Can Power-To-Ammonia Provide Grid Flexibility?
This means, among other things, shifting from extensive reliance on fossil fuels to greater dependence on low- and zero-carbon energy sources such as solar photovoltaic and wind power. An energy transition of this kind, however, poses significant challenges to the power system, as these resources do not have the key characteristics of traditional flexible generation.
Specifically, while seasonal fluctuations in energy consumption owing to winter heating and summer cooling are significant in most countries, renewable energy production cannot be substantially increased on request to meet peak demand. Additionally, unpredictable disturbances and periods of challenging weather conditions—such as snow cover and high pressure, which minimize the potential for solar or wind generation—create further barriers to grid balancing in renewables-dominated energy systems. Although one option in both cases is to maintain significant excess capacity in the electricity system, it is certainly not efficient. Finally, the cheapest and/or cleanest energy resources are not always close to demand centres, and connecting lowcarbon energy resources to users via grid lines may be neither easy nor cheap.
One possible solution to this set of challenges is power-to-X, technologies allowing for the conversion of renewable electricity into carbon-neutral fuels that could later be stored and transported or converted back to electricity.
Whilst ‘green’ hydrogen has traditionally been envisioned as the ultimate product of the power-to-X process, increased attention has recently been paid to ‘green’ ammonia (NH3) as a potentially more attractive alternative. This article focuses on the powerto-ammonia (P2A) systems that use renewable electricity to first generate hydrogen from water (via electrolysis) and nitrogen from air and then combine both in the Haber-Bosch process to synthesize ammonia. It argues that, in principle, P2A could offer grid services such as periodic and seasonal storage as well as emergency backup. Also, by transferring energy across time and space, ‘green’ ammonia could facilitate utilization of stranded renewables and thus minimize the need to increase grid capacity.
Nonetheless, development of P2A faces several challenges, including the relatively low flexibility of the ammonia production process. Since this makes ammonia not particularly suitable for providing fast-response services, it prevents it from participation in high-value markets which require fast response, such as ancillary services. To compete with alternative grid service providers, P2A capital and operating costs also need to decline, and regulatory and policy barriers need to be overcome.
Power-to-ammonia and its services to the power grid
Key threats to the stability of power systems include fluctuations in frequency, voltage, power demand and supply, as well as overall system failure. Although these could be addressed by various resources, energy storage can play a unique role. In fact, most of these challenges could be resolved by storing power for a short time (seconds or minutes), while others require medium-term (hours or days) or long-term (weeks or months) energy storage.
Four major types of energy preservation technologies are currently available: electrical, mechanical, electrochemical, and chemical. Of these four categories, the future of long-term energy storage is more often associated with the electrochemical (batteries) and chemical (e.g. natural gas, hydrogen, and ammonia) options. Unlike other options, these can store large volumes of energy for a long time in a transportable form, so that power can be transferred across both time and space. Of these, only hydrogen and ammonia—two substances that can be generated carbon-free—are able to preserve the same amounts of energy as fossil fuels, potentially cost-efficiently, while not emitting any CO2 when combusted. Of these two, ammonia can deliver more energy within the same volume, and it has an established infrastructure and lower handling costs.
In principle, P2A could offer several services to the power system:
- By transforming surplus electricity from intermittent renewables such as solar and wind into ‘green’ ammonia, it could provide periodic and seasonal storage, which would enable adjusting the output of generation facilities to the demand of grid operators and ultimate consumers. For renewable energy sources connected to the transmission network, P2A can potentially balance the grid by minimizing the need to curtail excess generation that would normally result in an overloaded and unstable grid. Instead, surplus power could be transformed into ammonia and stored until it could be used or converted back to electricity when the transmission system is available.
- P2A could facilitate grid integration of stranded renewables. Indeed, when the extension of the power grid is not possible for technical and/or economic reasons, the electricity produced by stranded renewables could be converted into ‘green’ ammonia and delivered to the end user through the normal transportation modes.
- Due to ammonia’s capacity to preserve large volumes of energy for a long time, P2A systems could be used for emergency backup. Synthesized by solar and wind electricity during favourable conditions, ‘green’ ammonia could later be reconverted to electric energy when generation incidents and failures cause outages.
However, in practice, P2A faces constraints to its ability to provide grid balancing services. This is specifically relevant to highvalue products such as frequency response which require a fast response. This is because there are specific technical requirements for production of ammonia, such as the need for continuous operation at a constant pressure and temperature. A dynamic operation can damage ammonia synthesis catalysts and result in loss of containment due to hydrogen embrittlement. Also, an intermittent operation weakens the economics of ‘green’ ammonia plants.
The flexible production of hydrogen through electrolysers is possible, but not at a large scale. The whole ammonia plant is, however, limited in flexibility by the NH3 synthesis section. Therefore, in order for P2A to be used effectively and reliably for grid balancing, the whole production process needs to become more flexible. This would require investment in further research and development.
Using existing technologies, it is possible to modify the configuration of an ammonia plant to improve its flexibility to some extent, albeit at a cost. For example, more flexible electrolysis (such as polymer electrolyte membrane units) can be used, which follows the profile of generated renewable electricity. The first stage can also use a combined electrolyser and battery, but of course, this would increase the cost significantly. The ammonia plant, including air separation section, can be operated in a base load pattern if the excess hydrogen can be stored for later utilization when electricity supply drops. If underground hydrogen storage is available, the cost of variability can be reduced significantly compared with using a pressurized tank.
Overall, P2A requires technological improvement in order to address the technical constraints of fast ramp-up and turn-down. In the presence of such constraints, the cost of operating P2A in a flexible manner can be an impediment for its participation in high-value markets such as fast response ancillary services.
Decentralized power-to-ammonia: drivers of capital and operational costs
Scale efficiency has traditionally been a key investment determinant for ammonia generation based on natural gas as a feedstock. Investors favour large-scale industrial production in order to take advantage of economies of scale and minimize costs. However, this is not the case when electricity is used as a feedstock.
With natural gas as the feedstock, reducing the size of an operation from large (2,000 tonnes NH3/day) to medium (545 tonnes NH3/day) (i.e. shrinking it by a factor of 3.6) will result in a 42 per cent increase in the cost of production. The corresponding increase when the feedstock is electricity is only 6.7 per cent. Thus, with the rapid growth of decentralized renewables generation technologies in the future, electricity-based NH3 production is likely to be organized and expanded in the form of a small- or medium-scale operations, as there is no significant cost advantage in increasing the scale.
Small-scale ammonia production is organized in a modular way, which can be better adjusted to the needs of renewable energy sources that are not necessarily connected to the grid. A typical 1.5-megawatt P2A unit running on renewable power is able to produce around 3 tonnes of ‘green’ ammonia per day.11 Although this may not look impressive compared to the output of methane-powered ammonia plants, with the current average capacity of most onshore wind turbines being around 2 megawatts, small-scale modular P2A systems seem to be particularly suitable for intermittent renewable energy sources.
Moreover, with the nexus of offshore wind and P2A technologies, greater volumes of ‘green’ NH3 could be produced. This could be done either onshore, if the electrolysers are connected to the turbines through cables, or offshore, if P2A facilities are placed next to the power generators. The latter option even offers potential cost reduction opportunities for remote wind turbines given the high costs of submarine cables (around EUR 1 million per km).
At the same time, in order for ‘green’ ammonia to successfully compete with conventional ammonia, its key capital-cost drivers need to be significantly reduced. With electrolysers currently constituting at least 60 per cent of capital costs, and nitrogen production and Haber-Bosch components jointly responsible for up to 30 per cent, construction costs are only around 10 per cent. Expenditures on construction can be further lowered, since each of the key modules of such P2A facilities (electrolysers, nitrogen generators, and ammonia loops) represents a separate component that can be supplied off-shelf, easily transported to the production site and then integrated into the joint system with no loss to economic efficiency. On the other hand, due to the technology’s maturity, the costs of nitrogen generation and ammonia synthesis are unlikely to decline further. Hence, the costs of electrolysers have the biggest potential for a significant drop and are expected to be almost cut in half by 2030, from around $ 700 /kW to around $ 344 /kW.
Nevertheless, even with such a dramatic fall in the main capital-expenditure item, in order for P2A to compete economically in the electricity market, operating costs should also be substantially reduced. Apart from the cost associated with improving the flexibility of P2A, the costs of electricity generation as well as maintenance and labour are the main expenditures. Electricity appears to make up more than 70 per cent of operating costs, leaving around 25 per cent for maintenance and 5 per cent for labour.
Although electricity cost could be minimized if primarily surplus power is used, constant operation on excess electricity may not be possible if the first and second stages of ammonia production are not redesigned to improve their flexibility. Additionally, the intermittency of solar and wind used for P2A lowers the capacity factor and further increases the costs. Similarly, since maintenance costs often strongly depend on the quality and costs of electrolysers, they may not be easily lowered. Last but not least, labour is likely to represent one of the most rigid operating costs.
Decentralized power-to-ammonia: barriers
Apart from the costs challenges of decentralized P2A, there are a number of regulatory, market, and policy barriers hindering development. In particular, because ammonia is highly toxic and potentially a significant threat to public health and the environment, the construction and operation of all ‘green’ ammonia installations are regulated in ways that may limit the conditions (e.g. scale and location) under which ammonia is produced, stored, and transported. These conditions, in turn, must align with the requirements of the specific renewable generating facilities used for production, which creates additional complexity. That is why it may be administratively burdensome for investors in P2A to provide the scale and capacity necessary for efficient contribution to grid balancing, while each small-scale facility will have to comply with strict regulations.
At the moment, high global demand for ammonia as well as low prices of natural gas (as the main feedstock for conventional ammonia) appear to be the key market barriers for the promotion of P2A, as they give competitive advantage to conventional large-scale ammonia generation based on methane. In this context, state policies on subsidizing production of fossil fuels and fertilizers further undermine the competitiveness of ‘green’ ammonia, which, in turn, has to overcome the adversity of higher marginal capital and operating costs. Furthermore, the absence of policies aimed at improving the generally low social acceptance of ammonia will make it hard for new P2A facilities to compete with the already established ones.
P2A could offer important services as periodic and seasonal storage as well as emergency backup. In addition, by transferring energy across time and space, ‘green’ ammonia could facilitate grid integration of stranded renewables. Technically, this could be done due to the possibility to organize P2A production in a decentralized way using a modular approach.
However, development of P2A faces a number of challenges. Technologically, slow progress in the improvement of electrolysers along with intermittency of wind and solar energy production are major hurdles which need to be overcome. Currently the flexibility of P2A is low, and this prevents it from participating in high-value markets which require fast response. Furthermore, the high cost of electrolysers—along with issues regarding ammonia’s toxicity, its lack of social acceptance, and the use of low-cost fossil fuels as the main feedstock for conventionally generated ammonia are barriers to the development of P2A. On top of that, state subsidies to the producers of hydrocarbons and fertilizers are likely to further discourage investors in ‘green’ ammonia, as they will make their decarbonized product even less competitive.
Originally published by the Oxford Institute for Energy Studies.
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