Navigating the Future Seas: The Role of Green and Blue Ammonia in Maritime Fuel from 2030 to 2050

Green Cross United Kingdom CIFI Labs Circularity Finance

As the global shipping industry steers toward a more sustainable future, the spotlight increasingly falls on innovative fuel alternatives capable of curbing carbon emissions. Among these, ammonia presents a promising zero-emission contender. Unlike conventional fuels, ammonia contains no carbon, allowing it to burn without CO2 emissions under optimal conditions. Presently, however, most ammonia is synthesized from hydrocarbons, offering no significant advantage in carbon abatement. This calls for a pivotal shift towards the production of green and blue ammonia, synthesized through more sustainable methods.

The production of ammonia predominantly relies on the Haber-Bosch process, which fuses nitrogen and hydrogen under intense conditions to yield ammonia. The environmental impact of this process hinges significantly on the sources of nitrogen and hydrogen used. Conventionally categorized by color labels, 'brown' ammonia originates from fossil sources like natural gas or coal, 'green' from renewables or nuclear power, and 'blue' from fossil sources integrated with effective carbon capture and storage (CCS). The distinction is crucial as it influences the carbon footprint of the resultant ammonia, making green and blue variants particularly vital for ecological sustainability.

Despite its potential, the widespread adoption of green and blue ammonia faces substantial hurdles. Key among these is the need to scale up production to meet the burgeoning demand, particularly in the maritime sector, which is poised to significantly increase its reliance on clean ammonia due to its suitability as a marine fuel. This shift is necessitated by the sector’s immense fuel consumption, which, if replaced by ammonia, would require a dramatic increase in ammonia production. This is further complicated by competing demands for ammonia, including its traditional use in fertilizers and emerging applications in power generation and hydrogen production.

To address these challenges, an expansive array of green and blue ammonia projects has been announced, aiming to augment production capacities substantially by 2030. These projects, however, span a wide timeline from announcement to fruition, often extending over several years, particularly for substantial stand-alone initiatives requiring significant renewable energy inputs. Our analysis leverages a comprehensive survey of projects announced up to mid-2023, assessing their potential contribution to the ammonia supply by 2030 and beyond, towards 2040 and 2050. As we delve into the future, balancing supply with the escalating demand from various sectors becomes crucial, necessitating a strategic approach to development, distribution, and utilization.

This article aims to provide stakeholders in the shipping and energy sectors with an in-depth look at the trajectory of green and blue ammonia production. We will explore the technical, economic, and regulatory landscapes that shape this future, emphasizing the crucial role of innovative technologies and international cooperation in achieving a sustainable balance between supply and demand. Join us as we chart the course towards a cleaner maritime industry, powered by the potential of green and blue ammonia.

Forecasting the 2030 Landscape: The Supply Dynamics of Green and Blue Ammonia"

As the global push towards net-zero emissions intensifies, the spotlight has turned to green and blue ammonia as pivotal players in the renewable energy landscape. By 2030, the sector is poised for a transformative leap, with an expansive rollout of projects aimed at bolstering clean ammonia production. Currently, the global project portfolio includes 161 blue and green ammonia initiatives, expanding into 206 unique project phases across 45 countries. This surge in clean ammonia projects reflects a decisive shift from traditional fossil-based methods, promising a production capacity of 244 million tonnes per annum (MTPA)—a substantial increase over the existing capacities.

The Growth Trajectory and Geographic Spread

The bulk of these projects, while ambitious, are still in the nascent stages—concept or feasibility—with 67% of the production capacity fraught with uncertainties in early development stages. Despite this, the commitment remains robust, with a projected onstream capacity of 193 MTPA by 2030, covering 79% of the announced capacity. This growth is supported by a compound annual growth rate (CAGR) of 112% for clean ammonia production, showcasing an aggressive expansion that outpaces even the International Energy Agency's (IEA) benchmarks for green and blue hydrogen production.

Geographical Dynamics

The geographical distribution of these projects is equally noteworthy, with a significant concentration in countries like the United States and Australia, which alone plans to command 22% of the global clean ammonia output. This geographical spread not only diversifies the production landscape but also aligns with regional policies and the availability of renewable resources, crucial for the sustainable production of green ammonia.

Implementation Timelines and Production Risks

Project timelines suggest a completion window of 2 to 24 years, with the majority aiming for a timeline within a decade from announcement. This timeline is critical as it correlates with the production capacity, indicating a larger production scope for projects with longer timelines. However, the real challenge lies in the transition from announcement to operational reality, fraught with risks especially for projects still in the conceptual or feasibility stages.

The Road Ahead

Looking towards 2030, the expected operational projects are set to redefine global ammonia production, transitioning from predominantly fossil-based to a cleaner, more sustainable framework. This shift is not just a win for environmental sustainability but also positions ammonia as a cornerstone in the global energy transition. The journey from now to 2030 will be pivotal, as stakeholders across the globe navigate the complexities of project implementation, technological advancements, and market dynamics to meet the growing demand for green and blue ammonia.

This analysis aims to provide a comprehensive overview of the expected supply of clean ammonia by 2030, exploring the intricate balance of project development, geographical distribution, and market readiness. As we look to the future, the role of green and blue ammonia in achieving global emission targets becomes increasingly apparent, setting the stage for a significant reshaping of the energy landscape.

The Future of Ammonia: Projected Demand and Uses in the Energy and Maritime Sectors by 2040 and 2050

Looking towards the mid-century, the demand for ammonia, especially within the maritime and energy sectors, is poised to undergo significant changes. Using advanced modeling tools like the DNV Pathway model and the DNV Energy Transition Outlook (ETO) 2022 model, projections for ammonia demand paint a diverse and rapidly evolving landscape.

Ammonia in Maritime Fuel

The maritime sector is set to experience a profound shift in fuel sources, with ammonia emerging as a key player. According to the DNV Pathway model, demand for ammonia as a maritime fuel is expected to escalate dramatically from a modest 2.3 million tonnes per annum (MTPA) in 2030 to a substantial 62 MTPA by 2040, and further to an impressive 245 MTPA by 2050. This surge highlights the maritime industry’s shift towards cleaner fuel alternatives, with both green and blue ammonia playing pivotal roles in reducing greenhouse gas emissions from ships.

Ammonia as a Feedstock

In contrast, the demand for ammonia used as a feedstock for fertilizers and explosives is projected to grow more modestly. The ETO 2022 model forecasts an increase from approximately 186 MTPA in 2021 to about 200 MTPA by 2050. Despite being a slower growth rate compared to maritime fuel, this steady increase underscores ammonia's continued importance in agricultural and industrial applications.

Ammonia as an Energy Carrier

Another burgeoning role for ammonia is in the transport of hydrogen. Starting in 2030, ammonia is expected to be increasingly used for deep-sea transport of hydrogen, where it will be cracked back into hydrogen at its destination. By 2050, this trade is projected to exceed 150 MTPA, with a significant portion originating from Northeast Eurasia. This use of ammonia highlights its potential as a versatile and efficient carrier in the global hydrogen economy.

Regional Variations and Supply Chain Dynamics

The analysis also reveals that differential costs and logistical considerations will lead to variations in supply chains based on the end-use category of ammonia. For instance, the economic and distance factors will significantly influence how ammonia is transported and utilized across different regions and sectors.

Environmental Considerations

By 2050, over 30% of ammonia production for feedstock will still involve traditional, unabated methods from methane reforming. However, the use of ammonia in shipping offers a path toward complete abatement, as maritime energy use could transition entirely to clean ammonia. This shift is crucial for the sector to meet global emissions reduction targets.

Sources and Types of Ammonia

The composition of ammonia sources by 2050 will also see a shift; for feedstock uses, grey ammonia will still account for 39%, with blue ammonia making up 35%, and green ammonia 26%. In contrast, for maritime fuel, blue ammonia will dominate, comprising 76% of the supply. This distinction underscores the different paths towards decarbonization in various applications of ammonia.

The future of ammonia by 2040 and 2050 is marked by dynamic growth in demand across several key sectors, particularly in maritime fuel and as an energy carrier. This growth is accompanied by evolving supply chain logistics and regional production variations. As the world pivots towards cleaner energy solutions, ammonia stands out not only for its traditional roles but also for its emerging potential to revolutionize how energy is stored and transported on a global scale.

Navigating the Future: Market Dynamics of Ammonia as a Clean Energy Carrier and Maritime Fuel by 2050

Ammonia's role in the global energy landscape is poised for a transformation, shifting from a primary use in fertilizer production to becoming a central player in the clean energy transition. Up until 2023, ammonia's main application has been as an industrial feedstock, particularly for fertilizers. However, its future growth is increasingly linked to its potential as a carrier of clean energy, particularly in the maritime sector, where it is expected to fulfill a significant portion of the demand for zero-emission fuels.

Ammonia as a Nascent Marine Fuel

Ammonia is emerging as a promising candidate for maritime fuel, driven by the broader demand for hydrogen and its derivatives across various energy sectors. Projected to constitute about 35% of all shipping fuels by 2050, ammonia's rise in the maritime industry reflects its broader acceptance as a sustainable energy source. However, within the context of the clean hydrogen, ammonia, and e-fuels market, marine ammonia fuel represents less than 10%—a relatively small segment indicating the extensive potential for growth in other areas as well.

Economic and Regulatory Drivers

The transition to zero-emission fuels like ammonia is largely driven by societal demand for reduced greenhouse gas (GHG) emissions, underpinned by regulatory support and financial incentives. For instance, the IRA program in the USA significantly subsidizes the cost of green and blue hydrogen, effectively lowering prices for end-users and accelerating market demand. These dynamics are supported by a self-reinforcing feedback loop, where increased production leads to lower costs and higher demand, further spurred by supportive policies and subsidies.

Supply Chain and Distribution Dynamics

The physical availability of ammonia is crucial for its adoption as a marine fuel. The supply chain for production and distribution needs to be robust, integrating ammonia into the shipping sector not only as a fuel but also as a vital component of the transportation infrastructure itself. Shipping is likely to play a dual role, acting both as a consumer and a provider in the ammonia supply chain, with the conversion of hydrogen to ammonia and back offering a cost-effective method for transporting hydrogen.

Market Competition

Ammonia faces competition from other zero-emission fuels such as hydrogen, methanol, other e-fuels, and biofuels. Each of these contenders will vie for market share within the zero-emission ship fuel market, which itself competes within the broader maritime fuel market. Current projections suggest that ammonia will make up about 50% of all clean fuels, a significant share, but not dominant, indicating a diverse future fuel mix where no single solution captures the entire market.

Strategic Implications and Path Dependencies

The market dynamics for ammonia and other clean fuels are influenced by strategic first-mover advantages and path dependencies. An early lead in the market can create a technology lock-in effect, where an initially dominant clean fuel secures a lasting advantage. However, regional and local contexts are likely to prevent a winner-takes-all scenario, with ammonia, methanol, and biofuels expected to split market share relatively evenly due to similar cost learning rates and local supply chain configurations.

Looking ahead, the ammonia market is at a pivotal juncture, with its future intertwined with global efforts to transition to a low-carbon economy. While ammonia has significant potential as a clean maritime fuel, its role within the broader clean energy landscape will be shaped by a complex interplay of market forces, regulatory frameworks, and technological advancements. As the industry navigates these waters, stakeholders must consider not only the economic and environmental benefits of ammonia but also the strategic decisions that will define its place in the energy hierarchy of tomorrow.

The Evolution of Green and Blue Ammonia: Global Trends and Market Dynamics up to 2050"

Before 2021, the production of green ammonia was relatively modest, limited to about 20 kilotonnes per annum in Peru, with no significant production of blue ammonia. However, by the second quarter of 2023, the landscape has shifted dramatically with the announcement of 161 clean ammonia projects, poised to deliver a total production capacity of 244 million tonnes per annum (MTPA). This burgeoning interest, particularly evident from 2021 to 2023, suggests an ongoing expansion, with further contributions expected towards the 2030 supply of green and blue ammonia.

Global Distribution and Development Stages

These projects are globally distributed, with a significant concentration of green ammonia projects in Australia and blue ammonia projects predominantly in the USA. Despite the vast potential capacity, most projects are still in their infancy, which introduces a degree of uncertainty regarding their completion and operational status. Nevertheless, a substantial 79% of the announced production capacity is projected to be online by 2030, with blue ammonia making up 12-16% of this capacity.

Resource Access and Production Costs

The development of green versus blue ammonia in any given country is heavily influenced by the availability of natural resources like natural gas and renewable energy potentials. Regions with excess natural gas might opt for exporting ammonia, a cleaner alternative compared to LNG and methanol, as ammonia does not involve end-user carbon removal. For green ammonia, regions with abundant wind and solar power capabilities, especially where local demand for renewable electricity is limited, stand out as potential leaders in exporting green ammonia.

Market Competition and Cost Dynamics

The competitive landscape for green and blue ammonia is shaped by market forces, including regulations, greenhouse gas (GHG) taxes, and stakeholder expectations. These elements interact with learning curves, leading to decreased production costs over time. While competition exists across various markets—from maritime fuel to fertilizers and power production—there is also a positive synergy between these markets and the advancement of production technologies, which helps drive down costs.

Export Focus and Market Expansion

Unlike the current market dominated by local consumption, primarily for fertilizer production, the future of clean ammonia is targeted towards international export. The planned production facilities, particularly those larger than any existing ones today, indicate a shift towards meeting broader global demands. Ammonia producers are increasingly looking to serve multiple sectors, not just maritime fuel but also power plants and as a hydrogen carrier, diversifying potential revenue streams.

Implementation Likelihoods and Projected Output

Despite the ambitious announcements, the realistic output by 2030 may be lower than expected, with only a fraction of the announced capacity likely to become operational. Estimates suggest that only about 43 MTPA, including 14 MTPA of blue ammonia, will be available under a balanced scenario. This includes a dedicated 4-7 MTPA for shipping and potentially 21-31 MTPA spread across other sectors like fertilizers and energy.

Renewable Energy Sources and Demand Projections

The majority of green ammonia production relies on a combination of wind and solar PV technologies. The demand for ammonia as a maritime fuel is set to rise sharply, from 2.3 MTPA in 2030 to 62 MTPA by 2040, and reaching 245 MTPA by 2050. This rapid increase in demand positions green and blue ammonia as critical components of the maritime sector's transition to zero-emission fuels.

Future Supply-Demand Balance and Market Strategy

The future balance between supply and demand for clean ammonia is expected to stabilize, with producers adopting a flexible strategy of catering to multiple market segments. This approach not only mitigates risks but also capitalizes on the expanding market opportunities across different sectors. Moreover, the potential competition from other off-takers with greater purchasing power could influence market dynamics, making the landscape for clean ammonia both complex and competitive.

In summary, the evolution of the green and blue ammonia markets up to 2050 highlights a significant shift from local consumption towards a globally integrated market, characterized by ambitious production targets, diversified applications, and a strategic focus on renewable energy sources.

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Andrea Frosinini Erik Valiquette, CCLP Tom James Chris Sunderman Bob Gravestijn Venu Borra Jonathan Garcia Amine Echtati Ruy Campos Dugone Virginia Mijes Martin Harley Hermanson Sami Bousri Shawn Chambers