Can Green Ammonia Solve India’s Subsidies Woes?

Ammonia is one of the two future fuels, the other being Hydrogen, envisaged to replace fossil fuels. On production of these fuels by using power from renewable energy, they are termed as green hydrogen and green ammonia. This is one of the major requirements towards environmentally sustainable energy security for India.

Ammonia is a chemical which is used mainly in the manufacture of nitrogenous fertilizers, like urea and ammonium nitrate, and may even be used to run engines. The chemical is the bedrock of the all-essential Fertilizer industry, considered vital for food security.

Synthesis of Ammonia

The compound involves one nitrogen atom and three hydrogen atoms. Neither of nitrogen or hydrogen exists by themselves in nature, independently. They need external aide to combine. That’s where a century-old ‘Haber-Bosch’ process comes into picture.

Apparently, the source of hydrogen is hydrocarbons (natural gas). The process requires a lot of energy as nitrogen and hydrogen join together only at high temperatures (around 450 degrees C) and high pressure (200 bars). This releases carbon which mixes with atmospheric oxygen and becomes carbon dioxide. Thus, huge amounts of carbon dioxide are released in the atmosphere. For instance, to produce one tonne of ammonia, you release two tonnes of carbon dioxide. The world produces 180 million tonnes of ammonia every year; this number will only go higher.

Ammonia in India

Not much natural gas is available in India. India produces only very little of the ammonia it needs—most of it comes out of imports. The country needs around 15-16 million tonnes of ammonia annually. India ends up with a massive fertilizer subsidy burden in addition to its dependence on imports of expensive liquefied natural gas (LNG) for fertilizer manufacturing. The Fertilizer subsidy budget in India is INR 1.05 trillion (US$14.2 billion) for 2022-23, exceeding one trillion rupees mark for third year in a row.

Gas prices increased from $10.75/MMBtu (metric million British thermal units) in January 2021 to $33 in January 2022. Global urea prices also soared to record highs of $690-794/ton (INR 51.4-60.4/kg) in the period between October 2021 to March 2022. While, the Indian subsidies for agriculture maintained the retail price of INR 5.3/kg ($71/tonne). This reflects the heavy subsidy of more than 90% on the global benchmark price of urea. The demand for hydrogen in the Indian fertilizer industry to rise from about 3MT per year today to 7.5MT by 2050

Hence, at this juncture, the green hydrogen enters the scene.

Indian Shift to Green Ammonia

A shift to green ammonia would significantly reduce India’s fertilizer subsidy burden and will cut dependence on imports of LNG for fertilizer manufacturing, according to a new report by the Institute for Energy Economics and Financial Analysis (IEEFA). The pollution causing part of Ammonia production is Hydrogen. What if that hydrogen comes from splitting of water (electrolysis)? Yes, green hydrogen is the key.

Green hydrogen is produced from the electrolysis of water powered by renewable energy sources. It can replace grey hydrogen, which is generated from natural gas, or methane, as a feedstock for ammonia production.

Is it Cost-efficient?

The cost of green hydrogen production is currently at about $5.5 per kg. It is $3 per kg in countries with good solar resources and will continue to decline steeply this decade. The grey hydrogen stands at $2 per kg. Hence, it is essential that the costs of two critical inputs – electrolysers and renewable energy – must fall further.

While it may take some more time to become most cost efficient source of ammonia, the gap between the cost of producing green hydrogen and hydrogen from fossil fuels is narrowing. For this, Electrolysers need to fall below $250 per kilowatt from existing $700-1,000 and renewable energy to $20 per megawatt-hour from existing US$30-35.

Government’s Policy Intervention

Ministry of Power recently notified Green Hydrogen/Green Ammonia Policy, for production of Green Hydrogen/Green Ammonia using Renewable sources of energy, a step forward towards its famous National Hydrogen Mission. India launched the National Hydrogen Mission on India’s 75th Independence Day (i.e. 15th August, 2021 which aims to aid the government in meeting its climate targets and making India a green hydrogen hub. The mission also will help in meeting the target of production of 5 million tonnes of Green hydrogen by 2030, apart from development of renewable energy capacity.

The policy envisages several incentivising features for the green hydrogen push. For instance, green hydrogen plants owners can buy electricity from anywhere in the country. Further, to bring down the cost of supply, there would be no inter-state transmission charges. These charges can be as high as ₹3 per kWh, for 25 years, along with few similar provisions.

The idea is to make green hydrogen cheaper, to make it as low as $1/kg. As of now, costs are twice to four times as much as conventionally produced ammonia.

Though, India to emerge as an export Hub for Green Hydrogen and Green Ammonia may still have some way to go. But when the global research comes to fruition, the chemical may even power ship engines. Other possible uses may also include purification of water, manufacture of plastics, explosives, textiles, dyes, etc.