Last month, we shared our insights on how clean ammonia is emerging as a crucial element in the U.S. energy transition. Boosted by IRA tax credits, clean ammonia is becoming a leading play in global decarbonization, particularly in hard-to-abate sectors. Unlike other nascent clean hydrogen markets, the export of clean hydrogen (in the form of ammonia) is driven by demand, particularly from the agricultural sector in Europe and coal plants in Japan and South Korea seeking to co-fire with clean ammonia to reduce coal usage.

Numerous memoranda of understanding (MOUs), letters of intent (LOIs), and some firm sales and purchase agreements have been executed with clean ammonia export projects in the U.S. Gulf Coast (USGC). However, many clean hydrogen projects are still in the pre-front-end engineering design (pre-FEED) or FEED phases, with final investment decisions several years away. For clean ammonia to realize its full potential as a key enabler of a greener future, the economics of producing, storing, transporting, and exporting clean hydrogen/clean ammonia must be competitive. This week, we examine the value chain economics of producing clean hydrogen from renewable sources such as solar and wind in the USGC and the cost competitiveness of delivering such clean hydrogen to key export markets.  

Impact of IRA Tax Credits The Inflation Reduction Act (IRA) provides significant government funding, tax credits, and other incentives to position the U.S. as a leading clean hydrogen and clean ammonia exporter from the USGC. Under the IRA 45Q/45V tax code, renewable electricity and clean hydrogen plants can receive a production tax credit of 2.6 cents per kWh and up to $3 per kg of hydrogen (base year 2023),