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

Open Resource

Year Published

2025

Contributing Organizations

Asia Research & Engagement (ARE)

Type of Resource

Research/Insights Report

Languages

English

Relevant Topics

Core Topic

Renewables

Target Audience

Governments & Policymakers

Asset Owners

Asset Managers

Advisors & Consultants

Real Economy Corporates

Relevant Geography

Asia & the Pacific

Open Resource

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.

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.

Key Insights

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

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