Get ready for the boom: the ammonia market will increase four-fold until 2050
This article is part of our green ammonia series. Read the main green ammonia article here. Keen to know about green ammonia technologies? See this article.
By Iris ten Have, Fernanda Bartels, and Yair Reem
Synthetic ammonia is essential as a fertiliser: without it, we could only feed about half of the world’s population. However, its production process currently emits close to 500 Mt CO2e per year. Apart from that, ammonia production consumes roughly 2% of global energy, 20% of industrial natural gas, and 5% of industrial coal. All in all: a dirty business.
Nevertheless, in the coming decades, synthetic ammonia will take on (at least) three additional roles apart from acting as fertiliser: energy storage medium, zero-carbon fuel, and hydrogen carrier. To make this work in a green and sustainable manner, it is essential that we decouple ammonia production from fossil-based resources.
The global ammonia market size was accounted for at $78B in 2022 and has been predicted to grow to $130B by 2030. The total global market volume of ammonia was 183 Mt in 2020. This includes roughly 156 Mt used as fertiliser and 27 Mt for other (industrial) applications such as plastic production, fibres, dyes, pharmaceuticals, nitric acid, and explosives. By 2050, the global market volume of ammonia has been predicted at 688 Mt in total of which 566 Mt should be green ammonia. The 2050 market volume can be broken down into three sectors that we will briefly touch upon below:
- 242 Mt demand as fertiliser (including bioenergy)
- 127 Mt demand as hydrogen carrier (including energy storage)
- 197 Mt demand from maritime sector (including energy storage)
Fertiliser
Ammonia’s main application has been and still is as synthetic fertiliser. As the global population is expected to continuously increase at least till the mid-21st century, the demand for synthetic fertiliser will certainly increase too. Additionally, the expected increase in bioenergy and biofuels will require more biomass and thus more synthetic ammonia as fertiliser for non-food applications.
Hydrogen carrier
Hydrogen will inevitably play a role in the energy transition, but also comes with challenges. Hydrogen is the smallest molecule in the universe and is therefore difficult to store and transport. Apart from leakage risks, the cryogenic tanks or high-pressure cylinders are required to make it an expensive undertaking. Ammonia has a relatively high hydrogen content (approximately 17.6% by weight) while it is easier and cheaper to store and transport: it is a liquid at modest pressure (10–15 bar) or refrigeration temperatures (-33°C). This makes it an ideal medium for hydrogen and/or energy storage and transportation. Besides, a distribution network already exists through which ammonia is stored in large refrigerated tanks and transported around the world through pipes, road tankers, and ships.
Maritime sector
Today, the shipping industry uses heavy fuel oil: the dirtiest of the dirtiest when it comes to fossil fuels. The International Maritime Organization (IMO) includes ammonia fuels in its plans to reduce greenhouse gas emissions by 50–70% in 2050 compared to 2008. Ammonia fuels have been used before. In 1943, during World War II, Belgium used ammonia as fuel in roughly 100 buses due to a diesel shortage. However, they went back to diesel after the war was over; mainly due to costs. Keeping the Net Zero in 2050 scenario in mind, it has been predicted that ammonia fuels could make up 25% of the total fuels used in shipping by 2050.
Ammonia has a couple of benefits over other alternatives. When comparing it to fossil fuels: virtually no CO2 is emitted when ammonia is burned in an internal combustion engine. The only by-products are water and nitrogen. Besides, ammonia’s energy density (3 kWh/L) is about 10 times as high compared to lithium-ion batteries. Moreover, thanks to a century of ammonia usage in agriculture, a vast infrastructure already exists: 120 ports worldwide are already equipped with ammonia terminals.
The downsides, however, include toxicity when inhaled in concentrated form and it is likely that personnel will require additional training to handle ammonia fuels safely. Moreover, ammonia has only half the energy density of traditional shipping fuel (fossil-based hydrocarbons). Consequently, storing ammonia fuel onboard requires more space. The same energy density issue often holds for other alternative shipping fuels, like methanol. Another concern is that (incomplete) ammonia combustion may release nitrous oxide and/or nitrogen oxides, which have a much higher global warming potential (GWP) than CO2. Catalytic converters may be needed to mitigate this.
Production costs and reaching price parity with grey ammonia
At the moment (2022), producing ammonia with fossil-based resources is 73% cheaper in the US compared to green ammonia produced using green hydrogen with the traditional Haber-Bosch process. When green hydrogen is used in the process, the electrolyser and renewable electricity are the main cost drivers. Once green hydrogen becomes cheap and widely available, green ammonia may reach price parity.
An important consideration to keep in mind when using green hydrogen for the Haber-Bosch process is heat integration. In the past century, engineers have literally undertaken every single step they could possibly take in terms of process optimisation. When we produce hydrogen with an electrolyser instead of via steam methane reforming, the excess heat produced by the Haber-Bosch reaction cannot be reintegrated in most cases. The operating temperatures of most electrolysers are simply too low; only with a solid oxide electrolyser could waste heat integration potentially be leveraged. If the excess of heat goes to waste instead, the overall process becomes less energy efficient and thus more expensive.
Regarding green ammonia production, the Ammonia Energy Association’s target costs for 2030 are 0.48 USD/kg and for 2050 0.32 USD/kg. Currently, grey ammonia produced through Haber-Bosch costs around 0.33 USD/kg. The carbon tax will likely be an important instrument in bringing down the costs of green ammonia further and faster while driving the costs of grey ammonia up. With carbon taxes, the best case production price for green ammonia in 2050 is around 0.35 USD/kg. Another important point to consider is that the main cost driver of ammonia production may change: the cost of natural gas is the main driver for grey ammonia production with hydrogen sourced via methane reforming, while for green ammonia production, the main cost driver will be renewable electricity if the hydrogen is sourced from water electrolysis. All in all, it seems plausible that green ammonia will become cost competitive with grey ammonia by leveraging carbon taxes and economies of scale.
The alternative is to use a completely new technology, e.g. direct electrolysis to produce ammonia, that omits the need for green hydrogen. Although such technologies are certainly under development, their technology readiness level (TRL) is a lot lower compared to the classical Haber-Bosch process with green hydrogen. Consequently, reaching full-scale commercialisation as well as price parity may take time. We will elaborate on TRL, willingness to pay, and regulations in the paragraphs below.
Technology readiness
Haber-Bosch with green hydrogen is already a relatively mature pathway (TRL 7–9). The core technology was invented more than a century ago and the only difference with the traditional non-green Haber-Bosch process is that grey hydrogen is replaced by drop-in green hydrogen. Sounds easy, but we do have to take into account here that green hydrogen simply isn’t available at low costs at the moment. The main developments will therefore have to be around cheap green hydrogen (produced e.g. via water electrolysis) in the case of Haber-Bosch with green hydrogen. Techno-economic analyses suggest that green ammonia production can both be environmentally friendly and economically competitive when improvements in electrolyser efficiency are achieved, the price of the electrolyser decreases, and the levelised cost of energy (LCOE) for renewable energy decreases.
Although direct electrolysis of water and nitrogen is an interesting alternative to create green ammonia, its TRLs are currently low (2–4) and reaching technology maturity will therefore likely take longer. The same applies to biocatalytic and photocatalytic pathways.
Willingness to pay
The international energy agency (IEA) estimates that we will require an investment of roughly $15B per year into green ammonia and related technologies to get to Net Zero in 2050. In the past years, multiple billions of dollars of investments have already been announced and/or deployed into green ammonia technologies. Projects are actively pursued in the United Arab Emirates, South Africa, the Netherlands, and Germany. Additionally, projects have been announced in Saudi Arabia, Australia, New Zealand, Spain, Norway, Morocco, Chili, the US, and more. All in all, it seems like there is a significant willingness to finance the development of green ammonia technologies.
Regulations
As the world is gearing up to limit global warming to 1.5–2°C, an increasing number of countries have been focussing on carbon pricing as part of the mitigation strategy. While the current global average price per tonne of CO2 emitted is only $6, policies will likely be implemented in the coming years. In the European Union, the price per tonne of CO2 emitted has already reached $100 and the average price could increase to $75 by 2030 with carbon pricing schemes.
The two main options for carbon pricing are carbon taxes and emission trading schemes. Carbon taxes are the easiest to adopt, for example, by tweaking existing fuel taxes. They can also be expanded to include other greenhouse gases, such as methane and nitrous oxide. Besides, they would provide certainty over future emissions prices. Emissions trading schemes may provide certainty over future emissions levels but could be more challenging to implement. Some countries, including Canada, Mexico, and 14 EU countries, have already chosen to adopt a combination of both carbon pricing options. For example, Sweden’s carbon tax was as high as €118 per tonne of CO2 emitted in 2022. The existence of such CO2 pricing schemes could accelerate the cost competitiveness of green ammonia by more than a decade.
The bottom line is that the costs of emitting greenhouse gases will increase in the coming years due to carbon pricing policies, which will encourage both energy conservation and climate tech investments. Moreover, it will incentivise humanity to adopt a more renewable mindset and therefore create a business opportunity for, amongst others, green ammonia-related technologies.
Subsidies for green hydrogen will likely be essential when green ammonia is produced with green hydrogen via the Haber-Bosch process. The main cost driver is the cost of green hydrogen, which is determined by a combination of three factors: (1) efficiency of the electrolyser, (2) price of the electrolyser, and (3) costs of renewable energy. In the best case scenario without subsidies taken into account (i.e. high system efficiency (60–80%), high system cost decrease, and low renewable electricity costs (0.06 USD/kWh)), green hydrogen becomes cost competitive with grey hydrogen around 2035. Subsidies, like governmental support, could significantly speed up this process.
Unleashing the potential of green ammonia: a catalyst for the energy transition
Green ammonia is revolutionising various industries by providing a clean and sustainable alternative to traditional ammonia production methods. Not only is the global ammonia market projected to grow four-fold by 2050, driven by increased demand for fertilisers, but green ammonia also holds immense potential as a hydrogen carrier, shipping fuel, and energy storage medium.
The versatility and high energy density of green ammonia compared to e.g. lithium-ion batteries make it a practical solution for large-scale storage and transportation, particularly in areas lacking hydrogen infrastructure. As the world strives to achieve ambitious climate goals and transition to a low-carbon economy, the adoption of green ammonia becomes vital. Collaboration between governments, industries, and research institutions is crucial to overcome challenges such as high costs and infrastructure development. By supporting and investing in the growth of the green ammonia market, we can accelerate the global energy transition and combat climate change effectively. It’s time to embrace the potential of green ammonia and drive the sustainable future we envision.
