Low-carbon ammonia has the potential to serve as a critical component of a decarbonized energy system. Ammonia is primarily used today as the key ingredient in fertilizer, increasing crop yield for food production. As a molecule containing one nitrogen, three hydrogen, and no carbon atoms, ammonia can also be a suitable low-carbon fuel for various applications, including power generation, shipping, and industrial processes. The International Energy Agency has recognized ammonia as an important potential carbon-free energy carrier.
Ammonia production is an energy-intensive process. Most ammonia is produced by the century-old Haber-Bosch process, which is dependent on fossil fuels and commonly called brown (when produced with coal) or gray (when using natural gas) ammonia. A more carbon-friendly option known as blue ammonia is produced using hydrogen from natural gas in conjunction with carbon capture and storage. Â Alternatively, ammonia can be produced from the direct synthesis of nitrogen and hydrogen produced via electrolysis from carbon-free electricity sources, such as wind, solar, or nuclear. This green ammonia can be produced and consumed with limited to no carbon emissions; however, the production process has significantly higher costs than conventional production.
The incentives for clean electricity, hydrogen production and carbon capture in the Inflation Reduction Act (IRA) have the potential to reduce the relative cost premium for low-carbon ammonia. EPRI conducted a new analysis under the Low-Carbon Resources Initiative evaluating the costs (with and without IRA incentives) and resource requirements of alternative ammonia production pathways for the United States, in the 2030 timeframe.
Green ammonia production costs depend on the quality of available resources used for production within a region, among other factors. When IRA incentives are considered, the production cost for green ammonia decreases by half and more in some U.S. regions. IRA credits increase the competitiveness of solar in some parts of the U.S., such as California, but wind was generally the lowest-cost option for green ammonia production across the regions considered. The production cost of blue ammonia is also reduced by the 45Q credit for captured carbon, resulting in a lower cost low-carbon ammonia pathway than green ammonia in regions with low gas prices. Results indicate that low-carbon ammonia production costs with IRA credits may be comparable to historic grey ammonia prices in select regions in the U.S., especially along the Gulf Coast and in the Midwest, where resources are favorable and where current production capacity is concentrated.
The study also includes an analysis of the impact of IRA incentives on the costs for low-carbon ammonia exports. As a liquid fuel, ammonia can be transported long distances at lower cost, a key advantage over other carriers with lower energy density. The U.S. currently exports ammonia for fertilizer use, and there is growing interest in some global markets in the use of ammonia as an energy carrier. Japan, for example, currently has a target to import 3 million tons of low-carbon ammonia by 2030 to co-fire with coal for electricity generation, to reduce its carbon emissions. The study evaluated transport costs assuming a domestic pipeline connection between the high-quality wind resources of the central U.S. and the international shipping ports off the Texas Gulf Coast.Â
Through the Low-Carbon Resources Initiative, EPRI is addressing the need to accelerate development and demonstration of low- and zero-carbon energy technologies to 2030 and beyond to help enable affordable pathways for economy-wide decarbonization.Â
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