The current conflict in Iran has resulted in a sudden hike in fertilizer prices, now up to US$567 per tonne according to the BBC. Could this drive local low-cost ammonia production?
The current conflict in Iran has already resulted in a spike in the cost of oils and natural gas. Fertilizer prices have been rising steadily, but the spike in fossil fuel prices has also resulted in a sudden hike in fertilizer prices, now up to US$567 per tonne according to the BBC.
The main component of fertilizer is ammonia, NH3, which is produced from the reaction of nitrogen, N2, and hydrogen, H2. Hydrogen is conventionally sourced from methane (natural gas). Ammonia is then produced via the Haber Bosch process. This results in the cost of ammonia production being heavily tied to natural gas prices.
In contrast, green ammonia is produced from hydrogen which was produced via electrolysis. When powered by renewable energy sources, this eliminates the requirement for natural gas or other fossil fuels. Historically, green ammonia has struggled to achieve cost parity with conventional Haber Bosch ammonia, so an increase in natural gas prices triggered by the Iran conflict may aid its competitiveness.
Local, modular ammonia production technology has been developed by companies such as TalusAg and Nium. These modular facilities produce roughly 1 tonne of ammonia daily, a fraction of the millions of tonnes produced annually by incumbent ammonia production. However, as ammonia is toxic and requires either pressurization or cooling to transport, it can result in high import and transportation costs, especially in areas over 500 miles from a deep seaport. When combined with low-cost renewable power, or green premiums such as the 45V tax credit in the US, there are already existing examples of small-scale local ammonia production being cheaper than importing conventional ammonia, prior to the Iran conflict. The environmental benefits of the ammonia production being green are secondary.
One example is the deployment of one such system in Kenya, at the Kenya Nut Company. TalusAg’s 1MW module is compatible with fluctuating energy sources, in this case powered by solar power. Future deployments across Sub-Saharan Africa are expected due to high ammonia import costs in this region, whilst the US corn belt is an area where local production can combine the removal of ammonia transportation costs with green tax credits to result in overall economic benefit. Due to the volatility of natural gas prices currently being tied to ammonia and fertilizer costs, the increased geopolitical tensions worldwide will further increase the desire for reliable local ammonia production at a known cost, with long term offtake contracts often utilized.
