A Catalyst for Green and Blue Ammonia Bunker Fuel Production
Unlocking the Future of Maritime Fuels: How the US Inflation Reduction Act Propels Green and Blue Ammonia to the Forefront of Sustainable Shipping
The IRA's Impact on Alternative Maritime Fuels
At the heart of the IRA's strategy is a supply-side incentive mechanism aimed at encouraging the production of alternative maritime fuels with zero-emission potential, such as green and blue ammonia, e-methanol, and e-methane. The act introduces tax credits for green hydrogen production (45V credits) and carbon capture and storage (45Q credits), which are instrumental for producers in the alternative maritime fuel sector. Specifically, green hydrogen, generated through the electrolysis of water using renewable electricity, is eligible for up to $3/kg ($3,000/mt) in tax credits under the 45V scheme. This financial support is expected to substantially reduce the production costs of green ammonia and e-methanol to around $16 per gigajoule ($16/GJ) and elevate e-methane to $17/GJ over a 30-year horizon.
The Promise of Green and Blue Ammonia
The production of green ammonia, which is envisaged to see its costs halved by 2030 due to IRA subsidies, represents a significant step forward in the quest for sustainable maritime fuels. Blue ammonia, benefiting from the 45Q tax credit for its production process that involves carbon capture, is projected to see a reduction in production costs by $5/GJ by 2030. This financial incentive makes blue ammonia, produced by combining blue hydrogen with nitrogen through the Haber-Bosch process, an attractive low- or zero-carbon alternative.
Despite these advancements, the IRA's subsidies may not completely bridge the cost gap with conventional low sulfur fuel oil (LSFO), but they are expected to significantly narrow it, making alternative fuels more competitive. The International Energy Agency (IEA) anticipates that ammonia bunker fuel will account for 44% of the total bunker demand by 2050, highlighting the growing importance of ammonia in the maritime sector.
Industry Response and Developments
In response to the anticipated rise in demand for ammonia bunker fuel, companies such as OCI Global and a consortium including Japan's INPEX Corporation, Air Liquide, LSB Industries, and Vopak Moda Houston are advancing plans to establish green and blue ammonia production facilities in the US. For instance, OCI Global's blue ammonia plant in Texas, set to commence operations in 2025, aims to capture up to 95% of CO2 emissions during production. Similarly, the consortium's plant by the Houston Ship Channel seeks to capture at least 95% of direct CO2 emissions from hydrogen production, underscoring the industry's commitment to sustainability.
Export Opportunities and Infrastructure Investments
The absence of restrictions on the export of subsidized green hydrogen or hydrogen-derived fuels opens up significant export opportunities for the US, potentially transforming it into a key player in the global green energy market. Furthermore, the US Bipartisan Infrastructure Investment and Jobs Act of 2021 complements the IRA by allocating $7 billion towards infrastructure investments, including the development of hydrogen hubs at strategic ports, thereby facilitating the distribution, transportation, and bunkering of hydrogen-based fuels.
