SCA attends 2nd conference on fuel ammonia, notes changes in approach toward “clean energy” initiatives
Strategic Choice Advisory has once again attended the annual International Conference on Fuel Ammonia (ICFA2022), held for the second time on Sep 28, 2022 in the framework of the Tokyo GX (green transformation) week. The conference, uniting government leaders, heads of major energy and chemical corporations, engineering and transportation companies, as well as research centers from all over the world, was organized by Japan's Ministry of Economy, Trade and Industry (METI), and Clean Fuel Ammonia Association (CFAA). Special thanks for the invitation to our long-time client Japanese engineering major JGC, one of the founders of CFAA.
Conference recap and key concerns
This year’s conference was very interesting and useful, just like last year’s, albeit with less numeric data and analysis. Rather, the speakers were reporting on latest activities, including various pilot projects, outlining also existing issues and tests being performed to resolve them. Indeed, a host of new projects in fuel ammonia manufacturing, power generation and shipping fleet construction are underway in many countries, especially in the Asia Pacific region (APR). Many of these projects are carried out in the framework of multilateral cooperation, quite a few utilize Japanese technologies.
Conference participants now seemed to be treating fuel ammonia, and blue ammonia at that (made from natural gas/ methane), as a matter-of-fact choice, a decision already made. This despite the fact the tests are still being conducted, and the business case is yet to be confirmed. Last year this cautious approach was voiced openly by participants, while now it is mentioned as if in passing.
Last time there was more talk about hydrogen, but now it was only noted that onshore hydrogen infrastructure construction and maintenance is extremely complicated (which it indeed is). Also, last year there was detailed analysis of ammonia manufacturing options (using wind, solar power, hydropower, nuclear power, etc.), and comparisons between blue and green ammonia (made using alternative energy sources). Now it was outlined clearly that wind and solar power availability across the globe is vastly different, while APR’s wind power and overall solar power potential is deficient, compared with most other macro regions. Therefore, fuel ammonia would make sense only in some places, taking into account also gas or fuel ammonia import costs, which have to be low enough for the whole thing to make sense. Also, it would be important to take into account seasonality in each region, to make the technologies more economically viable.
Remarkably, while last year some participants only inferred (somewhat timidly) that there is abundant newly-built coal power plant capacity and port infrastructure, which would be a waste to get rid of in favor of “clean energy” initiatives, this time it was a widely accepted approach. Asian economies have grown so fast in recent decades that they have built massive “young” generation capacity and shipping fleets, which would have to be phased out only gradually. This would happen as new “clean energy” technologies will become more readily available and viable. We must note that while this is a valid policy, the pace of replacement would likely be even slower than planned now. As Asian and other fast-growing economies continue to develop, further power generation and shipping capacity would have to be launched, thus taking even more time to phase out and switch to new technologies. Plus, as we noted last year, ships for fuel ammonia would have to be much larger than current fuel tankers, meaning further reconstruction of port facilities and other logistics infrastructure. Not to mention requiring more metal and energy for manufacturing, yet another obstacle for new technology adoption.
Importantly, the widely accepted scenario now is using fuel ammonia for co-firing coal power stations. There are plans to design, test and roll out technologies gradually boosting the share of ammonia in the fuel mix. Now the indicator is at about 10% in some projects, 20% at most in test conditions. Hopefully, 30% will become attainable in the early 2030s, possibly 50% in some places. The timescale to reach 100% spans decades, the rather optimistic target is around 2050.
A big question is what would be needed to actually burn ammonia, as facilities start reaching this level, because ammonia does not ignite in open air. It needs oxygen, which introduces further technological complexity. Co-firing ammonia and coal does allow using open air instead of oxygen, but as the share of ammonia approaches the 100% target, oxygen may need to be added. Production of pure oxygen consumes energy, and supplying the necessary quantities thereof will require launching substantial new oxygen manufacturing capacity.
Actually, this whole technological scheme of co-firing ammonia and coal is quite befuddling. Denis Zhilin, chemistry PhD, notes that you process methane to get hydrogen, which requires additional energy, then you use hydrogen to make ammonia, losing energy and thus sacrificing efficiency, and then you burn the ammonia together with coal. Along the way, you also emit additional CO2. It makes more sense from both energy efficiency and CO2 emissions standpoints to just burn methane as it is.
Another key issue is the price and supply of gas for blue ammonia. According to IEA estimates, the price of natural gas cannot exceed USD 350 per 1,000 m3, in order for blue ammonia to be commercially viable (in regions where higher output prices can be charged). How far we are from this level now… Even if the conflict in Ukraine abates now (which we do not expect), the disruption in gas supplies to Europe, relations between Europe, Inc. and Russia as a key source of gas will undoubtedly last for much longer, keeping gas prices much higher. Moreover, countries will most likely be fending for themselves, and gas may become a real scarcity. Governments will be struggling to secure enough for basic heating and manufacturing needs, rather than for new and so far economically questionable energy initiatives. Needless to say, there was no mention or analysis at the conference of Russia as a gas supplier and partner for various projects, the country’s wind and solar power potential, etc….
Among other unresolved issues is how and where to store the CO2 emitted in the process of ammonia production. This process is still not running effectively at existing storages, according to various researches, plus there is just not enough space to physically store all the extra CO2.
Viewing the various challenges, companies and governments have stepped up work on cost optimization solutions. Some focus on modular construction, while others tout the use of electrolyzers. The latter is an interesting cost optimization method for ammonia production, but also not without known issues. For example, electrolyzers have low efficiency or need a significant amount of time (as electrolysis proceeds quite slowly) to reach higher efficiency, thus often requiring additional electrolytes (e.g. sulfuric acid, which is quite corrosive and can contaminate surrounding areas). Plus, anodes have to be exceptionally durable and/or made of inert materials, to withstand the corrosion and destruction by electrolytic processes. Among options used currently, stainless steel is prone to patination, thus becoming substantially less effective (making the materials very difficult to manufacture precisely); platinum is prohibitively expensive, while graphite is way too fragile.
Last but not least, we were simply appalled by senior government officials of a key country leading the fuel ammonia initiatives openly admitting that the standards for measuring carbon emissions have been significantly relaxed. This effectively undermines efforts to reach carbon neutrality. Thus, currently only gate-to-gate CO2 emissions in the ammonia manufacturing process are measured, whereas it only makes sense to measure well-to-gate emissions… As we noted last year, any burning/processing of alkanes (including methane) into other combustible products (e.g. ammonia) leads to losses of energy and increases CO2 emissions.
Green ammonia is viable only in places where there is abundant wind power, while solar panels (another possible option) are a major source of pollution during their manufacturing, and there is a lack of raw materials for the required increase in production, plus their efficiency leaves the best to be desired. In addition, these power sources only work when logistics costs related to delivering ammonia to end users do not outweigh the low input costs, which only happens for select routes... Co-firing ammonia and coal does reduce carbon emissions compared to burning only coal for obtaining the same amount of energy. But as we noted above, producing the ammonia results in higher carbon emissions and loss of energy. Perhaps this is why this year the floor was not given to academia representatives, as last year various universities and research centers provided ample technological proof that “clean energy” initiatives are fraught with problems and discrepancies...
With all due respect, while finding alternative energy sources and reducing carbon emissions are noble goals, it seems many market players are throwing the science and economics out the window. It is one thing to test to see whether something works; it is another to test, having already decided this is the way to go, disregarding emissions and feasibility estimates and bending standards to mute criticism. So while various pilot projects may eventually churn out technologically viable and economically feasible solutions for some of the issues, will fuel ammonia become a lifesaver for our beautiful planet anytime in the foreseeable future? Most likely, no.
Book on Russian - South Korean cooperation and Eurasian railway transportation project sees strong interest among target audience
Earlier this year, in May, a book was published in Russia titled “Russian – South Korean Cooperation and Globally Beneficial Integration Project “United Eurasia”” («Российско-южнокорейское сотрудничество и глобальный интеграционный проект «Единая Евразия»). The Korean language edition was published in South Korea in late June. The book was co-authored by former Russian Ambassador, respectively, to South and North Korea Alexander Timonin; former Russian Ambassador to South Korea, former First Asia Department director at the Russian Foreign Ministry Evgeny Afanasiev, and Mr. Chang, Chi-hyeok, famous South Korean entrepreneur, founder and long-time chairman of petrochemical major Kohap. SCA Managing Partner Andrew Afanasiev participated in and coordinated the writing and publication of the book, per a contract between SCA and Mr. Chang’s NGO Korean Academic and Cultural Foundation (KACF), and is credited in the book for his role.
The book examines the development of Russian – South Korean cooperation in the 30+ years since establishment of diplomatic relations in 1990, outlining the achievements and shortcomings over the years. A special tribute is paid to Mr. Chang for his various business and charity projects in Russia’s Far East region since the early 1990s. A significant portion of the book is devoted to the transcontinental transport corridor project “United Eurasia”, which Chang, Chi-hyeok developed and has been actively promoting from the mid-2000s.
The project calls for the launch of a higher-speed (up to 180-200 km/h) cargo transport railway on the basis of the existing Trans-Siberian Railroad (Transsib, TSR). Transsib and the Baikal-Amur Mainline (BAM) are to be modernized and substantially revamped in process. Also, the project stipulates the transformation of Vladivostok into what is called a MEGA-City, cementing its pivotal role in regional development and Russia-APR trade and economic relations.
Back in 2012-2014, SCA conducted a detailed pre-feasibility study of the project and prepared various materials for Korean government authorities and project initiators who presented the project to Russian government institutions, including Russian Railways (RR). The project underwent rigorous examination by RR and received positive reviews, allowing commencing project negotiations on a government level. Unfortunately, the start of the military conflict in Ukraine in 2014 eventually led intergovernmental discussions to a halt, but corresponding government corporations continued close cooperation, and Russian-Korean railway cargo turnover and transit through Russia increased manifold in subsequent years.
The book’s text was finalized in Jan 2022 and already sent to print by the time Russia started its military operation in Ukraine in late February. As significant effort had been put into fine-tuning the content in the run-up to the presidential elections in Korea in Mar 2022, a decision was made not to further alter the text of the Russian edition amid the unfolding war in Ukraine. Corresponding notes on the impact of the military conflict on project realization were inserted into the Korean edition.
The book’s main idea that such cross-border integration projects should continue in spite of political differences and even conflicts between countries rings true to this day. The importance of a transport corridor between Russia and APR countries has actually never been greater. Tensions between Russia and the West, the West and China, and between various Asian countries (e.g. South Korea and China, China and Japan, Japan and South Korea, China and India, etc.) have been rising over the last 15 years or so, thus the focus on cooperation vs. conflict is all the more relevant on a global scale.
In addition to the United Eurasia project, the book also covers in detail the latest trends in Eurasian railway sector and transcontinental transport corridor development. A large portion of the book is also devoted to Russian-Chinese relations, exploring whether the countries are more like partners or competitors in this sector and on the whole.
Significant interest shown by high-ranking recipients of the book in both government institutions and large corporates, to whom we have been presenting the book, prove its relevance and highlight maintained mutual interest in economic cooperation in both Russia and South Korea, as well as in other APR countries.
SCA attends conference on fuel ammonia, reiterates concerns over "clean energy" initiatives
Strategic Choice Advisory is grateful to have been invited to the First International Conference on Fuel Ammonia (ICFA2021), held on Oct 6 in the framework of the Tokyo Beyond Zero week. The conference, uniting government leaders, heads of major energy and chemical corporations, as well as engineering, transportation companies, and universities/ research centers, was organized by Japan's Ministry of Economy, Trade and Industry (METI) and Clean Fuel Ammonia Association (CFAA).
It was very interesting to hear firsthand the latest news and respective countries' policies and planned projects in ammonia and hydrogen, touted as the key clean energy sources of the 21st century. The speeches by representatives of large sector players and academia, potential consumers and creditors were full of highly useful data, findings and estimates for the emerging sector's development.
At the same time, we were encouraged to see that the field recognizes the substantial technological and economic challenges facing this much-hyped development initiative, which we have been speaking about for some time. Our impression was that even high-ranking government officials see this as a most plausible hypothesis that requires proving, a business case yet to be determined. Positively, we saw the presence of various benchmarks, yardsticks for measuring the viability of the ammonia and hydrogen options, that have already been set forth by corresponding government institutions and market participants. The task now is to conduct R&D and field tests to see whether these criteria can be met to ensure the business case is indeed there.
As a senior government official noted in his speech at the event, it should be treated as one of the options, an alternative to achieve energy security. And as Japanese engineering firm JGC (one of our clients) rightly noted, how to reach net-zero, still remains to be established.
It was also interesting to hear that some supply chain options, some routes may work better than others. Given that the economics for ammonia and hydrogen work best on solar, and with some reservations, wind power, supplying the products from certain places to specific destinations might actually work from a business standpoint.
Overall, Japanese speakers remarked that for Japan the logistics component would be a key factor for assessing the cost competitiveness of ammonia and hydrogen imports. For example, while Russia and some other countries (e.g. in the Middle East) may have cheap gas as a natural advantage (for blue ammonia, despite its ecological concerns), or, a reliable source of wind energy, as in the case of Russia's gas-rich Yamal region, where gas major Novatek is developing its LNG facilities together with Japan's Mitsui Corporation, JOGMEC and MOL, among other international partners, the cost of transporting the output to Japan may all but nullify these advantages at this point.
That is why Japan's Itochu Corporation, Toyo Engineering and JOGMEC are carrying out the feasibility study for supplying ammonia from Itochu's gas fields in Russia's Irkutsk region in Siberia, situated closer to Japan. As we understand, the logistics factor is a key consideration there.
Key concerns and reservations
Overall, there are still multiple unresolved issues, spanning the economics of the manufacturing and transportation processes, technological viability, and, importantly, ecological problems. Thus, on the economy side, many of the proposed production methods end up being much more energy-intensive, have much lower energy efficiency, while transportation costs are times higher for ammonia, and especially hydrogen.
Also to be taken into account are the significant costs of designing and building a completely new shipping fleet and onshore transportation and storage infrastructure. Japanese government representatives noted at the conference that coal manufacturers and power plants, for instance, will have to rebuild their entire docking and storage terminal infrastructure for fuel ammonia. Meanwhile, so far Japanese R&D institutions have only managed to reach 20% co-firing - at that, in test conditions, and are hopeful 30% can be reached in tests in the next 5 years. This means immense new capex to facilitate introduction of a fuel that would only account for a very small share of the overall energy balance.
According to one of the conference speakers, the vessel size would be at least two times greater for fuel ammonia. Using solar batteries on such ships to minimize the enormous carbon imprint would cause the ships to become up to 15 times larger in area! All these new and additional ships would require times more metal and other resources (where from, at what cost and with what kind of carbon emissions?). Conference speakers also noted that there are currently not enough economically viable raw materials globally for the intended dramatic increase in production of ammonia as such...
Currently and in the foreseeable future, making ammonia and hydrogen will only be feasible with solar and wind energy, whereas there are various efficiency and raw material limitations for solar panels, while wind energy is not as abundant and reliable in most places (especially in Asia), plus it is not as productive in terms of generated energy per area. Even for locations with ample solar and/or wind energy like Chile or Russia's Yamal region, the key question would be the transportation cost.
Applying hydrogen fuel cells in ships may be more efficient, but it is much more difficult to transport liquid hydrogen than liquid ammonia. With ammonia, even though it is a more readily usable fuel, a major risk is that it is highly poisonous, while hydrogen is inflammable and easily penetrates various materials. Both products would require additional, very costly safety and security measures at all elements of the supply chain, both on water and on land.
Using ammonia as feedstock for further processing in the chemical industry is also an option, but again, it would entail much reconfiguring and investing in production and transportation facilities.
Various other technology issues, e.g. ammonia not burning in the presence of air, difficulty and energy intensity of extracting ammonia from the chemical reaction output through liquefaction, also persist. There are no known technological solutions for the foreseeable future (spanning decades).
Leaving technology issues aside, while lower efficiency and higher costs, as well as resulting higher general inflation, may be just the price to pay for saving and enjoying our beautiful planet, the most troublesome aspect is actually much higher CO2 emissions during the production, and also transportation process. Full-cycle carbon and energy emissions (including production of various equipment and components) are in many cases times greater, thus it actually makes more sense, and does less damage, to keep burning fossil fuels. This completely destroys the entire case for using ammonia and hydrogen as a fuel.
Plus, all the extra CO2 needs to be captured and stored, if it is not made using solar or wind energy (where on Earth?), while compliance by all local partners across the supply chain must be strictly monitored (another concern). As said above, solar and wind energy make the equation more palatable, but their availability and reliability, as well as sufficiency of raw materials for solar panels, etc. components, including for transportation infrastructure (e.g. metals for new ships and terminals), remain unresolved.
Denis Zhilin, chemistry PhD, says, "Currently there is only one technologically available process for synthesis of ammonia: direct catalytic reaction of hydrogen with nitrogen under pressure. This process is accompanied by the release of heat energy that should be utilized on the spot (and thus cannot be used by most of the consumers, which poses a question of what to do with the energy at the place of production of ammonia). Eventual burning of ammonia will produce 87% of energy that is released during direct burning of the equivalent amount of hydrogen. Plus, some energy will be consumed to provide the industrial process itself.
The nitrogen that is part of ammonia is available anywhere from the atmosphere, but its extraction from air consumes energy and poses the problem of utilization of pure oxygen. Hydrogen does not occur in nature and that is the fundamental trap of the “hydrogen energy” initiative. It can be obtained from either of two industrially available processes: steam reforming of methane (and, more broadly, alkanes), or water electrolysis. Steam reforming requires energy, that is provided by burning extra alkanes. Both the process itself and the burning of extra alkanes lead to the emission of CO2. In general, the only source of energy here is fossil alkanes, and their direct combustion is the most ecologically and energetically efficient process. Any transformation of alkanes into other combustible products results in the losses of energy and increases CO2 emission. Water electrolysis also consumes energy, but it is electricity that could be obtained the green way: using solar cells or wind power stations. Again, here we come to the reservations voiced above."
Therefore, for the time being, all this new energy talk remains but a hypothesis that requires proving, and it is not a given that current R&D projects will churn out an acceptable solution. We have been looking into a number of related projects lately, including those involving plasma technologies. Still, how these technologies will work at industrial scale, whether there will be enough resources, needs to be tested in practice. It seems that, indeed, these products should be treated as one of the options for ensuring energy security and reducing pollution, working better in some settings, for certain routes.
In general, while mitigating climate change is a lofty, noble goal, whether or not net-zero can actually be reached, is still unclear. Not only in relation to ammonia and hydrogen, but also to other initiatives such as electric vehicles and the like. To be continued...
Assignment on reagent production localization completed for leading Japanese manufacturer
SCA has completed a project related to production of reagents and other solutions for hematology diagnostic devices by a major Japanese diagnostic equipment manufacturer. The company had launched production of several reagents in Russia back in 2019 together with a local partner, hoping to gain corresponding preferences in procurement tenders, but the reality turned out more complicated than expected, and the Japanese company turned to an independent medical industry adviser.
Our task was to examine the expediency and viability of launching production in Russia of new reagents for specific diagnostic devices, as well as other supplies including control blood, calibrators, detergents, diluents, test tubes, and etc. A key question was the level of localization, i.e. optimal production format across these products, depending on existing regulations and planned changes thereof, technological processes, and demand from the company’s customer base.
The regulations providing support to locally manufactured medical products have been evolving steadily in Russia, but were thrown into disarray with the outbreak of the Covid-19 pandemic. Most importantly, in addition to studying the maze of legislative requirements, the decisions on launching production, degree of localization, etc. need to be made, first of all, based on customers’ unmet needs, their laboratory operational and procurement processes.
We therefore advised on key product priorities for localizing manufacturing among the range of supplies for diagnostic devices, and optimal product formats in each case, and overall operating model for the Russian market. The Japanese company is now examining the provided recommendations, and deciding on further steps in manufacturing its products in Russia.