The ammonia fuel supply chain development project, which the Japanese government has promoted as a flagship policy for its “Carbon Neutrality by 2050” goal, is facing a significant setback. A working group under the Ministry of Economy, Trade and Industry’s (METI) Industrial Structure Council approved a revised plan that halves the Green Innovation (GI) Fund’s budget allocation from approximately 69.8 billion yen to 32.56 billion yen.

Ammonia co-firing has long been criticized as merely a way to prolong the life of coal-fired power plants and a system that imposes a massive cost burden on the public compared to a shift to renewable energy. The withdrawal of a major manufacturer, project cancellation, and substantial reductions in initially planned installed capacity and demonstration scale have now decisively exposed the overly optimistic policy and economic outlook.

The reality of a halved budget and successive downward revisions to demonstration scale

At the “35th meeting of the Working Group on Energy Structure Conversion, Green Innovation Project Subcommittee” held on June 16, a revision of “Construction of a Fuel Ammonia Supply Chain” was officially approved.

This revision is not merely a delay in progress, but a “scaling back” that affects the very foundation of the project.

• Development of new catalysts for ammonia production: failed to pass stage-gate, resulting in complete cancellation
  While aiming to develop innovative catalysts capable of synthesis at low temperatures and pressures, the project failed to reach the target levels (economic viability and efficiency) necessary for social implementation, leading to the discontinuation of the project. The budget, which had a ceiling of 24.18 billion yen, has been drastically cut to 3.4 billion yen.
• High-ratio co-firing technology for coal-fired boilers: Mitsubishi Heavy Industries (MHI) withdraws, demonstration scale also reduced
  MHI has withdrawn from the national project after determining that completing full-scale demonstrations by the GI Fund’s deadline of the end of FY2030 would be difficult, estimating to exceed the schedule by 5 years. As a result, the originally planned demonstration of high-ratio ammonia co-firing technology (including mono-firing technology) in coal-fired boilers has faced significant delays or has been forced into a reassessment of its maximum output (installed capacity), and the budget was reduced from 36.35 billion yen to 20.53 billion yen. Currently, only IHI Corporation is continuing limited verification.

Structural cost and environmental issues concealed by ongoing projects

While some projects, such as IHI’s co-firing and mono-firing technologies development and JERA’s co-firing experiments at the Hekinan Thermal Power Station, are continuing, this recent plan revision has made it even clearer that these do not constitute fundamental solutions for decarbonization policy.

According to JERA’s materials submitted to the working group, JERA and its co-proposer IHI directly cite “soaring domestic construction costs” as a change in the business environment. As a result, while they maintain the plan to demonstrate high co-firing of over 50% by FY2030, the demonstration schedule, originally set to be completed by the end of FY2028, has been pushed back by approximately two years, effectively postponing it to the end of FY2030. Furthermore, to curb demonstration costs, the equipment configuration (demonstration scale) was significantly reduced from the initially planned “test at 1000MW maximum output during 60% co-firing” to “test at 600MW maximum output + performance prediction.”

Moreover, regarding the other central project with Mitsubishi Heavy Industries, although cost-reduction measures were considered, it became difficult to complete the demonstration by the end of FY2030, as stipulated by the GI fund. This resulted in a partial suspension of the project before reaching the actual demonstration phase. Despite approximately 2.2 billion yen from the public GI Fund already being invested in the project, Mitsubishi Heavy Industries withdrew from the GI Fund project framework and decided to aim for commercial operation in the 2030s as its own initiative. No matter how much the co-firing ratio is increased, the underlying technology remains coal-fired power generation, which emits large amounts of CO2, meaning its nature as a “life-extension measure” does not change. Furthermore, as revealed in the latest documents, a system is being established to pass on the “soaring domestic construction costs” and “continuously rising ammonia procurement costs” to the public in the future in the form of higher electricity bills and taxes.

As the world shifts toward expanding renewable energy, the legitimacy of postponing this shift while continuing to invest public funds in ammonia-fired power generation, which cannot achieve a self-sufficient status without generous subsidies and an endless burden on the public, is now being questioned once again.

The validity of the strategy itself should be questioned

Until now, the government has positioned ammonia as a “decarbonization fuel” to serve as an excuse for maintaining and utilizing existing coal-fired power plants and has allocated a substantial portion of its budget to it.

However, the cancellation of the core projects, the abandonment of the demonstration within the given timeframe, and the downward revision of the target installed capacity can be seen as the result of facing realistic technological and economic barriers. Japan’s energy policy, which still relies on the expensive and environmentally detrimental ammonia co-firing, is being compelled to make a fundamental transition as the world moves toward renewable energy.