By Gajendra Yadav
India is taking steps towards achieving its goal of net-zero carbon emissions by 2070 by placing emphasis on Green Hydrogen as a potential solution. The country recently announced its Green Hydrogen Policy which is expected to provide a significant boost to the sector. Green Hydrogen can reduce carbon emissions in heavy industries such as refineries, steel, and fertilizer. In particular, Green Ammonia, a derivative of Green Hydrogen, can be particularly useful in the fertilizer industry.
The subsidy for the fertilizer sector was pegged at Rs. 1.3 trillion, Rs. 1.4 trillion and Rs. 1.05 trillion respectively in the last three budgets starting 2020-21.” Demand for fertilizer in India is expected to grow, and this will increase the need for further subsidies and LNG imports unless we switch to cleaner and domestically produced feedstock,” says Kashish Shah, a senior energy analyst in his report at the Institute of Energy Economics and Financial Analysis (IEEFA). Green Ammonia can be produced in-house, reducing both the import bill for liquefied natural gas (LNG) and the carbon footprint of fertilizer production.
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Currently, Ammonia is mainly produced from steam methane reforming (SMR) method using Natural Gas as feedstock, known as Grey Ammonia. As a result, the price of Grey Ammonia is driven by the price of Natural Gas, which exposes India to geopolitical risk. Rishabh Agarwal, a leading expert in energy and sustainability and an energy transition development manager at a global energy company explains that “The ongoing Russia-Ukraine conflict pushed the price of Grey Ammonia to above USD 1400/ton in 2022, which is 4-5 times more expensive than historical ammonia prices.
About 70% of ammonia is used in producing nitrate-based fertilizers such as Urea and DAP. Green Ammonia offers an effective hedge against volatility in fertilizer and food prices while decarbonizing agriculture. ”
Opportunities for green ammonia
Ammonia production could be the first sector to see widespread usage of Green Hydrogen in India as it benefits from:
Proven technology: Production of Green Ammonia involves renewable energy, demineralized water, an electrolyzer to separate hydrogen and oxygen from water, an air separation unit to extract nitrogen from atmospheric air, and the Haber-Bosch
Critical for Food security: Due to rising Ammonia and fertilizer prices, the subsidy for fertilizer is expected to be around Rs. 2.5 trillion (USD 25 bn) in FY 2020-23. The agriculture sector contributes around 20% to India’s GDP and accounts for almost 40% of employment in the country. Given its importance to the Indian economy, Food Security is expected to remain a top priority for the Indian government in the near future. Through in-house supply chain, the government will have more control and visibility on ammonia prices and fertilizer costs.
Direct usage of Green Ammonia in the fertiliser industry: Green Ammonia can directly replace Grey Ammonia currently used in fertilizer plants without requiring any changes to existing infrastructure.
Opportunity for export: Ammonia can also play a significant role as a hydrogen carrier. Muhammad Aziz, a professor at the University of Tokyo, specifies that “Hydrogen needs to be stored at extremely high pressures and low temperatures (below -253 °C) for transport, which significantly increases the cost of transportation.” Ammonia ships are the most attractive for the widest range of size and distance combinations mainly because of low transport costs and pre-existing infrastructure. Thus, Green Ammonia production could unlock export markets for India and bring in valuable foreign earnings.
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With the support of the government and the participation of private players such as Reliance Industries
(The author is a director at Synergy Consulting Inc. Views expressed are his own and not necessarily that of financialexpress.com.)