Japan’s Ammonia Strategy: Excessive costs signal need for alternatives in the power sector

Resource Description: This resource reviews Japan’s plan to decarbonise coal power through co-firing with low-carbon ammonia under the 7th Strategic Energy Plan. It evaluates plant-level models, subsidy requirements, and alternative power sector pathways.

Key Insights:

1. Thermal power is projected to remain 30–40% of Japan’s mix by 2040, with coal reliant on ammonia co-firing for decarbonisation
2. At 20% ammonia, costs are 1.5 times revenues; at 50%, they more than double
3. Government subsidies of JPY3 trillion (~USD20b) fall short of the JPY15–30 trillion (~USD100–200b) needed to halve coal use
4. Auctions show rapid growth in battery storage, while ammonia projects remain marginal
5. Ammonia costs are unlikely to reach parity with coal, creating long-term subsidy dependence

Why This Matters: Ammonia co-firing is a costly and limited decarbonisation path. Redirecting funds to renewables, storage, and grid upgrades offers a more effective way to reduce coal reliance.