Lot 1: Renewable ammonia
This lot covers the purchase side (HPA) of renewable ammonia in the €900m pilot tender.
Ammonia (NH3) is a globally traded commodity, which is usually transported by ship, train or truck. It is mainly used in the production of fertilizers and in the chemical industry. Today, ammonia is produced almost exclusively in the Haber-Bosch process where hydrogen is mixed with nitrogen and together processed at high temperature and pressure with a catalyst. The most common current process for producing hydrogen is unabated steam methane reforming (SMR), using natural gas or coal.
Renewable ammonia can be produced using the traditional Haber-Bosch process, but with the distinction that the fossil-fuel based hydrogen is replaced with renewable hydrogen. This form of ammonia can be used to replace fossil ammonia in its traditional uses, such as fertilizer production, and can also be used to produce sulphur- and carbon-free fuel for shipping. Renewable ammonia can also be a transport vector for renewable hydrogen, benefiting from the existing - albeit limited - infrastructure.
€300 million were offered by Hintco to purchase renewable ammonia in its pilot tender launched in 2022. Over 1,000 interested parties in 65 countries across five continents downloaded the tender documents on Hintco’s auction platform. Twenty-two companies submitted non-binding bids, five entered negotiations, and one company was the winning bidder.
Egypt Green Hydrogen
About the project
Fertiglobe’s supply of renewable hydrogen will come from Egypt Green Hydrogen, a consortium between Fertiglobe, Scatec ASA, Orascom Construction, the Sovereign Fund of Egypt, and the Egyptian Electricity Transmission Company. The project is in the Suez Canal Economic Zone.
The electricity used in the production process will be generated in a newbuild onshore wind park of 203 MW located in Ras Ghareb close to the Red Sea and a newbuild solar PV plant of 70 MW in Africa’s largest solar complex located in Benban in the south of Egypt.
The renewable ammonia will be transported to storage tanks at Ein El Sukhna Port via an existing seven km pipeline. The seaborne delivery to Europe will be overseen by Fertiglobe International Trading, a wholly owned subsidiary of Fertiglobe PLC. The renewable ammonia will be delivered to the Port of Rotterdam.
Contracted volumes
The pressurized alkaline electrolyser facility will deliver up to 13,000 tons of renewable hydrogen annually as feedstock to the ammonia production facility. The Haber-Bosch plant, which is scheduled to be operating by 2027 and reaching full capacity in early 2028, will have an annual output of up to 74,000 tons of renewable ammonia. Fertiglobe is planning a first delivery of up to 19,500 tons of renewable ammonia to Hintco as early as 2027. Hintco will sign an agreement with Fertiglobe for a guaranteed minimum offtake of 40,000 tons of renewable ammonia per annum from 2028 through to 2033. In addition to the guaranteed minimum offtake volumes, Hintco holds the option to obtain additional renewable ammonia in a range between 17,500 to 33,000 tons per annum from Fertiglobe.
The pilot auction established the first price signal for renewable ammonia, facilitating market development and price transparency.
Price signals
This pilot auction established the first price signal at a contract price of EUR 1,000 per ton and a net price of EUR 811 per ton. These price signals send a positive, clear, and strong message, indicating renewable ammonia can be produced and imported into the EU at attractive prices through targeted support to the most competitive projects. As the scale of production grows and suppliers gain experience, costs are expected to decrease further, setting the stage for additional competitive pricing in subsequent H2Global auctions.
The maximum permissible net product price was set in the auction at 1,282 €/t or 1.28 €/kg. This bid cap was determined based on selected studies and forecasts. Fertiglobe’s volume-weighted net product price is 37% lower than the bid cap.
Product specifications for ammonia
Additional product specifications
In addition to the above-mentioned technical specifications, the product must comply with additional product specifications pertaining to the renewable and emissions savings characteristics of the product. They are based on the RED II and the Delegated Acts (2023/1184 and 2023/1185) and fulfil the requirements resulting from the grant decision and additional instructions given by the provider of funds, BMWK.
They include the following criteria:
- All hydrogen atoms must be derived from water electrolysis
- The electricity used in the production process must derive from renewable sources
- The GHG emissions savings (including transportation) must beat least 73 per cent in comparison to the fossil fuel comparator as set out in the Delegated Regulation (EU) 2023/1185 at 94 gCO2eq/MJ
Environmental and social sustainability
Find out here about the range of tools we use in our pilot tender to ensure that climate protection goes hand in hand with environmental and social sustainability.
Frequently asked questions
Why were ammonia, methanol, and e-sustainable aviation fuels chosen for the first tender?
The hydrogen derivatives in the pilot tender – renewable ammonia, renewable methanol, and eSAF – were selected by BMWK, based on a market analysis and a market consultation carried out in 2021.
The products auctioned in future tenders may vary according to the individual objectives of the respective funding bodies.
Who determines how the H2Global instrument is being applied, e.g. hydrogen criteria, geography, etc.?
The provider of the funds determines the conditions under which Hintco receives financial support to offset the expected cost difference arising from its trading activities. These conditions are outlined in a grant agreement, specifying key parameters such as the hydrogen's "color" classification (or other criteria for defining clean hydrogen), the geographic focus, and any potential additional requirements.
The H2Global mechanism, along with Hintco, is designed to be highly flexible and adaptable - remaining "color-agnostic" in its approach. However, all terms and conditions must align with H2Global’s overarching commitment to promoting environmental and social sustainability while contributing to global climate action.
Does Hintco only auction one-year contracts on the demand side?
Short-term contracts on the demand side play a key role in ensuring the efficient use of concessional (governmental) funding, while fostering price transparency and market liquidity. For this reason, many lots in the current H2Global auctions will feature one-year Hydrogen Sales Agreements (HSAs). These short-term agreements are essential to establish H2Global reference prices and indexes, laying the groundwork for a more mature hydrogen market.
At the same time, some off-takers, particularly in certain sectors, may require volume security over a longer horizon but struggle with fixed-price exposures. To address these needs, the H2Global mechanism is exploring models that allow Hintco to enter into longer-term sales agreements by adding additional layers to the existing structure. Detailed concepts for such models are already being developed and foreseen for upcoming tender designs.