Thermal generation is the largest source of power and heat in the world today.
A quick replacement of these thermal power plants will be costly as the thermal fleets in several countries still have many years of useful life, said Wood Mackenzie.
The ability to co-fire ammonia or low-carbon hydrogen in thermal generation is an increasingly attractive proposition, even if costs may be higher.
Speaking at the APPEA conference in Brisbane, Prakash Sharma, VP of Multi-Commodity Research at Wood Mackenzie said:
- Just a 10% use of ammonia co-firing in coal plants could result in a 50% growth from today to 200 Mt of ammonia demand by 2050, and this is a $100 billion market opportunity
- Additionally, co-firing will deliver a 10% reduction in carbon emissions, a strategic benefit in markets with physical limitations to build renewables and CCUS capacity
- Our analysis shows on average the delivered cost of low-carbon ammonia to Japan is expected to fall 60% from $1,250 per tonne currently to under $500/t by 2050
Japan’s power utilities are taking a lead in co-firing ammonia in both coal- and gas-fired power plants.
Initial tests have shown encouraging results, and commercial operations are scheduled to start around 2025.
Although ammonia co-firing is currently uncompetitive, even with a carbon price, the prospect of rapidly falling costs combined with supportive policies will lower the levelised cost of electricity to $90 per megawatt-hour by 2050, reckons Wood Mackenzie.
As ammonia delivered costs to Japan could fall to $500/t or lower in the long term, ammonia combustion in thermal power plants would become a feasible decarbonisation strategy and comparable to CCUS-paired plants.
To support this shift, WoodMac stimates carbon pricing requirements would need to be $40-$120/t of carbon dioxide equivalent in 2050 for 20% and 60% co-firing shares, respectively.