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Green ammonia seeks economies of scale
Supersized Australian mega-project drives down costs in bid to displace dirty existing fuels
Will the numbers ever add up on the international trade of ‘green’ hydrogen and ammonia? An international consortium hopes to prove the doubters wrong by developing a truly gargantuan wind and solar-powered hydrogen/ammonia fuel production mega-hub in Western Australia that would be the largest power generation project ever built. Energy Flux breaks down the numbers.
InterContinental Energy, CWP Global and Mirning Green Energy yesterday unveiled the mammoth Western Green Energy Hub in the south-east of WA. The sprawling development across the Shires of Dundas and the City of Kalgoorlie-Boulder boasts several unparalleled headline metrics. The scheme would:
span 15,000 sq km (larger than the surface area of East Timor)
be built in phases, up to 50 GW upstream wind/solar capacity (making it the world’s biggest, eclipsing Three Gorges)
produce ~20 million tonnes per annum of ammonia (11% of total global NH3 production today)
cost an estimated $70 billion (making it the world’s second most capital-intensive energy project after the Kashagan oil field in the Caspian)
The remote site benefits from onshore wind speeds of around 9 metres per second. This is comparable to the Horns Rev 3 offshore wind farm in Denmark – a higher-than-average wind resource site.
Combined with solar irradiation estimated at ~2,000 kWh per square metre, this gives WGEH an enviable diurnal renewable energy profile.
With “consistently high levels of wind and solar energy over a 24-hour period” the project’s capacity factor would be ~70%, InterContinental said. This is significantly above any standalone wind or solar power project.
Using these headline figures, it is possible to calculate a rough levelised cost of energy assuming a 25-year operational asset life. The full 50 GW array, producing at a constant 70% around the clock, 365 days per year, would generate 306,600 GWh per annum.
Over 25 years, that’s 7,665 TWh of electricity. And if the all-in capital cost is $70 billion, the cost of energy would be a highly competitive $0.009 per kWh – almost too cheap to meter.
Of course, this very rough estimate does not factor in transmission losses, taxes, cost of capital or ongoing operations and maintenance costs. But it does give an indication of the competitive advantages of building at this scale.
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Can supply drive demand?
WGEH would produce up to 3.5 million tons of zero-carbon green hydrogen or 20 million tons of green ammonia each year. This will be supplied domestically and exported internationally “as the green fuels market continues to expand post-2030,” the developer said.
One of the biggest stumbling blocks to export-orientated hydrogen/ammonia projects is the uncertainty around the volume of future demand and timescales for it to materialise.
InterContinental somewhat bombastically predicts that the green hydrogen sector will “become a US$2.5 trillion market by 2050”.
The company is confident that green fuels produced at the site “will meet massive future demand from multiple sectors, including in co-firing in power generation, the shipping sector, heavy industry such as steel, chemicals and mining, as well as the aviation sector”.
With the exception of power generation, these are all hard-to-abate sectors. Securing access to cheap, abundant green fuels would be an enormous boost to decarbonising Asian economies – but much will depend on economics.
Triple-dollar-digit carbon prices are not likely to materialise for the foreseeable future in most, if not all, Asian jurisdictions. In their absence, green fuels will need to compete directly with dirty incumbent energy sources.
In some applications this means displacing ‘grey’ hydrogen produced from unabated steam methane reformation. But in others it means competing with heavy fuel oil (in shipping), natural gas or coal (in steel furnaces), and diesel (mining operations).
With access to some of the world’s cheapest zero-carbon electrons, WGEH might find it can win market share without regulatory support or subsidies of any kind in some of those segments. But others might lie out of reach, particularly when the cost and logistics of shipping ammonia from WA to China, Japan or South Korea are factored in.
End-users will in most applications need to adapt their industrial processes to receive, process and utilise ammonia in place of existing fuel options. This requires capital investments that must stand on their own two feet. Guaranteed access to cheap green fuel on its own may or may not tip that calculus.
WGEH is aiming to take a final investment decision at some point post-2028. By then, who knows where commodities will be; how urgently Asian governments will wish to decarbonise; and whether wind and solar technology costs will have come down significantly (or not).
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Green fuels, red tape
Another major issue to contend with is securing project permits.
The Australian federal government recently shot down a proposed expansion to the Asian Renewable Energy Hub, another WA mega-project being developed by InterContinental and CWP, citing impacts on wetlands and migratory birds.
InterContinental says that both the AREH and WGEH sites were chosen for their lack of environmental sensitivities, and that both developments can fulfil permitting requirements.
One thing is certain: these epic Australian projects push the envelope on green ammonia ambition and scale. Their ability to navigate the regulatory regime and attract finance will be a bellwether for other at-scale developments around the world.
Seb Kennedy | Energy Flux | 14th July 2021
What do you think? Will green ammonia need subsidies to displace conventional fuels? How easy/difficult is the permitting challenge? Share your thoughts!