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June 13, 2023

Danish tie-up to test nuclear ammonia plant in Indonesia

Ammonia plant
While traditional ammonia plants are powered by coal and use natural gas as the main input, the Bontang plant aims to produce low-carbon hydrogen to convert into low-carbon ammonia (Photo: Saoirse2010/Envato)

A consortium led by Copenhagen Atomics has proposed a $4bn project that aims to create the world’s cheapest low-carbon ammonia.

A $4bn agreement to build a nuclear-powered ammonia plant in Indonesia is shaping up as a crucial test for a Danish start-up that claims its technology can produce the cheapest form of the clean fuel.

Copenhagen Atomics is leading a four-party consortium from Denmark that has signed a memorandum of understanding with two Indonesian state-owned enterprises — fertiliser producer Pupuk Kaltim and energy group Pertamina — to develop an ammonia facility in the city of Bontang powered by next-generation modular nuclear reactors. It will have a 1mn tonne capacity a year, making it one of the biggest, low-carbon ammonia projects proposed to date.

Ammonia is a compound of hydrogen and nitrogen atoms. While traditional or “grey” ammonia plants are powered by coal and use natural gas as the main input, the Bontang plant is part of a growing pipeline of projects aiming to produce low-carbon hydrogen to convert into low-carbon ammonia for use as shipping fuel or, in this case, fertiliser.

The Bontang plant differs from most other plants in that the power source for creating the hydrogen is nuclear, rather than wind or solar. None of the 46 low-carbon ammonia projects tracked by foreign direct investment data provider fDi Markets since July 2020 involve nuclear power.

Based on Copenhagen Atomics’ work to date, co-founder Thomas Jam Pedersen expects the plant to be able to produce the world’s cheapest low-carbon ammonia. “I believe that with this plant in Indonesia we can get the price of ammonia down to $500 per tonne,” he says. That compares with $720–$1,400 a tonne for wind or solar-generated ammonia in 2020, according to the International Renewable Energy Agency.

While nuclear power’s environmental risk-profile is different to traditional “green” power sources such as solar and wind, it is a low-carbon alternative to fossil fuels.

The project’s expected cost-competitiveness is due in large part to the efficiencies of Copenhagen Atomics’ next-generation reactors, known as thorium molten salt reactors. Jam Pedersen says these reactors will be able to get 100 times more energy out of every tonne of mined materials than classic reactors. “No other reactors in the world can do that,” he adds.

For example, the Bontang plant will need 850 kilogrammes of thorium as fuel a year. Traditional reactors would need 10 tonnes of enriched uranium — or 100 tonnes of uranium ore — to produce the same 1mn tonnes of ammonia each year, says Jam Pedersen.

Economic clout

Like other emerging nuclear technologies, such as small modular reactors, Copenhagen Atomics’ technology is yet to be rolled out. The Bontang plant is its most advanced project, although it is still early days.

The MoU, which was signed on May 19, commits the parties to six months of investigations to ensure regulatory approval can be obtained to construct reactors on the site, which is owned by the offtaker Pupuk, and provide the SOE with a more accurate price for the ammonia. The goal is to start bringing the facility online in 2028.

The parties are yet to agree on how the project will be financed, but Jam Pedersen said there is a “loose expectation” that roughly half the money will come from Pupuk and the Indonesian government, and the other half from international investors.

The plant’s $4bn price tag would make it the sixth-biggest foreign direct investment project in Indonesia over the past decade, according to fDi Markets. Low-carbon ammonia and hydrogen is one of the FDI world’s hottest sectors, mobilising more than $150bn in pledges during 2022 alone. With no commercial scale operations to date, its potential has drawn scepticism. But Jam Pedersen believes the backing of two Indonesian SOEs gives the Bontang plant a strong shot at success.

“We have some great partners which have the economic strength to move this process forward,” he says. Further, Pupuk is already a customer of two other companies in the Danish consortium — heat exchange specialist Alfa Laval and electrolyser developer Topsoe. The final Danish partner is thermal energy supplier Aalborg.

This article first appeared in fDi Intelligence

A service from the Financial Times