More ammonia requires for shipping, if we develop less green hydrogen projects

The fewer green hydrogen projects are on line by 2030, the more global trade there will be for renewable ammonia for use as a shipping fuel, according to a new report published by non-profits the Rocky Mountain Institute (RMI) and the Global Maritime Forum.

While this may seem counterintuitive — given the assumption that most projects will gear volumes of H2 to local demand first before export — the report, Oceans of Opportunity: Supplying Green Methanol and Ammonia at Ports, projects that bunkering points will have to draw in large volumes of hydrogen-based fuels by 2030 to cater to rising demand from shipping driven by regulation.

Meanwhile, the EU has passed its FuelEU regulation, which sets incremental decarbonisation mandates for vessels in its waters while rewarding the use of “renewable fuels of non-biological origin” — ie, made from green hydrogen.

While these may seem like small volumes compared to the share of fossil fuels that will still be supplied by 2030, the report anticipates that the increasing regulatory push will drive demand from ports — particularly in Europe — to secure supplies of ammonia and methanol at a low cost to avoid a significant green premium.

Since fewer projects also mean that lower volumes of green fuel are available at a given location, this means that ports will have to draw from a wider range of sources to meet demand, rather than solely from where the cost of production is cheapest.

The cost of green hydrogen production varies wildly between locations depending on renewable energy capacity factors, the cost of capital, and subsidies — such as the up-to-$3/kg clean hydrogen production tax credit in the US, which the report says will allow the country to produce ammonia and methanol at a lower cost than anywhere else in the world.

The study calculates that the cost of green ammonia by 2030 will range from $900 to $2,700 per tonne equivalent to the energy content of very-low sulphur fuel oil (VLSFO), and methanol $900 to $2,500 per tonne (VLSFO-equivalent), depending on location.

VLSFO already costs less than $700 per tonne, meaning that even if carbon taxes or other incentives push up this cost, ammonia and methanol on the lower end of this cost scale will be more attractive to ports.

Meanwhile, the report points out that the additional cost of transporting ammonia or methanol is comparatively low.

“On one of the longest possible seaborne transport routes in the world, from Houston to Singapore, transportation of green ammonia is estimated to cost $166 per metric ton VLSFO equivalent, or 15% of the delivered cost of the fuel,” the report notes.

“In contrast, the difference in production costs between locally sourced e-ammonia and imports from Houston is almost $1,900 per ton VLSFO equivalent.”

The report tracks 32 million tonnes of annual green ammonia production from announced projects by 2030, as well as a 3.5-million-tonnes-per-year pipeline for green methanol production available for shipping.

However, the report also models two scenarios for ports to supply 5% green fuels by 2030: one where all of this capacity comes on line and is available for shipping, and the other where only 20% of announced projects ever reach a final investment decision.

For ammonia, the first scenario would see fuel mainly supplied to ports from the US and Oceania. The study explains: “The trade flows remain largely regional, with the ports being supplied by projects located within their region of the world. However, because of its very low cost, ammonia from North America is exported globally.”

However, in the second scenario, “trade flows are generally more fragmented and global than in the 100% scenario, with ports drawing on more sources of fuel to meet their needs”, it says. This scenario would also see South America beat out North America and Oceania as the largest source of green NH3 for shipping.

Meanwhile, because the pipeline for methanol is already far below expected demand due to a lack of available biogenic CO2, both scenarios are expected to see much more regionalised trade flows of methanol between a smaller number of ports than for ammonia.

However, the report did not estimate the impact on the final delivered cost of ammonia or methanol between these two scenarios.

The report identifies four “archetypes” for ports that could inform decisions around investment, depending on what strengths they can leverage.

The first, “importing incumbents”, refers to ports that already have high demand for shipping fuels — and would likely see more than 250,000 tonnes a year of demand for green fuels — but local green hydrogen production costs of $4/kg or higher.

Since these ports — such as Singapore, Busan in South Korea, Antwerp in Belgium, and Rotterdam in the Netherlands — already have infrastructure in place for storage and ship bunkering, they can avoid what RMI terms “last-mile costs”, while also acting as a major buyer for exporters.

‘Hydrogen has too many technical and commercial uncertainties for us to invest in infrastructure at scale’

The report also predicts that these ports will be able to supply both green ammonia and green methanol — the two renewable fuels most sought after by the shipping industry due to their higher energy density by volume compared to both compressed and liquefied H2 — rather than having to choose one or the other.

The study recommends that the “importing incumbents” move quickly to lock in sufficient volumes of low-cost supply of green hydrogen-based shipping fuels.

The second archetype, “producing incumbents”, refers to existing bunkering hubs where the cost of producing green hydrogen is less than $4/kg by 2030, such as Houston and Los Angeles/Long Beach in the US, Fujairah in the UAE, Piraeus in Greece, and Algeciras in Spain.

“Their low production costs make it likely that these ports will also be exporters of green hydrogen derivatives, both for shipping and other sectors. This creates synergistic opportunities, including building out shared infrastructure, which can bring down last-mile costs,” the study says.

These ports, like the first archetype, are likely to be able to supply both fuels. However, they could struggle to make the most of their position if the emergence of demand, infrastructure build-out, and the development of regulations, standards and permitting for new fuels takes longer than expected.

“Future exporters” are the third archetype, which refers to planned and existing ports with low current demand that are located in areas where the cost of green hydrogen production is less than $4/kg, such as Pilbara in Western Australia, Boegoebaai in South Africa, Açu in Brazil, and Corpus Christi in the US Gulf of Mexico.

Low demand means that these ports have more capacity to export excess fuel to other bunkering hubs.

However, the report notes that these ports will have to set up infrastructure and regulations from scratch, and could face high last-mile costs unless they leverage demand and infrastructure from fuel exports to minimise the delivered cost of fuel.

Tags: Ammonia, Global Maritime Forum, Green Hydrogen