Japan’s strategy to decarbonize its power sector through ammonia co-firing is facing growing economic concerns, according to a new report from the Institute for Energy Economics and Financial Analysis (IEEFA).
The analysis by Energy Finance Specialist Dr. Walter James argues that while ammonia co-firing has proven technically feasible, it remains significantly more expensive than renewable energy and relies heavily on imported fuel, government subsidies, and complex global supply chains. The IEEFA report recommends shifting investment toward renewable electricity, battery storage, and grid modernization as a more cost-effective pathway to achieving Japan’s 2050 carbon neutrality target.
Japan Expands Hydrogen and Ammonia Roadmap
Japan continues to place hydrogen and ammonia at the center of its long-term energy transition strategy. Rather than retiring coal-fired power plants rapidly, the government plans to gradually replace coal with imported low-carbon ammonia.
In April 2026, Japan reaffirmed its roadmap, maintaining a target of 20 percent ammonia co-firing by 2030, increasing the blend ratio to 50 percent or more after 2030, and eventually achieving 100 percent ammonia combustion by 2050.
Hydrogen and ammonia are expected to contribute 1 percent of Japan’s electricity generation by 2030, while annual fuel supply is projected to increase from 3 million metric tons in 2030 to 30 million metric tons by 2050.
Government Commits ¥586 Billion to Hydrogen and Ammonia
To accelerate deployment, Japan has allocated ¥586 billion through its FY2025 budget to support hydrogen and ammonia technologies.
The funding includes:
¥69.8 billion through the New Energy and Industrial Technology Development Organization (NEDO) for research and development.
¥35.7 billion through the Japan Organization for Metals and Energy Security’s Contract-for-Difference program funded by GX Transition Bonds.
¥5.7 billion for ammonia storage terminals and port infrastructure.
The government aims to reduce imported ammonia costs to the upper ¥10 per normal cubic meter by 2030, while lowering hydrogen costs to ¥30 per normal cubic meter by 2030 and ¥20 per normal cubic meter by 2050.
Japanese Companies Invest in Global Ammonia Supply
Japanese energy companies are expanding overseas investments to secure long-term ammonia supplies.
In April 2025, CF Industries, JERA, and Mitsui & Co. approved the Blue Point Complex in Louisiana, expected to become the world’s largest low-carbon autothermal reforming ammonia facility.
The project is designed to produce approximately 1.4 million metric tons of ammonia annually while capturing and permanently storing around 2.3 million metric tons of carbon dioxide each year.
However, project costs have risen sharply, with capital investment increasing from more than $2 billion in 2022 to approximately $4 billion by 2025, driven by labor shortages and higher construction costs.
Ownership of the project is divided between CF Industries (40 percent), JERA (35 percent), and Mitsui & Co. (25 percent).
Utilities Depend on Imported Ammonia
Japan’s current ammonia deployment pipeline remains focused on a limited number of major power stations.
Beginning in February 2030, JERA plans to import approximately 492,144 metric tons of ammonia annually from the Blue Point facility to fuel its 4.1-gigawatt Hekinan Thermal Power Station, Japan’s largest coal-fired power plant.
Mitsui & Co. has also secured imports of approximately 280,000 metric tons annually starting in January 2031 to supply industrial furnaces and Hokkaido Electric Power’s Tomatoh-Atsuma coal-fired power station.
These projects underline Japan’s growing dependence on imported ammonia to meet its decarbonization objectives.
Commercial Deployment Remains Limited
IEEFA acknowledges that Japan has successfully demonstrated the technical viability of ammonia co-firing.
Between April and June 2024, JERA completed the world’s first commercial-scale demonstration of 20 percent ammonia co-firing at the 1-gigawatt Unit 4 of the Hekinan Thermal Power Station.
The demonstration maintained stable plant operations while reducing sulfur dioxide emissions by approximately 20 percent without increasing nitrogen oxide emissions.
Despite this milestone, commercial adoption remains limited. Hekinan Unit 4 remains the only commercial-scale coal-fired generating unit in Japan to sustain 20 percent ammonia co-firing, while only four additional generating units are expected to reach similar blending levels between fiscal years 2027 and 2030.
High Costs Challenge Large-Scale Expansion
The report identifies fuel economics and supply availability as the biggest barriers to nationwide deployment.
Achieving a 20 percent ammonia blend across Japan’s coal fleet would require approximately 20 million metric tons of ammonia annually.
Meeting the government’s longer-term target of importing 30 million metric tons each year by 2050 would consume roughly 11 percent of projected global clean ammonia production, exceeding today’s total international ammonia trade volume.
According to Japan’s Ministry of Economy, Trade and Industry levelized cost of electricity data, electricity generated using a 20 percent ammonia blend would cost 145 percent to 220 percent more than onshore wind and 240 percent to 464 percent more than commercial solar power.
IEEFA warns that expanding ammonia co-firing could increase electricity prices while slowing investment in lower-cost renewable energy technologies.
IEEFA Calls for Greater Renewable Energy Investment
The report concludes that although Japan has achieved important engineering milestones with ammonia co-firing, the technology continues to face significant economic and commercial challenges.
Dr. Walter James recommends redirecting the government’s ¥586 billion investment toward renewable energy generation, utility-scale battery storage, and electricity transmission infrastructure instead of expanding subsidies for ammonia co-firing.
According to IEEFA, these technologies are already commercially mature, deliver lower electricity costs, improve long-term energy security, and provide a more practical route to achieving Japan’s 2050 carbon neutrality goals while limiting future electricity price increases for consumers.
SHAFANA FAZAL