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Nobuhiko Kubota, IHI’s chief technology officer, is tasked with reinventing the nearly 170-year-old Japanese industrial conglomerate for a new era of green energy.
IHI – like its peers including General Electric and Mitsubishi Heavy Industries – must race to come up with new technologies that can reduce its heavy carbon footprint, in line with climate goals. And the company, which makes products ranging from aircraft engines to turbochargers, liquefied natural gas storage tanks, boilers and rocket boosters, is currently pinning its hopes on using ammonia. as a low-carbon fuel.
This bold bet on ammonia – a compound of hydrogen and nitrogen often used to make fertilizers – has had little success with investors in the absence of concrete targets for its contribution to profits. But IHI executives say the success of its technology will have broader implications for energy policy in Japan and Asia more broadly.
“It’s not necessarily the only option, but the use of ammonia is a major tool in moving towards carbon neutrality,” says Kubota. “The key is to gain social acceptance for wider distribution of ammonia.”
In 2017, Japan became the first country in the world to develop a hydrogen strategy — and, within this framework, highlighted the potential of ammonia.
But, since then, Japan has lagged behind other countries in developing regulations for the use of hydrogen. More recently, the US has caught up with the EU in hydrogen strategy, thanks to President Joe Biden’s $369 billion Inflation Cut Act.
Japan, which relies heavily on coal, natural gas and oil, has set a goal to produce 1% of its total electricity from co-fuel hydrogen and ammonia by 2030.
To that end, in June the government unveiled a 15 billion yen ($104 billion) public-private investment to develop the hydrogen and ammonia supply chains. Tokyo also has ambitions to sell the technologies of IHI and other Japanese companies to countries in Southeast Asia, such as Indonesia, Malaysia and India, to help them replace part coal with ammonia, thereby reducing carbon emissions from coal-fired power plants without removing them. .
However, Japan’s promotion of hydrogen and ammonia as clean fuels was strongly pushed back by other G7 countries in April, when officials and environmental groups criticized its policy of extending the life of existing fossil fuel infrastructure. Although ammonia itself does not contain carbon, its production is highly dependent on fossil fuels and is not yet commercially viable.
According to the Bloomberg NEF research group, co-firing a power plant with 20% ammonia and 80% coal will emit more carbon dioxide than combined cycle gas turbines, which are widely used to generate electricity from gas.
But a co-combustion rate of 50% ammonia or more should be too expensive to be competitive with other low-emission technologies.
An alternative for Japan is to import ammonia produced in countries with large renewable energy sources, although this would increase its dependence on imported energy and potentially pose economic security risks. .
IHI executives say ammonia has its advantages: it’s a minus 33°C liquid, while hydrogen needs to be cooled to minus 253°C to become a liquid. And the infrastructure is already in place for transporting ammonia.
“For long-distance transport and storage, ammonia has more economic advantages than hydrogen,” says Kubota. “Our motivation is certainly not to prolong the use of fossil fuels but to contribute as much as possible to the reduction of CO₂ emissions.”
IHI aims to introduce gas turbines powered entirely by liquid ammonia in 2025, and in January it signed a memorandum of understanding with GE to collaborate on large gas turbines using 100% ammonia. This too recently said it would spend around 250 billion yen on its own ammonia development, to create a new revenue engine alongside its main aero engine business.
Akihiko Numazawa, general manager of IHI’s business development headquarters, notes that some of its existing businesses — given its high carbon dioxide emissions — could shrink significantly in as little as three years. Coal-fired boilers, for example, generate just under 10% of the company’s annual turnover.
“There is a strong sense of crisis among management levels and that is why we want to change our business while we are still generating profits,” Numazawa says.
But analysts say IHI’s ammonia technologies haven’t thrilled investors in the same way as the commercialization of liquid hydrogen, by rivals such as Kawasaki Heavy Industries. “In the eyes of investors, he’s doing a disservice by not having specific (financial) targets,” said Citigroup banking analyst Graeme McDonald. “Because they can’t quantify it, ammonia doesn’t get the attention the company would like.”
But Edward Bourlet, an analyst at brokerage firm CLSA, adds: “Ammonia versus hydrogen has not been marketed or presented as effectively, and perhaps that has potential. IHI could be the dark horse of heavy industry.