Flip the Switch - Natural Gas Price Spike Curtails Ammonia Plants, Linking Hydrogen and Gas Markets

In many ways, the natural gas shortages and price spikes that came with last week’s Deep Freeze had nothing at all to do with hydrogen. There were no “green” hydrogen plants that froze up in the cold, no withdrawals of stored hydrogen into distributed local fuel cells backing the power grid, no shortages of fuel for hydrogen vehicles. None of that occurred because hardly any of that infrastructure exists just yet. But that doesn’t mean there was no link between last week’s natural gas market and existing forms of hydrogen production, namely “gray” hydrogen used to produce ammonia, most of which is used in the manufacture of fertilizers, and which makes up about a quarter of the hydrogen market. In fact, there was a strong connection, one that highlights the flexibility of industrial natural gas use during price spikes and possibly exposes a vulnerability in gray hydrogen production. Today, we continue our series on hydrogen with a look at how the ammonia industry responded to the recent spike in natural gas prices.

While many in Texas and neighboring states are still chasing down water leaks and scheduling time with their general contractors, natural gas prices have receded to levels seen before Winter Storm Uri hit last week. If you’re not sure what we’re talking about, then a review of our recent blogs will bring you up to date. We initially wrote about how natural gas prices across Texas and other areas west of the Mississippi River spiked into triple digits early last week in East is East, West is West. As you know, that wasn’t the end of the story for the energy market madness created by Uri as the chaos spread into power markets by the middle of last week, which we first detailed in Terminal Frost. We then followed that blog up with a closer look at the Texas power grid in Perfect Storm.

Now that the dust has settled, we thought it would be a good time to look at some of the natural gas market responses to the high prices. It’s also time for our every-other-week hydrogen blog, and as luck would have it, we might have found a way to accomplish both in the same space. As you’ll see, one of the largest natural-gas-consuming industries uses it to make hydrogen, which goes into the manufacture of ammonia. When natural gas prices spiked last week, many of those ammonia plants ramped down their operations or shut down entirely. How do we know? Though prices alone would suggest this was the case, pipeline flow data confirms it. We’ll take a look at that data later, but first let’s look at hydrogen and the ammonia industry.

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