India targets $650/mt renewable ammonia as Japan tightens power auction terms

Indian renewable ammonia developers are offering the renewable hydrogen-based clean fuel to potential Japanese power auction bidders at above $650/mt FOB India for 20-year contracts, as bidders prepare for stricter requirements under the fourth edition of the auctions, market participants told Platts, part of S&P Global Energy.

Multiple Indian project developers said Japanese end-users and traders are negotiating supply deals starting in the mid-2030s under Japan's fourth Long-Term Decarbonization power source Auction (LTDA), with current offers clustering around $650-$670/mt FOB India for volumes above 100,000 mt/year. A Japanese end-user said it is targeting a lower renewable ammonia price to meet LTDA 4 cost thresholds, down from the $670-$750/mt range quoted for LTDA 3 contracts.

The lower price expectations reflect Japan's revised auction structure, which imposes new upstream requirements, including Japanese company equity stakes, use of Japan-made electrolyzers or Japan-built ships, and supply-chain diversification to reduce single-country dependence. The end-user expects the ceiling price in the auction to remain the same as last year, forcing them to negotiate a lower FOB price to account for other cost escalations resulting from the changes.

Platts assessed Middle East renewable-derived ammonia delivered in Japan at $650/mt on July 20.

The third edition of LTDA in Japanese FY2025 or LTDA 3 awarded 516 MW total for hydrogen and ammonia-based decarbonized power, including 264 MW for ammonia cofiring and 253 MW for hydrogen mono-firing, the first time hydrogen mono-firing received support. The round reflected a policy response to earlier limited participation, with the bid ceiling raised to better cover high clean-fuel costs and enable more viable bids.

A senior METI official previously told Platts that Japan's emerging low-carbon hydrogen and ammonia market is being reshaped by geopolitical tensions that have eroded the cost advantage of low-carbon, or "blue" ammonia over renewable ammonia, with Indian supplies now reaching competitive prices.

However, bidders must show they have identified low-carbon ammonia supply disruption risks and will avoid supply chains overly dependent on a single country or limited region, with mitigation for geopolitical and market shocks, according to the LTDA 4 guidelines.

Equipment dilemma

In LTDA 4, the ministry mandates Japanese company investment and greater use of Japan-made equipment, citing examples including Japan-made electrolyzers, Japan-built ships for upstream projects, and Japan-made turbines or domestic storage facilities for downstream projects. Bidders must ensure at least one Japan-linked main facility each in upstream and downstream projects. The new rules present a cost dilemma for Indian suppliers.

"Japanese electrolyzers would be expensive not only because the stacks cost more but also because their smaller size requires more units, adding to project expense," an Indian project developer said. He added that no electrolyzer manufacturer can guarantee performance over the full lifetime of the stack. A Japanese buyer confirmed that uncertainty over electrolyzer lifetime guarantees raises concerns about ammonia supply reliability.

Indian developers are more likely to comply with LTDA 4 by using Japan-built ships rather than Japanese electrolyzers. A second developer said using Japanese vessels "will make more sense" even though medium gas carriers capable of carrying ammonia built in Japan might be hard to find, noting that "sufficient lead time exists as supply is not required until 2032 or later."

Price indications

Indian renewable ammonia project developers are actively negotiating with Japanese buyers, quoting prices at $650-$670/mt FOB India for long-term supply contracts, while navigating the new rules that might cause some price escalation depending on the upstream and downstream project strategies.

This price is at a premium to the Indian SECI (Solar Energy Corp. of India) renewable ammonia tender, which closed at Rupee 53.35/kg ($554/mt). Six Indian renewable ammonia developers will supply of 670,000 mt/year of renewable ammonia to eleven domestic fertilizer units on a 10-year fixed price contract.

"The reasonable offer for renewable ammonia [for LTDA 3] is $650-$670/mt FOB India for 500,000 mt/year loop capacity on a 20-year contract," a third developer said, adding that "price does not change significantly beyond 15 years because capital cost recovery and financing are completed by then." Loop size plays a significant role in optimizing the plant and bringing down price, the developer added.

A fourth Indian developer said that the renewable ammonia market is currently at close to $650/mt FOB India "plus or minus $10/mt."

The Japanese end-user said it is negotiating with all East Coast India renewable ammonia projects for supply starting in the mid-2030s. He reported receiving offers in the $670-$750/mt FOB India range for LTDA 3 and is trying to negotiate prices down to $650/mt. For LTDA 4, the end-user said it would need offers as low as $600/mt FOB India as the shipping costs might escalate to meet additional upstream project requirements.

"In LTDA 4, the Japanese government has given companies seven years to procure ammonia, with volumes low at just 500,000 mt/year for 500 MW capacity. The contract is for 20 years," a fifth developer said. He added that the volume it would need to supply depends on how much its partner, who is also the bidder, wins. The developer said the price it can offer is close to $670/mt for 100,000-200,000 mt/year for 20 years. Once it's clearer which Japanese component will be used for LTDA, the offer might increase, but right now the developer is assuming Japanese companies will figure something out.

The Japanese end-user said the idea behind the equity share requirement in LTDA 4 is that renewable ammonia is not just a product but a strategic investment. He said it would need to carefully select projects to ensure supply certainty and is considering more than one project because the supply timeline is far away. For retrofit downstream projects, the supply timeline might be fixed, but for new projects the environmental impact assessment might delay the project, the end-user said.

Indian renewable ammonia developer ACME has an offtake agreement to supply 488,000 mt/year of renewable ammonia to IHI from Gopalpur and Paradip facilities, with LTDA-linked volumes of 260,000 mt/year of renewable ammonia.