Exploring Supply Chain Design and Expansion Planning of China's Green Ammonia Production with an Optimization-based Simulation Approach

Green ammonia production as an important application for propelling the upcoming hydrogen economy has not been paid much attention by China, the world's largest ammonia producer. As a result, related studies are limited. This paper explores potential supply chain design and planning strategies of green ammonia production in the next decade of China with a case study in Inner Mongolia. A hybrid optimization-based simulation approach is applied, considering traditional optimization approaches are insufficient to address uncertainties and dynamics in a long-term energy transition. Results show that the production cost of green ammonia will be at least twice that of the current level due to higher costs of hydrogen supply. Production accounts for the largest share of the total expense of green hydrogen (~80 %). The decline of electricity and electrolyser prices are key in driving down the overall costs. In addition, by-product oxygen is also considered in the model to assess its economic benefits. We found that by-product oxygen sales could partly reduce the total expense of green hydrogen (~12 % at a price of USD 85/t), but it also should be noted that the volatile price of oxygen may pose uncertainties and risks to the effectiveness of the offset. Since the case study may represent the favourable conditions in China due to the abundant renewable energy resources and large-scale ammonia industry in this region, we propose to take a moderate step towards green ammonia production, and policies should be focused on reducing the electricity price and capital investments in green hydrogen production. We assume the findings and implications are informative to planning future green ammonia production in China.