Japan’s power sector will be 'first' to offtake hydrogen and ammonia — but why?
The industry is continuing to push co-firing in gas- and coal-fired power plants despite criticism around effectiveness for decarbonisation
Japan is charging on full steam ahead with plans to co-fire hydrogen and ammonia in gas- and coal-fired power plants this decade.
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“Demand will start from power generation… and also the steelworks,” agreed Hideaki Tanaka, general manager for hydrogen at Japanese oil and gas firm Eneos.
The Japanese government has already allocated ¥27.9bn ($242m) on subsidies for two demonstration projects aiming to burn at least 50% ammonia with coal at power plants by 2029, with JERA trialling a 20% blend at its 1GW Hekinan 4 unit in 2025.
JERA had in June signed a sales contract with fellow Japanese firm Mitsui for supply of grey ammonia — produced from fossil gas without carbon capture — during the trial, with the first volumes set to be burned at the power plant this year.
However, at the beginning of this year following a competitive bidding process, it signed memoranda of understanding with ammonia producers Yara and CF Industries for the supply of 500,000 tonnes a year of blue or green ammonia from 2027 onwards.
However, ammonia co-firing has been criticised as actually extending the lifetime of coal-fired power plants, rather than allowing them to be shut down ahead of emissions penalties being enforced and replaced with renewables or even fossil gas-fired facilities which still have a lower emissions footprint than coal.
Figures from price reporting agency S&P Global Commodity Insights presented at the conference suggest that renewable ammonia would cost $700-800 per tonne, while grey has cost $500-600 per tonne since September — with the smallest premium over that period $100 per tonne.
Refineries and chemicals production need large volumes of hydrogen at a constant rate flowing in, whereas co-firing requires smaller volumes.
“At the beginning case, it is very difficult to match the supply and demand balance, from my perspective. It is not only a volume issue, but a timing issue as well,” said Tanaka.
“Hard-to-abate sectors, like steel or cement or paper, they consume the energy as heat, not electricity,” said Yasuhiko Otsuki, managing director at Siemens Energy in Japan, adding that electricity demand is currently rising in Japan as more and more processes are electrified — with a limited availability of green electrons. “Maybe after 2035, the focus will be on hard-to-abate sectors.”
Others in the conference suggested that hard-to-abate industries in Japan are already starting to shut down due to cost.
Kijima pointed towards “four major movements… in the last few months” showcasing the increasing shutdown of refineries and steelworks in the country.
“One steelworks shut down by Nippon Steel, then another steelworks shut down by JFE Steel. Also, refineries were announced to shut down by Idemitsu, and lastly there’s one [refinery] shut down in Wakayama,” he said, noting that “some of them are pledging and shifting towards hydrogen production facilities” on the land following decommissioning.
And this is well before Japan’s voluntary carbon trading system becomes mandatory or the EU’s carbon border adjustment mechanism (CBAM) kicks in from 2026, both of which would put extra costs on steel or other products with a high emissions footprint.