ENERGY INVESTOR MONTHLY

INSIGHTS OF THE MONTH
Ammonia: More than just a household cleaner

Since Congress passed the Inflation Reduction Act (IRA) in 2022, there has been a renewed interest in ammonia as a potential carbon-free energy source. In its most basic chemical form, NH3, ammonia is an inorganic compound made up of nitrogen and hydrogen. More importantly, ammonia, directly or indirectly, is also a precursor building block for many pharmaceuticals and key basic materials. In fact, according to a 2022 US Geological Survey (USGS), 88% of the ammonia produced in the United States was used to make fertilizers. Ammonia is also used to produce explosives, plastics, synthetic fibers, resins, and yes, household cleaners. Beyond its direct uses, ammonia is also seen as a viable option for transporting hydrogen gas H2 and as an additive to traditional fuels, specifically diesel, to reduce carbon emissions.

The primary method to produce ammonia on a commercial scale is the Haber-Bosch process. This involves mixing hydrogen with atmospheric nitrogen and then using heat, pressure, and a metal catalyst to produce ammonia. Traditionally, natural gas has been used as a source of hydrogen for ammonia production, but coal can also be used. However, because the hydrogen source comes from hydrocarbons (i.e., natural gas or coal) and produces CO2 as a by-product, the ammonia produced from this process is often called “gray” or “brown” ammonia. This distinction has become more important since the passing of the IRA. Today, there is a renewed interest in “blue” ammonia production, in which the produced CO2 is captured and sequestered, and “green” ammonia, in which electricity from a renewable power source is used to break down water to produce hydrogen for ammonia production – without generating CO2 as a by-product.

The storage and transportation of ammonia can be performed in a variety of ways. Anhydrous ammonia – ammonia without water – can be liquified by pressurizing it to 125 psi. Ammonia can also be liquified by mixing it with water, although this method is less efficient for transportation. Ammonia can even be turned into a solid, called ammonia salts, which are used primarily as a nitrogen source in fertilizers. While each method has its own advantages, liquified ammonia remains the primary way to store and transport this increasingly important commodity.

Ammonia can also be used as a fuel source for internal combustion engines (ICE); however, its use has both advantages and disadvantages. First, the energy content of ammonia is only 1/3 that of diesel. Therefore, it is much less efficient per unit volume. Second, ammonia requires a narrower range of air-to-fuel mixture in order to burn efficiently – 15% to 25% air by volume – compared to the far wider range of gasoline or diesel. Third, ammonia can be very corrosive to fuel and storage systems and difficult to handle in non-commercial applications. However, the primary advantage ammonia has over fossil fuels is that it produces low particulate emissions and no CO2.

However, because the combustion of ammonia produces the greenhouse gas NOx, a net reduction in greenhouse emissions occurs only when ammonia is more than 36% of the fuel mixture. This means that many of the engines in service today would have to be retrofitted or replaced completely to accommodate these higher ammoniacontent fuels.

One of the more exciting ammonia developments, however, is not as a transportation fuel but as a source of hydrogen for fuel cells. Liquid ammonia is cheaper (and safer) to produce, store, and transport than hydrogen – and all of this can be accomplished using existing pipeline and storage infrastructure. On the other hand, pure hydrogen would require entirely new equipment and pipeline systems to achieve the same goal. Additionally, the energy content of liquid ammonia is 11.5 Megajoules per liter (MJ/L), which is higher than liquid hydrogen’s 8.491 MJ/L and would require less energy to produce, transport, and store. This gives ammonia a clear competitive advantage as a medium for hydrogen transportation and storage. In addition, the technology behind ammoniapowered fuel cells has been around since the 1960s. Perhaps this is why ammonia is seen as key to making hydrogen-powered vehicles cheaper and more accessible.

With the IRA creating a renewed interest in hydrogen as a fuel source, ammonia is increasingly seen as the best way to produce “carbon-free” hydrogen. This is not only because ammonia is cheaper and safer to produce than hydrogen, but also because it leverages existing infrastructure to transport and store. Similarly, pipelines are the best way to transport ammonia in terms of efficiency and safety. Another benefit is that existing pipelines can, in most cases, easily be converted to handle ammonia. From a political and regulatory standpoint, there is also less opposition to ammonia pipelines – especially compared to oil and natural gas. Therefore, while the use of ammonia as an end or intermediate fuel is at an early development stage, we believe there is still ample opportunity to invest in ammonia’s future development, primarily through traditional pipeline and infrastructure companies.