Massive Green Hydrogen Project To Produce Low-Carbon Fertilizer
Elected officials here in the US are very determined to make fossil fuels happen — forever — but it’s a big world out there and activity in the decarbonization field continues apace. That includes the green hydrogen industry, which is finding a place for itself in global food systems as producers scout for more sustainable alternatives to petrochemical fertilizers.
New Green Hydrogen Project Targets Green Ammonia
The latest news about sustainable fertilizer comes from the UK-listed firm ATOME. The company is planning to construct a new, $630 million USD fertilizer facility in Paraguay, which will deploy green hydrogen to produce ammonia-based fertilizer.
“Due to traditional fossil-fuel production methods, the fertiliser industry emits 2.6 billion tonnes of CO₂ per year – more than the shipping and aviation sectors combined,” ATOME notes, by way of explaining why a shift into green hydrogen is needed.
If you’re wondering how green hydrogen comes into the fertilizer equation, that’s a good question. Producing ammonia fertilizer requires a copious amount of hydrogen along with nitrogen (the chemical symbol for ammonia is NH3). In the conventional ammonia-based fertilizer industry, the supply chain lands on hydrogen extracted from natural gas or coal. The green hydrogen industry presents a more sustainable alternative.
ATOME plans to produce calcium ammonium nitrate fertilizer at the new facility, with green hydrogen providing a fossil-free source of ammonia. Electricity from the hydropower facility will run electrolysis equipment, which jolts hydrogen gas loose from water. “Our process virtually eliminates harmful emissions at the point of production which leads to the displacement of up to 12.5 million tonnes of CO2 – from just one of our projects!” ATOME enthuses.
Green Hydrogen: Follow The Money
Stakeholders in the alternative hydrogen space have also explored bio-based and waste-based pathways to push virgin fossil sources out of the way of the hydrogen supply chain, but most of the investor money is currently focused on water electrolysis.
ATOME comes into the picture flush with cash and a string of well heeled industry collaborators including Yara, Hy24, AECOM, Natixis, IDB Invest, and ANDE among others. Earlier this year ATOME tapped Hy24 for up to $115 million USD to serve as anchor and lead equity investor for the Paraguay project.
Another major milestone occurred in April, when ATOME put up a lump sum of $465 million to engage the global engineering firm Casale to take the lead on EPC (Engineering, Procurement, and Construction) for the Paraguay fertilizer project. Located in Villeta, the new facility is expected to produce 260,000 tonnes (about 286,600 US tons) of fertilizer for markets in the Mercosur region. If all goes according to plan, Casale will begin construction later this summer and the facility will be up and running in time for sales to begin in 2028.
“Once constructed, the Villeta Project will service a developed and ready market in the heart of the largest food-producing region in the world, meeting critical demand for low-carbon fertilisers from the agriculture and food sectors,” Casale noted in a press release last April.
Casale CEO Federico Zardi also emphasized that his firm has been transitioning its traditional business into a low-carbon model for the past 10 years or so, enabling it to apply a considerable base of knowledge to the ATOME project.
“Through these technological advancements, we are delivering an extremely optimized design at Villeta, setting a precedent for sustainable fertiliser production at costs that are competitive with, or even lower than, conventional ‘grey’ fertilisers, paving the way to a sustainable agricultural future,” Zardi emphasized.
Follow More Money To Green Hydrogen
If you caught that thing about “competitive with, or even lower than, conventional ‘grey’ fertilisers,” that represents a sea change for the green hydrogen industry. Leading up to today, green hydrogen has struggled to compete on cost against the fossil energy supply chain. However, the script is beginning to flip. In addition to system optimization, the cost of electrolysis equipment has come down. Access to low-cost renewable energy also plays a role, as does qualification for public subsidies. ATOME notes that the Villeta project is located in a tax-free zone, for example.
Another downward driver of costs is favorable financing, for which the new fertilizer project also qualifies. Earlier this week the ATOME team contacted CleanTechnica by email with news that the project has just been approved for $50 million USD in concessional financing from the Green Climate Fund. Concessional provides more favorable terms than conventional, market-available financing.
“The concessional finance reduces the Project’s cost of capital and supports market competitiveness,” ATOME noted.
“This highly competitive funding, alongside competitive senior debt support from leading multilateral development institutions, will meaningfully lower the overall cost of capital, ATOME CEO Olivier Mussat emphasized in a press statement.
“By enhancing the value of the equity component, it importantly enhances the bankability and value of the Project equity and will assist in optimising returns for ATOME’s shareholders,” Mussat emphasized again for good measure.
A feature of the 2015 Paris Agreement on climate change,the Green Climate Fund bills itself the largest climate fund in the world. It provides financial support to developing countries in pursuit of their decarbonization goals under the Paris Agreement. The $50 million in financing for the fertilizer project will be administered through the International Finance Corporation branch of the World Bank Group.
Meanwhile, Here In The US …
ATOME anticipates that the seal of approval from GCF will provide a shot of adrenaline to the green hydrogen industry beyond the Villeta project. “GCF views the Project as a large-scale catalytic step towards decarbonising fertiliser production across South America and importantly will contribute to the sustainability, affordability and security of the food supply chain,” the company notes.
Meanwhile, here in the US, the green hydrogen industry already got a shot of adrenaline a couple of years ago, from the 2021 Bipartisan Infrastructure Law. The BIL carved out $7 billion to support the creation of new regional hydrogen hubs, leveraging the distinctive natural, infrastructural, and economical resources of different parts of the US.
The BIL also included a further carveout requiring natural gas to be represented in the program, but most of the emphasis was on green hydrogen produced from water or biomass with renewable energy.
That’s “was” as in “probably not gonna happen after all.” On May 30, Energy Secretary Chris Wright (this guy) canceled 24 clean energy programs totaling $3.7 billion, some of which were related to clean hydrogen.
That doesn’t necessarily mean the end of green hydrogen in the US. In Iowa, a modestly scaled, solar-enabled green hydrogen-to-fertilizer project is providing farmers with access to locally produced, carbon-free ammonia fertilizer.
On the larger end of the scale, keep an eye on Texas. BloombergNEF recently identified Texas as one of the few regional markets where green hydrogen has the potential to gain a competitive edge, and the global sustainable aviation fuel movement is providing green hydrogen stakeholders with a lifeline.
Photo (cropped): Zero emission electricity from a hydropower dam will be deployed to produce green hydrogen for a new low-carbon fertilizer plant in Paraguay (courtesy of ATOME).
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