Japan certifies JERA-, Mitsui-led ammonia projects under Yen 3 trillion price-gap subsidy

Japan has certified two ammonia projects developed by JERA and Mitsui as part of the country's Yen 3 trillion ($19.2 billion) hydrogen price-gap subsidy, the Ministry of Economy, Trade and Industry said Dec. 19.

The JERA-led project will supply 492,144 metric tons/year of low-carbon ammonia starting February 2030, produced in Louisiana. The majority will be used for cofiring at its Hekinan thermal power plant, while a portion will serve as fuel for industrial furnaces at Toyota Industries Corp., AGC Inc., NGK Insulators Ltd. and Aisin Fukui Co. Ltd.

The Mitsui-led project will supply 280,000 mt/y of low-carbon ammonia starting January 2031, produced in Louisiana. The majority will be used for ammonia cofiring at Hokkaido Electric Power's Tomato-Atsuma thermal power plant, while a portion will serve as fuel for industrial furnaces at UBE Mitsubishi Cement Corp. and as raw material at Tosoh Corp.

"This is an exciting development for Japan's hydrogen policy, which had been relatively quiet. These are the first major international supply chain projects supported by the $20 billion hydrogen CFD [contract-for-differences] program," said Anri Nakamura, principal hydrogen research analyst at S&P Global Energy Horizons.

"JERA and Mitsui, as investors in the Blue Point low-carbon ammonia project in Louisiana with CF Industries, now have offtake agreements covering just over half of the plant's blue ammonia capacity -- a reassuring milestone," she added.

"These agreements also strengthen ammonia cofiring plans at power plants supported by long-term decarbonized power auctions. While burning ammonia in coal plants is costly, we expect this volume can be supported by the CFD budget, especially if higher-value industrial applications are also developed," Nakamura said.

"The next things to watch are whether more international supply chains will follow, such as green hydrogen from India by ACME and a Japanese consortium led by IHI, and whether the infrastructure support scheme will back hydrogen hub plans in corresponding areas," she added.

Projects

JERA and Mitsui are sourcing low-carbon ammonia from the same 1.4 million mt/y Blue Point low-carbon ammonia project in Louisiana. JERA holds a 35% stake, Mitsui holds 20% and CF Industries Holdings holds 40%.

JERA said April 9 that it has made a final investment decision on the $4 billion Blue Point low-carbon ammonia production project in Ascension Parish, Louisiana, US, in partnership with CF Industries and Mitsui.

The latest move also means that JERA now plans to start 20% ammonia cofiring at the 1-GW No. 4 Hekinan coal-fired unit from fiscal year 2029-30 (April-March), a JERA spokesperson said.

JERA has also signed legally binding heads of agreement for the chartering of four ammonia carriers with NYK Bulkship (Asia) Pte. Ltd. -- a subsidiary of NYK Line -- and Mitsui O.S.K. Lines.

The latest announcement followed METI's Sept. 30 announcement of the certification of the first two projects.

The selected 1,600 mt/y green hydrogen project led by Toyota Tsusho and Resonac's 20,000 t-NH3/y domestic hydrogen/ammonia project are both expected to begin supplying in 2030.

The green hydrogen project led by Toyota Tsusho envisages procuring electricity generated at an onshore wind farm by a special-purpose company, also involving Eurus Energy Holdings and Iwatani Corp., and using this electricity to produce hydrogen through the electrolysis of water at Aichi Steel's Chita plant in central Japan.

The hydrogen produced will be used in the heating furnaces of the special steel processing operation to manufacture special steel.

Resonac's hydrogen and ammonia project, which also involves Nippon Shokubai, plans to gasify waste plastics and textiles to produce low-carbon ammonia using the hydrogen obtained as a raw material.

The main user will also be Resonac, which aims to manufacture and sell ammonia-derived products (acrylonitrile) as textile raw materials, promoting resource circulation.

Support framework

Japan has earmarked Yen 3 trillion for a support framework -- similar to the international CFD arrangement -- to cover the price gap between the production and transportation costs of hydrogen and its derivatives and conventional fuel prices, based on the Hydrogen Society Promotion Act, which took effect in October 2024.

The support framework is designed to cover the gap between a "base price," which covers project costs for imports and domestic production, and a "reference price," such as the CIF import price for existing fuels -- LNG and coal -- which will be replaced by low-carbon hydrogen and its derivatives.

Eligible companies can receive subsidies for 15 years from the start of low-carbon hydrogen supply. However, after the support period ends, companies must continue supplying for another 10 years.

Japanese companies view the hydrogen price-gap support as essential for advancing their projects, underpinning their decision-making, according to industry sources and experts.

Japan aims to introduce up to 3 million mt/y of hydrogen in 2030 and about 12 million mt/y in 2040, including the introduction volume of ammonia and other substances directly combusted in hydrogen-equivalent terms, compared with about 2 million mt/y currently, with a target of around 20 million mt/y in 2050.