Assessing the Viability of Green Fertilizer Production in Africa

This study is highly novel for multiple reasons. We took an optimization-based approach that employs advanced systems engineering for chemical production from variable renewable energy. To ensure relevance to the target geographies, our study used localized data in relation to fertilizer consumption and prices; renewable energy resources; the costs of renewable energy project development, labor, and transport; and water risks. To achieve realistic and accurate results, we also used comprehensive renewable energy project development costs from projects recently commissioned, under construction, or planned. 

Green Ammonia and Low-Carbon Urea Modeling Process for Renewable Energy Integration 

Our modeling, conducted in partnership with Power-to-X Analytics, determined the levelized costs of producing green ammonia (LCOA) and low-carbon urea (LCOU) from variable renewable energy based on hourly generation data, as well as purchased green electricity. The model determines the optimal tradeoffs between (i) battery storage capacity for electricity storage, (ii) hydrogen and nitrogen storage capacity, and (iii) oversizing of flexible chemical production, which can adjust its production rates in response to variability in renewable generation.  

We modeled scenarios in four countries, including wind/solar hybrid, geothermal, and purchased green power in Kenya; geothermal and purchased power in Ethiopia; wind/solar hybrid in Nigeria; and wind/solar hybrid in Morocco. We also modeled small-scale and large-scale production based on historical fertilizer import quantities. 

We selected the locations and scenarios based on their renewable energy resources and the industry’s maturity, regional power trade, the availability of fertilizer data and market insights, the amount of fertilizer imported, climate-related water risks, the existence of enabling environments to support the production of green hydrogen and its derivatives, and signs of investor activity. 

Green Fertilizer Production: Key Challenges and Findings  

Our analysis indicates that Kenya and Ethiopia are best-positioned to leverage available renewable resources such as wind, geothermal, and hydropower to meet their domestic urea needs. Our results also highlight some major challenges for implementing novel technology solutions in these countries. We find that though these solutions are technically viable, the cost of accessing capital in these regions is a major barrier.

In the figure below, we compare the price of imported urea (in black) to the modelled cost of domestically produced urea. We project that if the facility were in the U.S., with certain standard interest rates for green hydrogen projects, urea costs would be much lower than current imported costs. However, the costs of capital access are more than two times higher than the U.S. This difference leads to an almost 40% increase in levelized costs of urea production in the geothermal example below. The cost of capital has similar impacts for fertilizer production from other renewable resources as well.  

Recommendations for Advancing Green Fertilizer Projects in Sub-Saharan Africa  

It is important to emphasize that green fertilizer projects are technically viable in Sub-Saharan countries with strong renewable energy resources, as the technologies continue to mature. The elevated production costs modeled are financial barriers. The good news is that financial barriers can be addressed through policy interventions, the reduction (or elimination) of subsidies for imported fossil fuel-derived fertilizers, and the adoption of regulatory incentives that support green industrial production, with a particular emphasis on policies and regulations that lower renewable energy costs. We must also consider that in a carbon-constrained world, carbon pricing mechanisms will inevitably make traditional ammonia and its derivatives less cost-competitive. 

In addition, to make green fertilizer project development viable in low- and middle-income countries, it is necessary to attract concessional development finance to lower and de-risk the cost of capital. Such finance may come as grants or technical assistance to cover early-stage project preparation, low-interest loans with longer and more flexible repayment terms, first-loss debt, guarantees, political risk insurance, currency exchange protection mechanisms, or other forms. 

To attract concessional development finance, it is imperative to account for both the costs of green fertilizer production, as analyzed in this study, and the developmental benefits. These benefits include lowering the reliance on imports (cash outflows), reduced food insecurity through the application of domestically produced fertilizers, building a workforce catering to green higher-paying jobs, development of local content green industrial supply chains, investment in the domestic economy, and reduced GHG emissions, among others. Considering both costs and benefits can frame policy and financial support for green fertilizer development as a no-regret sustainable development choice.  

RTI continues to conduct further research to quantify these benefits and engage with relevant stakeholders to ensure that technological advances and knowledge can be turned into practice for the global good.  

Learn more about the potential of green ammonia in clean energy storage and mitigating climate change across Africa.