Shared from the 10/7/2021 Financial Review eEdition

Ammonia in, coal out for Japan power trial

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Japanese power giant JERA has begun a trial to substitute hydrogen-rich ammonia for coal in a large thermal power station, as a global insurer urges investors to flex their muscles in boardrooms to force more rapid decarbonisation.

JERA, a joint venture of Tokyo Electric Power Company and Chubu Electric and a large global buyer of liquefied natural gas and coal, yesterday commenced its four-year trial of raw ammonia co-firing with a small volume of the chemical at its Hekinan Thermal Power Station in Japan.

It aims to build the ammonia co-firing share at Hekinan to 20 per cent by 2024, and if successful achieve the same rate across its entire fleet of coal-fired power stations by 2035, on the way to achieving net zero emissions by 2050.

The move marks a cautious start to the Japanese giant’s decarbonisation effort and is part of an accelerating trend towards more ambitious decarbonisation measures by heavy industry around the world as landmark United Nations climate talks in Glasgow draw closer.

If sustained, this could gradually reduce demand for Australian coal and LNG exports over time.

South Korean steel producer POSCO on Tuesday named Australia as a ‘‘regional strategic base’’ to help achieve its global aspirations for the production of low-carbon hydrogen to decarbonise its steel and power generation. Fortes-cue Metals Group, an iron ore supplier to Posco, for the first time set targets for carbon emissions by its steelmaking customers by 2040, aided by Fortescue’s embryonic hydrogen business.

Allianz SE’s chairman of the group ESG board Gunther Thallinger said yesterday that traditional partnership agreements may not be enough to ensure management is making the right decisions to ensure decarbonisation targets are met.

Speaking to Macquarie’s Green Energy Conference, Mr Thallinger said having regular discussions about the performance of industrial assets may not be enough to rapidly decarbonise.

‘‘We need more in terms of the cooperation than the usual form of [partnership],’’ he said. ‘‘We need to think about board seats on certain assets, we need to somehow share and discuss certain alignments, in terms of decision-making. These elements need to be set up in a somewhat different form than what we see in other areas.

‘‘Why? Because we need to actively drive the transformation.’’

Australian steel-maker BlueScope is typical of many Australian industrial energy users. While the company has pledged to reach net zero carbon emissions by 2050 and committed to spend $150 million over the next five years on projects and processes designed to reduce carbon emissions, it has shied away from more ambitious commitments, pointing to an absence of large-scale commercially proven ‘‘green’’ technology in steelmaking that was commercially available.

JERA will work with Japanese engineering corporation IHI to deploy the ammonia, a transportable form of hydrogen gas, at the Hekinan thermal power station for four years until March 2025, aiming to achieve a firing rate of 20 per cent by that time.

The success of this project could have ramifications for Australia’s thermal coal producers as Japan is Australia’s biggest buyer of the key fossil fuel.

Mr Thallinger said active transformation requires two key steps: a long-term plan which is revisited possibly every year because the nature of the transition to a net zero asset means almost nothing is static in a business’s clean-up plan.

‘‘On our end, we do not know how the transformation has to happen every year for the next decade. You may have a plan. But that plan next year certainly needs to be revisited,’’ he said.

Macquarie’s head of asset management Ben Way agreed that alignment of investors and companies was key. He didn’t go as far as endorsing board activism but touted the global investment bank’s strong growth in its green portfolio. ‘‘It’s such a dynamic area. The thing we talk a lot about is: what’s expected today will be different next year, some of the things we’re doing for the first time this year, will become business as usual.

‘‘The expectation of us will ramp up, and so we’ll have to keep investing, changing, evolving. So you can’t be static.

‘‘I think the point there is that you need partners are who are actually like-minded, they realise that what is considered best in class today will just become business as usual next year,’’ Mr Way said.

Macquarie’s Green Investment Group (GIG) unveiled its annual round-up of green investments for the year at the conference, highlighting it had securing rights to develop the 1.5-gigawatts (GW) Outer Dowsing Offshore Wind Farm in the UK, and establishing partnerships to bid for offshore projects in Scotland, France and Norway. GIG also acquired its first utility-scale battery storage portfolio in the UK from Capbal.

It also launched Cero Generation, GIG’s specialist European solar development platform, one of Europe’s largest dedicated solar development companies. GIG portfolio company Blueleaf Energy expanded into Japan, the Philippines and India.

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