come online by 2025. Announced projects equating to around 0.3 Mt of ammonia production capacity are scheduled to come online by 2030.

Natural gas-based production with CCS is also likely to become increasingly common in the future in order to meet CO2 emission reduction targets. CCS projects are typically measured by the quantity of CO2 that they capture. For a given capture project, the near-zero-emission ammonia production capacity can be estimated as being equal to the capacity of an unabated plant emitting that quantity of CO2, assuming energy performance levels based on BAT. Using that approach, we estimate that just over 1 Mt of ammonia is currently produced each year with near-zero emissions via the application of CCS in projects located in the United States, Canada and China. All of the CO2 currently captured in these projects is used for EOR. Announced CCS projects, if realised, would increase near-zero-emission ammonia production capacity via CCS to around 4 Mt by 2030.

Economic considerations

The cost of producing ammonia is highly dependent on the cost of the main inputs, particularly the cost of energy used for both process energy and feedstock. Using the simplified levelised cost metric as a proxy for the cost of producing one tonne of ammonia, these raw material and energy inputs typically account for 20-40% of the total for commercial routes in operation today. The annualised cost of capital expenditure (CAPEX) and the fixed operational expenditure9 account for the remainder. The techno-economics of three important near-zero-emission routes are explored in more detail at the individual plant level in Box 1.4.

The prices of the main energy inputs for feedstock and process energy (natural gas, coal and electricity) are key determinants of the overall levelised cost of production. The higher CAPEX of the coal gasification route is offset by the abundance and low-cost of coal relative to natural gas in certain regions, especially China. Avoiding the need to increase relatively expensive natural gas imports, which could potentially hamper efforts to improve energy security, is another factor at play when it comes to the prevalence of the coal-based route in China.

Simplified levelised cost of ammonia production for commercial and near-zero-emission production routes in 2020

Notes: SMR = steam methane reforming; ATR = auto-thermal reforming; CCS = carbon capture and storage; VRE = variable renewable energy. The simplified levelised cost is calculated using a discount rate of 8% and a design life of 25 years for all equipment, with the exception of the electrolyser stack (11 years) and system (28 years). CAPEX includes core equipment costs, corresponding to the plant battery limit (including CO2 capture equipment in the case of CCS-equipped routes, electrolysers in the case of electrolysis-based routes, and hydrogen storage in the case of the dedicated VRE electrolysis route), and includes engineering, procurement and construction costs, equating to 70% of core equipment costs. A 95% capacity factor is used for all equipment apart from the dedicated VRE electrolysis route, where a 50% capacity factor is used. The combined sensitivity includes the impact on the total levelised cost of varying the regional coefficient for CAPEX and fixed OPEX (a factor of 73-127% of the CAPEX cost estimated for the United States), energy cost variation for natural gas (USD 3-8.2/GJ), coal (USD 1.3-2.9/GJ), electricity (USD 4.5-30.2/GJ) and bioenergy (USD 2.2-4.4/GJ). The dedicated VRE electrolysis route uses a narrower electricity cost range (USD 2.8-11.1/GJ). Where relevant, the central values for the column series are calculated based on an output weighted average of the fuel prices faced across regions today. For the electrolysis routes, electrolyser cost = USD 1477/kWe, electrolyser efficiency = 64% and feedstock refers to the electricity used for electrolysis. For CCS-equipped routes, the CO2 capture rate is 90%, the CO2 transport and storage costs vary by region from USD 5/t CO2 to USD 100/t CO2. CCS is applied to both concentrated and dilute emissions streams for SMR with CCS route, and just the concentrated emissions stream for the ATR with CCS route. No CO2 emissions price is imposed. A range of revenues for the solid carbon by-product is assumed (USD 0-500/t) for the methane pyrolysis route. CCS in this instance refers to long-term storage. The dotted grey area represents the range of average monthly ammonia prices for 20102020, using US Gulf, Middle East and Western Europe spot prices.

Source: Ammonia price data from Bloomberg Terminal.

Energy costs typically account for 20-40% of the levelised cost of ammonia production for the dominant routes used today. Near-zero-emission production routes are typically 10115% more costly than the incumbent routes.

expenditure (OPEX) for the capture equipment. The cost of the electrolysis pathways is in large part dependent on the cost of the electricity used, over 90% of which is consumed by the electrolyser. For the case using dedicated VRE capacity, the proportion of cost attributable to CAPEX is much higher than for the grid-based case (95% capacity factor), due to the much lower capacity factor (50% considered here, although this will vary significantly from site to site).

For the methane pyrolysis and biomass gasification routes, the levelised cost is significantly more uncertain due to the lack of a commercial-scale plant in operation today. Cost premiums for the biomass-based route appear to be very large, owing to the very high energy intensity (37 GJ/t including feedstock) and the relatively high cost of bioenergy assumed for a representative sustainable supply (USD 3.3/GJ). The cost of the methane pyrolysis route is highly dependent on the revenue obtained for the carbon black, which is co-produced alongside the hydrogen (and in turn ammonia). At a revenue assumption of around USD 360/t for carbon black, it appears the route could produce ammonia at costs competitive with conventional routes. However, there is a limit to the amount of carbon black that can be absorbed by existing markets for the product (tyres, other rubber products, fillers, pigments), and the grade of carbon black produced significantly affects the revenue that can be obtained. If no revenue, or even a cost, was associated with producing the carbon black, the competitiveness of this route would be severely affected.