Japan's push to decarbonize coal-fired power plants with ammonia faces high cost, supply and implementation challenges, the Institute for Energy Economics and Financial Analysis said Thursday.
Japan continues to rely on ammonia co-firing as a key part of its decarbonization strategy because it has not committed to phasing out coal-fired power plants, according to IEEFA.
The government reaffirmed targets to achieve a 20% ammonia co-firing rate by 2030, increase the share to over 50% after 2030 and reach 100% by 2050.
Japan backed the strategy with four subsidy programs totaling 586 billion Japanese yen ($3.7 billion) in fiscal year 2025 to expand ammonia and hydrogen production, supply chains and related technologies, IEEFA said.
The Blue Point Complex in Louisiana represents Japan's largest planned low-carbon ammonia supply project.
CF Industries is building the 1.4 million-metric-tons-per-year facility with carbon capture and storage after JERA and Mitsui approved the project in April 2025, according to the report.
JERA holds a 35% stake in Blue Point, while Mitsui owns 25%. The project is scheduled to start production in 2029, with JERA agreeing to purchase 492,144 mt of ammonia each year from February 2030, primarily for its 4.1-gigawatt Hekinan thermal power station.
JERA plans to begin commercial 20% ammonia co-firing at Hekinan Unit 4 in fiscal year 2027, increase co-firing to over 50% across two units in fiscal year 2028 and transition to 100% ammonia firing during the 2040s, IEEFA said.
Hekinan's one-gigawatt Unit 4 completed Japan's first large-scale 20% ammonia co-firing demonstration between April and June 2024.
JERA considers the project central to its decarbonization plans and uses the operating data to estimate avoided carbon emissions.
Mitsui also plans to import 280,000 mt of ammonia annually from January 2031 for Hokkaido Electric Power's Tomatouatsuma thermal power station and several industrial customers.
Hokkaido Electric targets 20% co-firing in fiscal year 2030, rising above 50% from 2035 and reaching 100% during the 2040s.
Japan strengthened support for Blue Point by awarding Contract-for-Difference subsidies to JERA and Mitsui in December 2025.
IEEFA said blue ammonia produced with carbon capture and storage on the US Gulf Coast remains more expensive than Japan's renewable energy options.
The report added that continued government support could increase electricity costs for households and businesses.
Japan currently consumes about 1.08 million mt of ammonia each year, mainly for industrial uses. Hekinan Unit 4 alone would require about 500,000 mt annually at a 20% co-firing rate, equivalent to nearly half of the country's current ammonia demand.
Expanding 20% ammonia co-firing across all coal-fired power plants operated by regional utilities would require about 20 million mt annually, matching global ammonia trade volumes in 2019. IEEFA said developing supply chains at that scale appears unlikely.
Japan's Ministry of Economy, Trade and Industry has already reduced its 2050 ammonia fuel demand forecast to about 20 million mt, down from the 30 million mt projected in 2021.
IEEFA said expanding renewable energy, battery storage and grid infrastructure could deliver lower-cost emissions reductions while strengthening energy security.