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.
Dennis 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.