Green ammonia supply chain and associated market structure

Abstract

Green ammonia is poised to be a key part in the hydrogen economy. This paper discusses green ammonia supply chains with a focus on market structures. The architecture of upstream and downstream supply chains is explored. Market structure prototypes in different stages are explored based on transaction cost economics and lessons from the energy industry. In the infancy, a highly vertically integrated structure is proposed to reduce risks and ensure capital recovery. A restructuring towards a disintegrated structure is necessary in the next stage to improve the efficiency. In the late stage, a competitive structure characterized by a separation between asset ownership and production activities and further development of short-term and spot markets are proposed towards a market-driven industry. Mixed structures combining multiple structure features are also discussed due to the dependency on actual conditions. Further, a multi-linear regression model is developed to evaluate the designed structures using a case in the gas industry, due to the commonality in vertical integration and data availability. Results indicate that high asset specificity and uncertainty and low frequency lead to a more disintegrated market structure, and vice versa, thus supporting the structures designed. In addition, evidence from the latest trends in the clean ammonia market also verifies the designed early structure. Besides, potential ways to accelerate market emergence are also discussed. We assume the findings and results contribute to developing green ammonia supply chains and the hydrogen economy.