable supply of renewable power. Foreign buyers have shown themselves willing to pay Chinese companies a green premium for the product, but globally there is a trend of green gas projects being cancelled due to soft demand and growing costs. In China, many projects remain stuck on paper.
Although buyers of ammonia to make agricultural fertilisers are mostly unwilling to pay a premium, demand for the product may well increase from a global shipping industry needing to cut its emissions, experts told Dialogue Earth. Expanding China’s carbon market to include the chemical industry would improve the economic viability of green ammonia, they added.
Efforts to boost green ammonia in China
In July, Envision Energy’s green hydrogen and ammonia plant started running in Chifeng, Inner Mongolia. Capable of producing 320,000 tonnes of green ammonia a year, it marks a shift in China from demonstration projects to large-scale commercial production, CCTV News stated.
China has been promoting a low-carbon transition in ammonia production since 2022 to help meet its carbon targets. A little over two weeks after the Chifeng project started operating, a similar plant came online in Da’an, Jilin. That one, owned by State Power Investments Corporation, can produce up to 180,000 tonnes of green ammonia a year.
By the end of 2024, China had almost 100 green ammonia plants either planned or in construction. If all built, their total output would be 20 million tonnes annually – equivalent to 48% of current global production, and more than any other country. This is according to data provided by the Rocky Mountain Institute (RMI), a non-profit focused on clean energy.
Li Ting, chief representative and managing director of RMI China, told Dialogue Earth that China’s green ammonia sector is starting to take shape, but has not yet taken off. The current stage is a “crucial battle”, she said – a window in which to prove the technology and the business model works, and to get policies, standards and market mechanisms in place.
Costs of green ammonia
China is the world’s biggest producer and consumer of ammonia, making 73 million tonnes in 2024. Of that, 78% was “brown ammonia” made from coal. In 2020, ammonia production in China emitted 220 million tonnes of CO2 – about 2.2% of national emissions.
Ammonia is usually synthesised by combining hydrogen with atmospheric nitrogen in high-temperature, high-pressure reaction chambers. The quantity of carbon emitted depends on the sources of both the electricity used and the hydrogen. Gas produced using fossil fuels is known as grey hydrogen. When the emitted carbon is captured, grey hydrogen becomes blue hydrogen. When the gas is produced by the electrolysis of water powered by renewable energy, it’s green hydrogen. The “colours” of ammonia are similar, with the ideal being the green variety, which uses no fossil fuels at any point.
Phasing out brown ammonia in favour of green will make an important contribution to meeting China’s carbon targets. But you can’t make green ammonia without green hydrogen, and production of green hydrogen is being held back by high costs.
Most green ammonia plants today are integrated with on-site green hydrogen production. Some provinces have already put subsidies in place for green hydrogen, which will help make green ammonia cheaper. However, in most cases caps on the subsidies make them of limited use for bigger ammonia plants.
Electricity is the biggest cost of producing green ammonia, between 70% and 80% of the total. So the key to cheaper output is affordable and continuous supply of green electricity, which means building somewhere with plenty of wind or solar power. However, RMI has calculated that making green ammonia in China, even assuming constant wind power, costs 1.2 to 2.1 times as much as brown ammonia.
In reality, sources of renewable power fluctuate. Manufacturers can either opt to connect to the grid and buy in power when needed or stay off-grid and buy energy-storage systems. Both options add to costs.
Li Shuyi, principal of RMI’s China programme, works on the decarbonisation of heavy industry. She pointed out that the Chifeng facility is built close to good wind and solar resources and has opted for an off-grid approach. It has 680 megawatt-hours of electricity storage to ensure ammonia production can keep running. Its electricity costs will be one-third of those for nearby industrial facilities, giving it a solid foundation for competitiveness, she said.
With recent policy changes encouraging the consumption of green electricity, Li Shuyi expects to see more green ammonia plants opting to build combined wind-solar-hydrogen-storage models off the grid.
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A demonstration project for solar-power generation and hydrogen production and storage in Delingha, north-west China’s Qinghai province (Image: Ma Mingyan / China News Service / Alamy)
Will buyers pay a premium?
The Chifeng plant is up and running without subsidies, partly thanks to cheap green electricity. But support from overseas customers and an improving system of green-ammonia standards have also helped.
With green ammonia still pricey, customers’ willingness to pay a green premium is important. In July 2024, Germany’s import strategy for hydrogen and derivatives of hydrogen set a price for green ammonia for the first time. At up to EUR 1,000 per tonne, this was three or four times as much as usual for ammonia. The Chifeng facility has signed a green ammonia supply contract with Marabeni, a Japanese trading conglomerate. The State Power Investments Corporation plant in Jilin has deals with buyers in Europe, Japan and Korea.
In May this year, the first phase of the Chifeng facility was awarded Renewable Ammonia Certification by French certification issuer Bureau Veritas, confirming the environmental attributes of the product and allowing for easier exports.
Li Shuyi said that a voluntary “organisational” standard for grading green ammonia, set by the industry, came into effect at the start of this year. A compulsory industry standard, set by government, is in development and expected to be released at the end of the year. If China can speed up that work and align its standards with those in use internationally, the country’s products will be more competitive on export markets, she said.
Stable markets will boost upstream investment and confidence. According to Li Ting, countries like Germany and Japan have put green ammonia import plans in place to help emissions-intensive sectors such as shipping and chemicals with the costs of decarbonisation.
Lou Yushan, former Columbia University researcher and specialist in China’s hydrogen development, says Europe, Japan and Korea are the bigger buyers of “clean” (blue and green) ammonia. In May 2024, Japan passed a Hydrogen Society Promotion Act, including a 15-year arrangement to subsidise the cost gap between green ammonia and coal or gas. Europe and Korea have similar mechanisms in place.
Most of China’s policy support is targeted at the production of hydrogen and ammonia. There is less help downstream to encourage the use of greener products and the industry still needs support to close the loop, says Lou.
Lou also told Dialogue Earth that there are few buyers for green ammonia in China. The exception is “internal trading” by big state-owned firms like Sinopec who produce and use it themselves. In the past, those companies manufacture ammonia and methanol using brown hydrogen. Now, policy is encouraging them to set up green hydrogen projects and use green hydrogen as a feedstock.
“Those companies have money, they have land, they have access to cheap loans, and they’re not worried about finding buyers as they can use the green hydrogen or green ammonia in their own operations. Private firms like Envision Energy, however, need to look overseas for buyers,” she said.
Uncertainties
Wherever you are in the world, the ability to run commercially and without domestic subsidies is project dependent, says Lou. Some, like that in Chifeng, are able to keep costs competitive and find buyers willing to pay a premium. Others have been delayed or cancelled. The final investment decision on a 600-megawatt green hydrogen and ammonia project in Angola, for example, was delayed in June due to lack of demand.
According to a recent article from Peking University’s Institute of Energy, soft demand and rising costs have led to many hydrogen-production projects around the world coming to premature ends.
This is also true in China. Policy changes have led to a rapid increase in plans for new green hydrogen, ammonia and ethanol, according to China-based non-profit the Global Energy Interconnection Development and Cooperation Organization. But most projects remain on paper only because energy companies are actually interested in gaining permits for renewable-power generation. To get these they have to show local government there will be enough demand for the power they generate, so they plan green chemical projects which don’t come to fruition.
Last September, governments including Inner Mongolia and Zhangye in Gansu announced a tightening of the approval process for green hydrogen projects, reported China Energy News. A failure to start construction would lead to the cancellation of the project and associated renewable energy permits, stated the Inner Mongolia government. Green ammonia production is the intended use for the output from 58% of existing green hydrogen projects, according to the Orange Group, a hydrogen-energy-focused research institute. With business models not yet clear and the hydrogen energy rush cooling off, green ammonia production is clearly facing uncertainties.
Fuel a way out
Although 70% of ammonia production currently goes into making fertiliser, the Rocky Mountain Institute expects the amount used in agriculture to fall to 20% by 2025. This is in part because fertiliser will be used more efficiently. Fertiliser is essential for agriculture and its supply and prices can impact food security. There is not much enthusiasm among buyers for paying a green premium for it.
Green fuel currently accounts for close to 0% of ammonia demand but in the future it may account for 50% and play a key role in remaking the sector. Li Ting says the shipping industry may be the first to use it as a fuel on a large scale. Shipping accounts for almost 3% of global emissions and the sector is under pressure to find alternative fuels, particularly for long-distance routes unsuitable for electric vessels.
Ammonia is relatively compatible with existing ship engines and the technology to use it as fuel is already well mapped out, making the shipping sector the most likely first mover, Li Ting said. As a globalised industry, shipping has also begun to set up cross-border cooperation and green-certification systems, laying the groundwork for international trade and pricing of green ammonia.
If shipping does scale up its use, she added, this would drive down costs, standardise practices and streamline supply chains, with the benefits then spreading to other industries such as manufacturing and agriculture.
But promoting green ammonia cannot rely on any single factor. Li Ting said: “Cutting electricity costs and scaling up electrolysers are naturally important, because this reduces unit costs. But for real scaled rollout and commerciality, we need policy, the market and the technology moving in step.
“For example, if we could expand the carbon market to include the chemical industry and build in an effective carbon-pricing mechanism, green ammonia would become much more economically viable.”
China this year expanded its carbon market to include the steel, cement, and aluminium sectors, and it is anticipated that more heavy industries, such as chemicals, will be included by 2027.
Author: Niu Yuhan
This article was originally published on Dialogue Earth under the Creative Commons BY NC ND licence. Read the original article.
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