Germany’s EnBW buys stake in green ammonia plant under construction

Karlsruhe-based EnBW bought 10% of the Skipavika Green Ammonia (SkiGA) project in Western Norway alongside exclusive long-term offtake rights. The investment reflects the European electric power industry’s trust in the future role of a minuscule and still unprofitable sector in decarbonization efforts. Nevertheless, its perspective has worsened as the gas crisis eased.

EnBW Energie Baden-Württemberg said it entered into an investment agreement with one of Europe’s most advanced projects for emission-free ammonia production. The company purchased a 10% interest in the SkiGA endeavor in Western Norway. It is a step toward meeting the climate goals that the European Union, Germany and Norway set by developing climate-neutral hydrogen products, it said.

The deal includes exclusive and long-term offtake rights. It will play a crucial role in expediting the project’s path to a financial investment decision, EnBW pointed out.

However, the plant is already under construction, scheduled to be finished by 2026 and become the first system of its kind, the announcement reads. The initial capacity is set at 100,000 tons per year.

Market hurdles getting steeper

Ammonia is a compound of nitrogen and hydrogen, NH3. It can be used for the production of fertilizers and other industrial goods,  converted to hydrogen for combustion in heat and power generation and used directly as fuel. Green ammonia is made from green hydrogen, which is obtained through a water electrolysis process powered by renewable sources.

Both technologies are in early stages of deployment and are still far from profitable, but developers count on hefty subsidies in Europe and North America. Namely, green ammonia is one of the possible solutions for the decarbonization of industrial production. It is also much easier to handle and transport than hydrogen, a volatile gas with the smallest molecules in universe.

As for the market environment, demand uncertainty on the low-carbon ammonia front, logistical issues and a steep fall in global spot prices of conventional hydrogen are jeopardizing investments, S&P Global Commodity Insights said in a report last month. The same goes for hydrogen.

Gas price slump worsens green hydrogen investment case

The spread between the prices of hydrogen and ammonia made from unabated fossil fuels on one side, and lower-emission options on the other, makes investments in greener solutions more risky. Namely, almost all the hydrogen currently produced is from fossil gas, through steam-methane reforming.

Taking the conventional CFR Northwest Europe ammonia spot price as reference, its price on August 14 was 63.9% lower than on December 1. Unsurprisingly, it followed the steep drop in natural gas prices, while the price of green ammonia weakened just 0.3% in the same period, to USD 790 per metric ton. The cost difference ballooned 89.8% to USD 410 per metric ton.

The terms such as clean, emission free, carbon free, clean and climate neutral include hydrogen that is produced using electricity from nuclear power plants. It is called pink hydrogen.

Nordics seen as Europe’s top carbon-free energy suppliers

EnBW is an electricity producer and operator of power grids and an electric vehicle charging network. The utility headquartered in Karlsruhe is owned by the state of Baden-Württemberg and OEW, a regional association of municipal authorities.

The company also suggested it may offer green ammonia to the local and international maritime sector.

“The Nordic region is poised to be a top supplier to Europe’s carbon-free energy landscape, complementing its existing position as a reliable, stable energy partner of choice for Europe. This agreement underscores the potential of Norwegian-German collaboration in green energy and industry”, sad EnBW’s Executive Director for Trading Peter Heydecker. “We in EnBW want to be a long-term partner for Norway’s ambitions to develop the future energy mix, both offshore wind, green hydrogen and ammonia.”

EnBW joins Allianz in SkiGA’s investor pool

The Skipavika Green Ammonia facility will be in Gulen municipality, near the Mongstad refinery on the west coast. The project has secured a grid connection and is in advanced talks for power purchase agreements, EnBW said. Fuella, a company specializing in hydrogen and ammonia, initiated the endeavor.

In particular, leaning on Norway’s plan to reach 30 GW in offshore wind capacity by 2040, Fuella wants to tap on surplus electricity from such facilities to make hydrogen and ammonia in SkiGA. One of its investors is Allianz Capital Partners.

Of note, German utility RWE and Norway’s Equinor agreed earlier this year to study the feasibility of a plan to produce and transport hydrogen through a proposed pipeline from Norway to Germany, where the fuel would be used to generate electricity.