Japanese engineering conglomerate IHI has signed a term sheet with Indian renewables developer ACME for 400,000 tonnes a year of green ammonia offtake starting from 2028.

Stay ahead on hydrogen with our free newsletter
Keep up with the latest developments in the international hydrogen industry with the free Accelerate Hydrogen newsletter. Sign up now for an unbiased, clear-sighted view of the fast-growing hydrogen sector.

IHI will then sell on this NH3 to “customers in various industries, including power generation, primarily in Japan”.

ACME plans to supply ammonia from its project in the state of Odisha, currently being developed in multiple phases, which it expects will produce nearly 1.3 million tonnes of green NH3 a year once fully built — meaning only 30% of these volumes have been pre-sold to IHI.

The Japanese firm had previously signed a preliminary agreement to co-invest in the project, which is expected to cost 600 billion rupees ($7.2bn) in total.

In August, ACME said it would stump up 270 billion rupees ($3.3bn), although it is unclear whether this refers to the amount of investment needed to build the project’s first phase, or its total commitment to the plant’s costs.

Ammonia’s use in power generation is controversial. While proponents in Japan have argued that the country has limited options to built out wind and solar to decarbonise its grid, necessitating imports of clean H2 and NH3, critics have pointed out that in the short term, this will necessarily mean co-combustion with fossil fuels.

Ammonia co-firing with coal, which is already being trialled by Japan’s largest power generator JERA, has faced particularly fierce critique due to high costs while emitting more CO2 than a power plant burning 100% natural gas.

However, IHI has also this week announced its partnership with US engineering giant GE to develop a turbine capable of running on 100% ammonia.

Late last year, the Japanese government announced ¥3trn ($21bn) in subsidies for both domestically produced and imported clean hydrogen (and its derivatives) to cover the cost gap with their fossil equivalents.