Fertiglobe success in H2Global pilot auction marks milestone in renewable ammonia supply for EU
By on July 16, 2024
Click to learn more. Fertiglobe, a collaboration between ADNOC and OCI, has won H2Global’s pilot auction with a bid promising 397,000 tons of ammonia at a price of €1000/ton.
H2Global has announced Fertiglobe has won its first-ever pilot auction for renewable ammonia. Funded by the German Federal Ministry for Economic Affairs and Climate Action (BMWK), this winning bid promises to deliver 397,000 tons of renewable ammonia to the Port of Rotterdam between 2027 and 2033. H2Global’s new announcement is the culmination of a rigorous two year auction process, and a valuable insight into the state of play in the renewable ammonia market.
The winning bid
Fertiglobe, a collaboration between ADNOC and OCI, emerged victorious with a €397 million bid. That figure reflects the maximum output of 397,000 tons of renewable ammonia from Fertiglobe’s EBIC plant in Egypt over six years, priced neatly at €1000 per ton. Importantly, the actual production cost is approximately €811, with the difference reflecting anticipated transport and logistics costs for exporting the ammonia to northwest Europe from Egypt. BMWK note that this in turn translates to a price of less than €4.5/kg of green hydrogen, a lower price than those signalled in other EU auction results.
Click to expand. The Fertiglobe project is expected to make its first delivery in 2027, followed by ~63,000 tons per year in the years 2028-2033. Source: H2Global.
Supply volume from Egypt is projected to start at 19,500 tons in 2027, and then average ~63,000 tons between 2028 and 2033. For each of these years, H2Global has guaranteed a minimum off-take of 40,000 tons while retaining the option of purchasing the total quantity. This reflects a relatively balanced approach to the tensions between suppliers and off-takers over volume guarantees.
Fertiglobe will source renewable hydrogen feedstock from Egypt Green Hydrogen, located in the Suez Canal Economic Zone. That partnership was solidified with a 20-year offtake agreement following the H2Global announcement, a testament to the investor certainty fostered by the auction. The Haber-Bosch process will occur at Fertiglobe’s existing EBIC plant in Ain Sokhna, before the ammonia is shipped from Ain Sokhna Port to the Port of Rotterdam. The project will be powered by 273 MW in new renewable electricity generation.
Click to expand. The Fertiglobe project will operate a supply chain running from the Suez Canal Economic Zone to the Port of Rotterdam. Source: H2Global.
Notably, the project will comply with extensive sustainability criteria. In addition to following the EU’s RFNBO (renewable fuels of non-biological origin) definitions, the BMWK introduced further requirements to be enforced by an independent body. These include protection of arid regions, sustainable land use, protection from forced resettlement, conservation of biodiversity, implementation of an environmental management system and other requirements related to local value creation, equal opportunities and gender. Fertiglobe must also comply with ILO labour standards as well as conduct Environmental and Social Impact Assessments following IFC or World Bank standards.
A milestone, but more to come
This project is a victory for H2Global’s Contract-for-Difference mechanism. HINT.CO (H2Global subsidiary and implementation entity) will sell the resulting ammonia supply as standardised quantities in annual auctions, providing valuable pricing data to the sector at large.
The success of the pilot auction underscores the global effort required to fund large-scale energy transition projects aimed at tackling climate change. H2Global has catalyzed a collaborative convergence of expertise, funding, and resources from across Europe, the Middle East, and North Africa.
Markus Exenberger, Executive Director and Co-creator at H2Global Foundation in his organisation’s official press release, 11 July 2024
Relative to the scale of the transition ahead, however, this particular project remains a modest initial step. In Egypt alone, over $37 billion will be invested in projects announced at the recent EU-Egypt Investment Conference, following investment incentives announced earlier this year.
H2Global has considerable funding, and will offer “substantially larger lot sizes…in the upcoming funding window”, while learning from the successes of this pilot. Moreover, it is possible that other funders beyond the German Government will make use of the H2Global mechanism in coming years, benefiting from the lessons learned.
Find H2Global’s press release, auction process brief and further information here.