Blog

With coal accounting for 54% of Asia’s power mix last year, the region faces a significant challenge in meeting its net-zero ambitions. In a bid to cut emissions, several Asian countries are turning to ammonia for power generation, particularly through co-firing, blending low-carbon ammonia with coal or natural gas. Rystad Energy expects China, Indonesia, Japan, and South Korea to emerge as key hubs for this transition. However, a sizeable supply gap remains, with about 8.8 million tonnes per annum (Mtpa) of ammonia needed to meet 2030 targets.

Having relied on coal for decades, Asia lacks both the policy frameworks and the market demand needed to justify investment in infrastructure for ammonia as an energy source. Countries such as Japan and South Korea also face resource constraints, whether limited natural gas or insufficient renewable capacity, that hinder domestic production of clean ammonia. To meet net-zero goals, they will need to import clean ammonia from overseas, enabling coal replacement as a baseload power source while safeguarding energy security and affordability.

Ammonia co-firing is currently expensive, mainly due to the high costs associated with low-carbon hydrogen production, ammonia conversion and transportation. However, countries in Asia appear willing to tackle this challenge and advance their co-firing plans. Assuming a low-carbon hydrogen price of $5 per kilogram, which corresponds to an ammonia price of $1,000 per tonne, Rystad Energy estimates that the levelized cost of electricity for a 10% ammonia blend will be about 50% higher than coal-only generation. This indicates that costs must be tackled through innovation, economies of scale, or the implementation of a meaningful carbon price to make ammonia co-firing competitive.

While hydrogen and ammonia are set to play a growing role in decarbonizing Asia’s power sector, much of the progress hinges on foreign partnerships and long-term offtake agreements. Even with high costs associated with hydrogen, our data shows that ammonia demand from power generation is expected to grow ninefold by 2030. However, without firm offtake commitments and accelerated development of critical import infrastructure, this growth could stall. While several key Asian players are already in discussions with international partners to secure ammonia supply, progress on import terminals and co-firing capabilities must speed up,

Learn more with Rystad Energy’s Hydrogen Solution.

While Japan and Indonesia moved early to explore ammonia co-firing for power generation, China has taken a later but more decisive approach by embedding it as a decarbonization strategy in its National Development and Reform Commission (NDRC) 2024-2027 Action Plan. China is moving directly to national targets before large-scale feasibility trials. Starting in 2027, coal plants that are upgraded or newly commissioned must cut emissions by half compared to 2023 levels, with China planning to implement 10% co-firing of biomass and green ammonia alongside carbon capture, utilization and storage (CCUS) technologies.

If ammonia co-firing proves viable, it could be vital to meeting the nation’s goals of peaking emissions by 2030 and achieving carbon neutrality by 2060. However, it remains uncertain how many plants will adopt the technology. Given the size of China’s significant coal power generation fleet, it is likely that the roll-out of ammonia co-firing will take more than the targeted two years, especially when existing coal power plants will have to be retrofitted to accommodate the technology.

Due to abundant renewable resources in Inner Mongolia, China is well-positioned to produce low-carbon hydrogen and ammonia at scale, giving it an advantage compared to regional peers. This year, Envision Energy commissioned the world’s largest green ammonia plant in Chifeng, Inner Mongolia, with an initial capacity of 0.32 Mtpa and plans to expand to 1.5 Mtpa by 2028. As deal-making accelerates China could bolster its role as a dependable ammonia supplier for the region and pave the way for exports, though the required volumes still remain unclear.

South Korea is also looking to back hydrogen-for-power by 2029, with the country’s Ministry of Trade, Industry and Energy (MOTIE) having launched its second clean hydrogen power generation auction. Winning bidders, to be selected later this year, must begin generating power using hydrogen or derivatives such as ammonia by 2029 under a 15-year contract covering 3 terawatt-hours (TWh) of electricity. While this is 3.5 TWh less than the inaugural round, Rystad Energy estimates that producing this volume will still require around 200,000 tonnes of low-carbon hydrogen each year.

In the 2024 auction, the world’s first, MOTIE reported participation from only six power plants out of roughly 59 nationwide. Despite the limited response, only one plant met MOTIE’s evaluation criteria, which considered factors such as bid price and alignment with the country’s Clean Hydrogen Portfolio Standards (CHPS). MOTIE ultimately awarded Korea Southern Power (KOSPO) 750 gigawatt-hours at its Samcheok power plant, representing just 11.5% of the total volume on offer.

To encourage greater participation in this year’s auction, MOTIE is introducing two new mechanisms: an exchange rate-linked settlement system and a hydrogen volume borrowing system. Unlike the 2024 auction, which settled prices in South Korean won and exposed participants to currency risk from USD fluctuations, the upcoming auction will link power price settlements to the exchange rate, helping to mitigate this risk. The volume borrowing system allows power generators to borrow hydrogen volumes from the following year in advance, complementing the existing carryover system for unused volumes. Together, these changes offer generators increased flexibility to manage unplanned events or maintenance.

Japan, an early adopter of ammonia co-firing, has also made significant progress in 2025. The nation has secured key contracts and attracted foreign investment to maintain a steady supply of low-carbon ammonia, planning to source blue ammonia from the US and green ammonia from China and India to scale up and address domestic supply shortages. Early next year, Japan will also announce the winners of its contract for difference program, which is expected to provide additional support for its ammonia-for-power ambitions and help the country meet its emissions targets.

---

Contacts

Minh Khoi Le
Head of Hydrogen Research
Phone: +47 24 00 42 00
Minh.khoi.le@rystadenergy.com 

Nigel Rambhujun
Analyst, Hydrogen Research
Phone: +61 02 8067 8468
nigel.rambhujun@rystadenergy.com 
Kartik Selvaraju
Media Relations Manager 
Phone: +65 8779 4619
kartik.selvaraju@rystadenergy.com 

---

About Rystad Energy

Rystad Energy is a leading global independent research and energy intelligence company dedicated to helping clients navigate the future of energy. By providing high-quality data and thought leadership, our international team empowers businesses, governments and organizations to make well-informed decisions.

Our extensive portfolio of products and solutions covers all aspects of global energy fundamentals, spanning every corner of the oil and gas industry, renewables, clean technologies, supply chain and power markets. Headquartered in Oslo, Norway, with an expansive global network, our data, analysis, advisory and education services provide clients a competitive edge in the market. 

For more information, visit www.rystadenergy.com.

Abreu Advogados provided legal advice to the Veolia Group in the limited tender by prior qualification, a contract that secured it the management of the Energy Recovery Plant of Lipor, an entity representing eight municipalities in the Greater Porto area, for a further 15 years.

This project is based on a strategy of decarbonisation, energy efficiency and digitalisation, in line with the sustainability goals of the intermunicipal entity, which serves around one million inhabitants in the municipalities of Espinho, Gondomar, Maia, Matosinhos, Porto, Póvoa de Varzim, Valongo and Vila do Conde.

Lipor’s Energy Recovery Plant processes around 390,000 tonnes of urban waste annually, converting it into enough electricity to supply approximately 150,000 people. In addition to continuing the operation and maintenance of the Energy Recovery Plant, the aim is for the plant to become one of the most decarbonised waste-to-energy facilities in Portugal.

Among other initiatives, the contract provides for studies to install a solar photovoltaic unit for self-consumption, a carbon capture unit with the potential to reduce CO₂ emissions by more than 90%, and the diversification of the energy produced, moving from the current exclusively electrical production to the potential inclusion of thermal energy.

Lipor also plans to explore the establishment of an energy community, moving from a regulated tariff to a market tariff that will directly benefit the municipalities served by the plant, closing the cycle of transforming waste into resources with economic benefits.

Advisors

Abreu Advogados’ advice consisted of support throughout the contract formation process, from the application phase, with assistance in reviewing documents and defining the structure of the Candidate, to the proposal phase, with assistance in supporting documentation and analysing competing proposals. After the adjudication, Abreu supported Veolia in the qualification phase of the competing group and proceeded to set up an SPV to be assigned to the operation. The intervention of the Competition Authority was also analysed in view of the operation to be carried out.

The team involved in the operation was led by Mafalda Teixeira de Abreu and supported by Marta Romano de Castro, Sónia Gemas Donário, Guilherme Mata da Silva and Catarina Miguéis Picado.